Social gaming has played a huge part in the stock price of many a company so far this year. There have, of course been other factors such as the continued legalization and regulation of the US market, which saw many companies stock nearly double, for a short time at least. These rises on the back of legalization news or news that social gaming is the next big thing etc, are of course purely speculative and as of yet neither social gaming or US regulation has earned any one of these companies a dime, as far as real money gambling is concerned. The debate continues as to whether social gaming is in itself able to be monetized to the extent that some people are talking about, or whether the whole thing is a conversion exercise, in that the merge or acquisition of social gaming providers with or by real money gambling companies is simply to acquire potential new customers. The advantage for real money operators is that the social gaming world is said to be up to 20 times bigger than that of the real money player base and of course any inroads into that would be profitable. However let's not forget a few facts here...share prices of social gaming companies such as Zynga have crumbled in recent times from a high of $14 to somewhere around the $3 mark and social gaming type apps come and go very quickly making it hard for the majority of apps to sustain any sort of longevity, making little to no money at all. So can social gaming really contribute long term to the gambling industry and companies stock price?
Slow Growth in the US Market
The US gambling industry rolls on, of that there is no doubt, but there has been little growth in recent years and maybe this is the reason that so many companies are showing a huge interest in social gaming. It offers an opportunity, an untapped market so to speak and the users of Social Games meet the demographic that real money companies are looking for, to a certain extent. Profits, in the main, from social games developers comes from advertisements and right now there's a big swing toward the mobile market and this creates a little issue. Advertising on mobile is a lot cheaper and may get more reach but mobile users are far less likely to act upon seeing an ad. Zynga's growth, profit wise is non existent. What perplexes many observers is the price tags that are attached to some of the social gaming companies. IGT for example paid a huge amount for social gaming company Double Down and yes, Double Down may have 5.4 million monthly social gamers and have a top 5 ranked game on Facebook with what it calls, "The World's Largest Virtual Casino", but can it ever justify it's half a billion dollar price? IGT believe that it will start to turn a profit in 2014 - that better be some kind of profit! Revenue is growing but it still has a long long way to go. This is just one example of the investment by real money companies in social gaming companies and most have have been looked at with more than a little skepticism.
The Present and the Future
At the moment not one joint venture or acquisition has realized anywhere near the dollar figure or the impact that was expected and as such, share prices have come down to a somewhat 'sensible' figure. The impact of social gaming has of course yet to be truly recognized and it may take more than just a few years for it to get anywhere near these expected levels. Buying into social gaming appears to be a must for many large real money operators and if they have patience and can further build on the mobile market then many see profits on the horizon.