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Gambling companies get big on gaming

By on June 16, 2010
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The news that 888 Corporation has spent up to $48 million on gaming company Mytopia is, at one level, no surprise.

It’s all about CPA

Mytopia logo

Gambling companies are experts at two things: customer acquisition and understanding legislation. Given that customer acquisition is the sina qua non for online games companies, it makes sense for gambling companies to buy into games in a big way.

But (and it is a big but), there are very substantial differences. The lifetime value of a gambling customer can easily run into thousands of dollars. Paying over $100 CPA (cost per acquisition) is a sensible strategy, and gambling companies are set up to spend a lot of money (both gross and per user) to acquire customers.

Games companies are different. Broadly speaking, gamers spend less than gamblers. So a gambling company will have to get used to CPAs that need to be a whole lot lower (possibly by a factor of 10 or more).

That’s not impossible. It’s just that gambling companies will have to get cleverer. And they have a decade of experience at responding to the changing online environment.

I don’t expect this acquisition to be the last by a gambling company. Far from it. The online gaming space is about to get a lot more competitive.

(Thanks to Stuart Dredge’s iPhone Games Bulletin for the heads-up)

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com