DoubleDown acquisition lends credence to Facebook gambling rumors
There have been rumors for some time that Facebook will soon allow real-money gambling in the UK. Some would say that it’s a natural move for the social network, which makes a substantial portion of its revenue from facilitating purchases of in-game virtual goods. Considering that real-money has a significantly higher revenue potential than virtual currency, allowing online gambling could help Facebook boost its revenue growth before it’s rumored May IPO.
To lend credence to these rumors, there were two massive acquisitions of Facebook casino game companies within the last two weeks. On December 30th, Caesars Casino elected to purchase the 49% it did not own of Playtika, one of Facebook’s larger casino game makers with over 5 million monthly active users. But the announcement that turned heads was gambling heavyweight IGT’s $500 million acquisition of DoubleDown Interactive.
If you look at the numbers as they are now, there’s no reason for IGT to pay $500 million for DoubleDown. DoubleDown was rumored by AllThingsD to be making $140,000 per day, which equates to about $51 million in revenue per year. This puts the purchase price for DoubleDown at almost 10X their revenue, which is high even for the frothy social gaming market. Furthermore, DoubleDown Casino, their only game, has approximately 4.7 million monthly active users, which means that IGT paid over $100 per monthly active user. [Click to Tweet]
This purchase would only make sense if real-money gambling is coming to Facebook. Whether you view it as a land grab (DoubleDown Casino was the #4 game on Facebook by daily active users in 2011), or as a smart buy for the future (online casino players are worth roughly $1,800 over their lifetime), this acquisition is a sign of things to come. With social game giants EA and Zynga rumored to be looking into the real-money gambling opportunity, social game developers would be wise to stake their claim in the market as soon as possible.