Betable Ltd., the online-gambling startup backed by venture capital, reached agreements with three social-gaming companies that will use its platform to expand into real-money betting in competition with Zynga Inc. (ZNGA:US)
Slingo Inc., a maker of virtual-wagering slots and bingo titles with 54 million monthly users worldwide, will use the company’s U.K. gambling license and technology, according to a statement today from London-based Betable. Digital Chocolate Inc., started by Electronic Arts Inc. (EA:US) founder Trip Hawkins, and Murka Ltd., the maker of “Slots Journey,” also signed on.
Video game companies are racing to establish themselves in the developing market for online gambling in the U.K. and other countries where it is legal. Zynga, seeking to reignite growth, formed an online-betting partnership last week with Bwin.Party Digital Entertainment Plc. (BPTY) Betable says it can streamline the licensing and offer developers a technology framework they can plug in to and quickly get started.
“This is really a tectonic change,” Betable Chief Executive Officer Chris Griffin said in an interview. “This is not going to lead to an incremental shift in the market.”
An early Betable partner, Seattle-based Big Fish Games Inc., said on Oct. 29 its casino slot-machine game in the U.K. is taking real-money wagers for the first time.
Zynga fell 3 percent to $2.24 at the close in New York, on the first day of trading after Hurricane Sandy forced the markets to shut down this week. The shares are down 76 percent so far in 2012.
Online gambling isn’t legal in the U.S. Until recently, when some countries began allowing real-money Internet wagering, online gamers could purchase virtual currency and gamble, but couldn’t cash out their winnings.
Mobile gambling will grow to $100 billion worldwide by 2017, driven by surge in social-website gambling and legalization in key U.S. states, Juniper Research estimated in May.
In the U.K., where online gambling has been legal since 2005, the market has reached $2 billion, said Doug Creutz, an analyst with Cowen & Co. in San Francisco. Competition among social game-makers could make it hard for any one company to stand out, he said.
“Our goal would be to transition online players into gamblers of our content,” Slingo CEO Rich Roberts said in an interview. “Betable gives us an opportunity to move a little bit quicker than we could on our own.”
About 2 percent of the people who play titles such as Zynga’s “Farmville” end up buying virtual goods, according to analysts. Online gamblers spend about $75 to $100 a month, according to Betable’s Griffin.
The market is crucial for San Francisco-based Zynga, which is looking to wean itself from reliance on Facebook Inc. (FB:US)’s social-media website for revenue.
Makers of social games are grappling with a 5 percent annual U.S. decline in game play, led by casual players, according to researcher NPD Group Inc. They are looking to offer cash prizes to revive consumer interest and boost profit. Partnerships with companies that are focused on gambling allow them to meet the licensing requirements in various countries where they would operate.
Betable, whose investors include Greylock Partners, Yuri Milner of Digital Sky Technologies and Michael Arrington’s CrunchFund, handles the infrastructure, payment system, licenses, anti-fraud procedures and verification needed to prove whether a given consumer can legally play an online gambling game in a given location. The games can be played on a PC’s web browser, or on mobile devices running Google Inc. (GOOG:US)’s Android or Apple (AAPL:US)’s iOS.
Game developers still must adhere to rules for Apple’s App Store that prevent them from selling gambling titles in countries where online wagering remains illegal. Betable is working to get licenses outside of the U.K., Griffin said.
“Social gaming companies are not just going to be competing with each other, but they’re going to be competing with traditional enterprises,” Creutz said. “Gambling games are a commodity, and there’s no guarantee of success for that reason.”
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