An overview of online gambling and social gaming

Betting in social gaming is on the rise. Yazino has established itself as a legitimized player in the social gaming sphere while start-ups like Plumbee are bound to enter with a bang. At this year’s Social Gaming Summit, Facebook’s Julien Codorniou offered developers one piece of advice: develop mobile social casino games! I invited Julia Maxwell Research Analyst for CasinoTopLists to write an article about the current state of online gambling and its early footsteps into social gaming.

In many ways the world of online gambling is a unique beast. It generates revenues in the tens of billions of dollars each year, yet it has only really been in existence for the last 15 years, with the first substantial online sites emerging in the mid-to-late 1990s. While the basic core of the online gambling business remains the same – offering people the chance to play poker, blackjack games, and bet on sports from the comfort of their home – the industry has already seen several major changes during its brief lifespan, with plenty more on the way.

The novelty of simply being able to gamble online was enough to draw customers in the early days of the industry. However, sites soon found themselves under pressure to differentiate their offerings. Some chose to focus on certain niches, such as PokerStars sticking solely to poker and avoiding the temptation to expand into casino games, while others including PartyPoker went the opposite route, eventually expanding to offer a full range of sports betting, casino, and bingo products.

Legislation of the market

The passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in the US in 2006 had major repercussions on the industry as a whole, with many operators finding their largest market and majority of revenues shut off virtually overnight. Despite many casualties, the online industry as a whole emerged stronger after the passage of the UIGEA, with a renewed emphasis on more efficient advertising and marketing efforts, as well as renewed interest in growing markets like Europe and Asia.

The European market over the last two years has seen an increase in the involvement of countries on a national level with online gambling, with the French and Italian governments stepping in to regulate online gambling. Other countries including Spain and Greece have adopted a similar model, with governments not only raking in a share of tax revenue from the online gambling sites who receive licenses to operate within these countries, but also exerting greater control as to what types of games and stakes are available.

Regulation on a national level has been met with mixed success so far; the French government has publicly stated it has been disappointed with tax revenues generated from online gambling as it failed to see an expected uptick in demand. Both Italy and France control the number of licenses issued to online gambling companies, enabling them to cap the overall supply, yet both countries have struggled to generate increased demand amongst gamblers. Other perspectives hold that the demand is still very much in-tact, however due to challenging tax demands and complex regulations, the market has failed to grow to its full potential.

Transition into social gaming

On the game development side, more and more online casinos are rolling out mobile apps for use on iPhones, iPads, and Android devices. Apple and Google, nevertheless, remain wary about approving apps that can be used to gamble for real money. The tide appears to be heading in that eventual direction though, with strong demand from gamblers who want to access their favourite poker, casino, and sports betting games from their mobile devices.

Social gambling apps remain strongly divided between games for play chips, such as Zynga Poker, and apps from online gambling operators like bwin that let customers play for real money. The former category still outnumbers the latter, but this is primarily due to Apple and Google’s reluctance to approve apps for real money wagering; many online operators such as PokerStars and PartyPoker have publicly stated that the only reason they don’t currently offer more mobile apps is the difficulty in getting them approved for distribution in the App Store or Android Market.