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Rigging the Odds: What Facebook’s gambling strategy means for developers

So the cat’s out of the bag. Facebook is hosting real-money gambling games on their platform, starting with Bingo Friendzy by Gamesys. Now what?

One thing is certain: this won’t become a free-for-all like the Wild West early days of social gaming on Facebook. The official statement from Facebook is that “real money gaming is a popular and well-regulated activity in the UK and we are allowing a partner to offer their games to adult users on the Facebook platform in a safe and controlled manner.” This means Facebook will want to work with companies that have gambling expertise and, most importantly, operating licenses.

For social game companies, this means you still need gambling licenses. Getting a gambling license costs millions and takes years to acquire. For smaller game companies, this is prohibitively expensive, and even larger game companies face significant organizational & compliance hurdles that make acquiring a gambling license even more time-consuming and expensive. And while social game companies are forced to sit on the sidelines, you can be sure that gambling companies will do their best to capture as much of the market as possible.

This strategy isn’t just unfair to social game companies that have staked their livelihoods on Facebook’s platform: it’s counter to Facebook’s ethos.

Of course, there’s a logical reason why Facebook hasn’t gone down this path: gambling is a highly regulated and scrutinized industry. Simply opening the platform to all gambling companies exposes Facebook to significant compliance and legal challenges. From the looks of it, Facebook is practically partnering with the company to ensure that the game is compliant and gated only to 18+ players in the UK. Due to the legal ramifications, this course of action makes sense for the first game or even the first few games. But in the future, the opportunity cost of maintaining this closed platform strategy far outweighs the potential benefits.

Furthermore, by closing the platform and only allowing a small trickle of companies to release real-money games on Facebook, the platform is picking winners and limiting competition. This strategy completely contradicts what Facebook did to foster social gaming, which was one of the fastest growing entertainment categories of all time and contributed significantly to Facebook’s growth, engagement and revenue. To capture the full market potential of real-money social games, Facebook needs to let competition and creativity pick the winners on its platform. To do otherwise shortchanges loyal developers that have stuck with the platform and decreases the likelihood that truly innovative real-money experiences will be created for players.

Given the inherit value of an open platform, we can only assume that this is Facebook’s eventual goal. Facebook can accelerate this transition by partnering with a gambling company that can manage the compliance and legal issues for them. Betable handles the finance, operational and compliance aspects of each game, making it possible for social game companies to legally add real-money gambling to their games without needing their own gambling licenses and taking a large chunk of work off of Facebook’s plate in the process. With Betable, Facebook’s strategy can be in-line with its ethos and again become home to a booming segment of the game industry.

Meanwhile, while Facebook dips its toes in the water, real-money online gambling on mobile and the open web is taking off. Developers that get access to these new markets early will have three important advantages in this massive new market:

1. These companies will be the first to capture valuable learning about this new market being created by the intersection of social gaming and real-money play.
2. They will build real-money gaming audiences earlier and cheaper than their competitors, who will enter later into a frothier market.
3. With the increased revenue provided by real-money gaming, they can outspend their competitors that are still using virtual currency on player acquisition and game development.

Developers that move now have a huge leg-up on the competition and will be able to bring their players back into the Facebook experience once they open their platform to real-money play. Within 18 months, the social game market on Facebook was won by Zynga. The real-money gaming market will be no different, and with Zynga leaking that they will launch real-money games in 2013, speed has never been more important. Real-money gambling is restarting the race for social game developers on Facebook and mobile, meaning the market leaders of tomorrow could be completely different from the leaders of today. If you want to be one of them, Betable wants to help.