The online gambling business is a hotbed of activity lately with Nevada, Delaware and New Jersey passing legislation permitting Internet betting with real money. Bills have already been introduced in several other states as well, including California, Iowa and Mississippi, to legalize online wagering.
There’s good reason for the markets buzzing about the potential revenues from online betting. The global online gambling market is expected to reach $45 billion by 2017, according to Juniper Research. The firm estimates that wagers placed from mobile devices alone will reach $100 billion in less than four years.
“This is the next evolution in games, and kind of ground zero for the developer community,’’ said Chris Griffin, CEO of London-based Betable, a company that assists other companies with gambling licenses in addition to being a provider of a platform for developers to put gambling into their mobile apps. Social Gaming Network, a firm headed by MySpace.com co-founder Chris DeWolfe is utilizing Betable software in their gaming studio that has garnered investment from the likes of Google, Inc. executive chairman Eric Schmidt and Amazon.com founder Jeff Bezos.
Social game maker Zynga Inc. (NASDAQ: ZNGA) is seeing a rise in share value of late due in part to its maneuvers to position itself in the online gambling arena. It didn’t hurt that the company also topped analyst estimates for both earnings and revenue with adjusted earnings of 1 cent per share and revenue of $261 million in the latest quarter. Wall Street was predicting an adjusted loss of 3 cents per share on revenue of $212 million.
With consolidation efforts ongoing at Zynga, including ditching development of several games and shuttering of offices, many investors are hanging their hats on the fact that the company can become a turnaround story largely because of its Internet gambling initiatives. The belief has helped shares rise about 50 percent in 2013.
There are those that questions Zynga’s ability to even establish a presence in the online gambling industry with established giants like PokerStars, the largest online poker company in the world, and casino operators such as Caesars Entertainment Corp. (NASDAQ: CZR), the gambling beast who owns the World Series of Poker, Boyd Gaming Corp. and MGM Resorts International surfacing immediately as heavy-hitting competition. Zynga’s agreement with Bwin.Party Digital Entertainment has been widely publicized as opening the door to the U.K. markets for Zynga, but let’s not forget that MGM has a deal with Bwin as well.
Caesars has already hatched a plan to build-out its Internet gambling presence and has received tentative approval from the Nevada Gaming Control Board for an online poker website. There’s no mistaking that Caesars is looking for new revenue as it carries a massive debt load, a fact that the company is looking to combat by proposing to issue $1.5 billion in new debt through the sale of private secured notes to pay outstanding loans and associated expenses. Fresh online gaming revenue may help Caesars to finagle out of its tight financial position and reverse shrinking levels of revenue.
Whether Zynga can penetrate the market to compete with industry behemoths is justifiably in question, but perhaps a better way to look at it is from the angle of what Zynga has to offer as a potential partner or acquisition target by the far bigger outfits. After all, they may not be wizards in the legitimate gambling world, but they know a thing or two about the online space with 30 million people each month playing the free, social game Zynga Poker. Their assets and the $1 billion in revenue that they bring to the table could be a value add for a larger company looking to combine hands and leapfrog competition.
Speculators are also looking ahead to what could be the next game-changing technology in online gambling are thinking augmented reality.
Gamblers will be able to get the full experience of being at a card table, or a slot machine, or standing at the end of a craps table ready to throw the dice in whatever casino they want anywhere in the world, without being there at all. That is truly the ultimate gambling experience. Like to play a game of Texas Hold ‘Em with Johnny Chan in Atlantic City? It can happen. Like to bet on a basketball game and then transition apps to “virtually” go to the game and sit in the front row? That will be available too. It’s the collision of real world and the web, representing the next technological advance that can take online gambling by storm.
Augmented reality gambling is not going to be like staring at a computer screen, smartphone or tablet. While the technology has the capability of greatly enhancing the experience through those medians, it can also feature glasses that allow the user to become fully immersed in the environment with views and scenery changing with the turn of the head. This is where the real game-changer lies with augmented reality.
Scroll back and look again who was invested in Chris DeWolfe’s SGN; it’s Eric Schmidt of Google. Google has already garnered plenty of attention with their Google Glass augmented reality project and there are some strong synergistic possibilities for Glass and a major app and game maker like SGN, formerly known as MindJolt, in the augmented reality online gambling industry. Entrepreneurs like DeWolfe see the opportunity before it arises and align accordingly to capitalize. When he sold MySpace to News Corp. in 2005 for $580 million, the site was bigger than Facebook.
For those interested in ground-floor companies, a younger serial entrepreneur with a history of success, Moshiko Hogeg, has quietly set his sights on augmented reality and is now a director at Infinity Augment Reality, Inc. (OTCBB: ALSO), one of the only pure AR plays in the public domain. Hogeg is the CEO and founder of the popular real-time photo and video sharing website Mobli.com, a site that in just a few years has grown from vision to millions of users. Hogeg said he intends to build Mobli into a visual search engine comparable to Google that can show users “everything worth seeing in the world.”
In raising more than $22 million for Mobli, Hogeg has brought in high profile personalities such as Leonardo DiCaprio, Tobey Maguire, Lance Armstrong and Serena Williams into the Mobli investor community. It would seem safe to assume that Hogeg will tap into his Rolodex again with Infinity AR to help build the brand.
Being the only pure augmented reality play sets Infinity apart from the outset, but what they are doing to help build-out the industry is notable as they are developing a platform that can interface with augmented reality glasses being built by companies like Google, Vuforia and Lumus, opening the door for partnerships and revenue streams either before or after commercialization. In the context of online gambling, there is going to be a shortlist of companies that have products available in the near term, allowing for application and IP owners to command a premium for licensing, a fact that should bode well for companies establishing an early footprint.
The future of augmented reality employs technologies of today, coupled with visions of tomorrow. Technologies such as facial recognition, image recognition, location recognition and more will have users navigate and connect in the augmented reality world. It’s also interesting to note that Hogeg’s Mobli utilizes facial and image recognition software for tagging of video and images, so don’t discount possible synergies down that road either.
Consumers have an unquenchable thirst for new technologies that can provide them with unprecedented amounts of data and instant gratification for their needs. Augmented reality will not only be broadly accepted from a consumer standpoint, but also on the commercial front as the applications are endless. The casino and online gaming industry is a natural match.
Earlier this month, Scandinavian Internet casino operator Mr. Green Casino won the award for the “Best Casino Operator” during the International Gaming Awards held in London. Mr. Green Casino says that, “the most important thing is entertainment.” Its platform is described as an “unmatched gambling experience” that goes “beyond typical” by the UK Gaming Directory.
So what does this have to do with anything?” The answer: “Just watch.”
When augmented reality hits the scene, just watch companies like Mr. Green Casino embrace it like a long-lost child. Just watch other industry leaders like William Hill, Paddy Power, 888 Casino and 32Red look to employ the technology to try and knock Mr. Green Casino from its pedestal as the so-called best in the business. Just watch as gaming industry stalwarts like Caesars and MGM rush to adopt the technology as part of their online gambling initiatives that they know they need to supplement fleeting revenues in their casinos. Just watch as smaller firms begin to emerge in the online gaming space searching for state-of-the-art technologies to lure in users and line their own coffers. They too will come calling for augmented reality technologies.
So while the topic of the day may be states legalizing gambling, sending investors scrambling to discern if companies like Zynga or Caesars are positioned today to maximize ROI, they should also be looking outside the box to companies like Google, Lumus or Infinity as to what is coming down the road as a disruptive technology in the industry.
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Andrew Klips - Editor
OTC Showcase
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