WHITEFISH, MT / July 28, 2014 / The casino gaming industry has rapidly evolved over the past 25 years from handful of casinos operating in only Nevada and Atlantic City to 566 casinos in 22 U.S. states by 2010, according to the American Gaming Association. The industry generates approximately $125 billion in annual spending and employs around 820,000 U.S. citizens, accounting for a sizeable 1% of the $14.5 trillion U.S. GDP.
Expanding certain aspects of casino gaming beyond brick and mortar, so called social casinos have brought many popular casino games onto mobile platforms like Apple iOS and Google Android. In fact, social casino games have done so well on mobile that many physical casino operators and game manufacturers use them to create user acquisition channels to find new players who will monetize in physical casinos at relatively low marketing costs, according to Distimo.
Caesars Entertainment Corporation (NASDAQ: CZR) already owns Playtika, a top social casino game publisher, and acquired three other social casino games over the past few years, including Bingo Blitz developer Buffalo Studios in 2012, the World Series of Poker app from Electronic Arts Inc. (NASDAQ: EA) in 2013, and Pacific Interactive in February of 2014, as its most recent acquisition.
While real-money gambling in social casinos remains federally illegal, U.S. states like Delaware, Nevada, and New Jersey have implemented limited versions of real-money online gambling. The revenues from in-app purchases for many social gaming apps, however, makes the apps some of the most profitable for developers. In fact, one-fifth of the top 100 gross publishers have at least one social casino app.
CrowdGather now has the benefit of expanding revenues beyond just traditional advertising channels by introducing millions of monthly visitors to its Mega Fame Casino.
Levered Exposure
CrowdGather Inc. (OTC: CRWG), an operator of special interest forums and enthusiast message board communities, acquired Plaor and its popular Mega Fame Casino & Slots franchise earlier this year. With the acquisition, the $15 million market cap company anticipates generating unaudited pro-forma revenue of approximately $2 million per year before organic growth and synergies from their recent merger are taken into account.
Perhaps the most interesting part of the acquisition, however, is management’s plan to leverage its existing special interest forums and message board communities to grow the social casino’s footprint. The company has reported monthly unique visitors in the 8 to 9 million range, with total monthly page views running at approximately 80 to 90 million.
Currently, Plaor has approximately 24,000 daily average users that result in over $1 million in current social casino revenues[MM1] for the company. Management aims to leverage its millions of monthly unique visitors to increase the number of daily average users over time, which should provide a much higher per-user revenue generation than online advertising. For every 24,000 to 25,000 daily active social casino players that CrowdGather can convert from its existing traffic sources, or acquire through marketing channels, could result in approximately $1.0 million in additional revenues.[MM2] Converting visitors into players could result in greater revenue expansion than is possible through advertising alone.
The conversion rates for its forum users and the stability of the revenue remains to be seen, but these dynamics could certainly provide a significant catalyst for investors. If successful in converting even a small amount of its forum users into social casino gamers, the company could see its revenue expand quite a bit over the coming quarters, particularly as it adds new casino games to broaden its market.
Looking Ahead
CrowdGather’s acquisition of Plaor marks its entry into a market that Transparency Market Research believes will grow at a 16.1% CAGR to reach $17.4 billion by 2019. By leveraging its existing forum users, the company hopes to dramatically increase the number of average daily players in order to drive long-term revenue growth with low/no customer acquisition costs and high gross margins.
In addition, the social casino industry continues to generate a lot of interest within the traditional casino industry. The high number of acquisitions could help drive the company’s multiples higher over time by virtue of peer multiple comparisons, while the aforementioned growth should justify those loftier figures. With a market capitalization of just $15 million now, the stock could turn out to be a great bet.
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Source: Emerging Growth