bwin.party is paying $23m to buy gaming contracts and engineering resources from two social gaming companies and plans to invest another $27m over the next two years to get a foothold in the social gaming market. Poker will be one of five “studios” offering internet gaming under the new brand “Win.”
The group “… are focused on building a meaningful stand-alone enterprise that will operate outside our core real money gaming business but which will benefit from the Group’s significant resources and assets,” according to Co-CEOs Jim Ryan and Norbert Teufelberger.
A presentation for investment analysts claimed that social gaming achieves a conversion rate of over 2% in turning free players into paying players. Paying players buy virtual credits, virtual gifts, virtual consumables and virtual decorations.
A “whale” in this virtual gaming world averages $2,000 of real spending. bwin expects ~3% of its paying players to be “whales” and to earn over $20 per paying player on average. Slot games will be launched first with poker following at the end of this summer.
bwin.party expects additional benefits from “lead generation to real money
products in relevant markets.” It will be interesting to see how well this can work given the Facebook restrictions on advertising real money gambling sites.
RocketFrog, which has just launched, is hoping to capture market share by offering real prizes such as gift cards donated by advertisers. bwin.party makes no mention of any similar ambitions. It believes that it will succeed as the result of its:
- Experienced management team and proprietary gaming platform
- Portfolio of new applications online and on smartphone platforms
- Original IP in the creation and distribution of social gaming content
- Best of breed partnerships with leading independent game studios
$50m is a huge amount to invest in a start-up and normally such a sum would only be justified if the company felt that there was the potential to create a billion dollar business. That appears to be exactly what bwin.party believes.
