Social casino: Q1 update

The year is off to a flying start, with market growth outstripping the forecast for 2018, reports Adam Krejcik of Eilers & Krejcik Gaming

We estimate the global social casino game market grew by 6.0% quarter on quarter, or 19.1% year on year, in Q1 2018. We estimate social casino revenues generated on Facebook were up 0.4% quarter on quarter, while mobile was up 7.6% quarter on quarter.

For TTM (ending March 31, 2018), we estimate a total market size of $4.72bn (£3.4bn), or year-on-year growth of 19.8%. The year appears to be off to a very strong start, with the industry already on pace to exceed our CY18 forecast, which assumes 14.6% year-on-year growth. 

Performance among the top 15 social casino publishers was mostly positive. Standout performers this quarter included Playtika, Product Madness, Huuuge Games, PlayStudios and KamaGames.

Key movement in the ranking charts from last quarter included Aristocrat, now the #2 publisher following its acquisition of Big Fish Games in January 2018. Huuuge Games has moved up to #6, PlayStudios is up to #7, KamaGames has moved into the #11 position, while Super Lucky switched spots with Penn Interactive to move back into the #15 spot.

Company highlights
• Playtika, which is owned by Shanghai Giant Technologies, saw revenues increase 7.2% quarter on quarter and 23.8% year on year. Despite being twice the size of its nearest competitor, the company continues to gain market share and exec¬ute in an exceptional fashion. Every one of its apps grew sequentially with double-digit growth from House of Fun, Bingo Blitz and WSOP. In terms of KPIs, we believe Playtika was able to drive modest DAU growth this quarter but the most revenue growth was through improved monetization, with blended APRDAUs now around 50c. Facebook/web revenues remained constant, with declining user levels offset by higher-paying conversion rates.

• Aristocrat (Product Madness + Big Fish), has become the #2 publisher worldwide with a 12.2% market share, which assumes a full quarter contribution from Big Fish (social casino only). Pro-forma gross revenues were up 5.7% quarter on quarter and 36.7% year on year. In terms of breakdown, we believe Product Madness was up 6.7% quarter on quarter, or 43% year on year, primarily driven by Cashman Casino (we estimate up 10% quarter on quarter) and re-launch of FaFaFa (now wholly owned by Aristocrat), while Heart of Vegas saw low single-digit sequential growth. Big Fish social casino revenues were up an estimated 4.1% quarter on quarter and 22% year on year, largely driven by growth from Jackpot City Slots (we estimate up 22% quarter on quarter) and marginal sequential growth from its franchise game Big Fish Casino.

• SciGames Interactive saw total social revenues (B2C + B2B) increase 2.8% quarter on quarter, or 21.1% year on year. In individual game performance, we believe Jackpot Party Casino was down slightly on a sequential basis, while Gold Fish Casino, Quick Hits, Hot Shots, 88Fortunes and Bingo Showdown were the primary growth drivers. SG Interactive B2B social casino revenues were essentially flat. 

• DoubleU Games, which owns Double Down Interactive (a deal closed on June 1, 2017), was the fourth largest social casino publisher worldwide with total gross revenues up 6.1% quarter on quarter. It was a decent quarter for both Double Down and DoubleU Games, as they were able to grow revenues on a sequential basis. We estimate Double Down Interactive revenues on a standalone basis were up 4% quarter on quarter, driven by its latest app Ellen: Road to Riches and low single-digit sequential growth from Double Down Casino. We estimate DoubleU Games grew revenues to be up 7.8% quarter on quarter, and 16% year on year on a standalone basis, largely due to DoubleU Casino. This marks the second consecutive quarter that pro-forma revenues have grown on a sequential and year-on-year basis. While its growth rate still trails the industry average it’s now at trending in the right direction.

• Zynga saw social casino bookings increase 3.4% quarter on quarter and 3.2% year on year. Zynga Poker has been the primary growth driver over the past few quarters, which remained the case in 1Q18 with Poker bookings up an estimated 5% quarter on quarter. However, Slots also saw a modest uptick this quarter with its key franchise titles Wizard of Oz and Hit it Rich both seeing healthy sequential growth. We continue to believe that Zynga’s social casino division is operating at its highest profitability level in years, reflecting the maturity of its portfolio and reduction in UA spend.

• Huuuge Games, continued its impressive growth trajectory with revenues increasing 20.7% quarter on quarter, or 79% year on year, resulting in market share of 4.3% and moving it up to the #6 position in our ranking. Growth in Q1 was largely driven by Billionaire Casino (which we estimate as up 46% quarter on quarter) and its marquee game, Huuuge Casino (up 16% quarter on quarter in our estimate). The company continues to demonstrate strong growth on Android/Google Play, with gross revenues up nearly 25% quarter on quarter on Google Play store.  It’s now the fourth-largest standalone social casino publisher on this platform.

• PlayStudios saw revenues increase a healthy 6.9% on sequential basis, or 29% year on year. Growth in Q1 was once again driven by POP Slots, which continues to expand its user base thanks to unique and innovative gameplay. We also believe this is the company’s top monetising game with ARPDAUs comparable to some larger peers.  The company’s franchise game, myVegas, underwent a major overhaul last year but saw revenues decline on a sequential basis as it continues to experiment with the game economy and new features. 

• Tencent’s social casino division largely consists of a Chinese version of Poker called Fight the Landlord. Tencent is a global behemoth in PC and mobile gaming (it generated more than $8bn in mobile game revenues in CY17), and its ‘social poker’ games are a small portion of its overall business. That said, our checks indicate that its Fight the Landlord apps have shown significant growth over the past few quarters, driven by a large user base to cross-promote from and a resurgent mainland-China Poker boom.

• GSN/Bash Gaming (majority owned by Sony) saw its social casino revenues increase 1.7% quarter on quarter, but still down -8.3% year on year. Sequential growth was driven by its two primary games: GSN Casino and Bingo Bash, while Fresh Deck Poker, Wheel Fortune Slots, Mirrorball Slots and GSN Grand Casino all made modest revenue contributions.

• Murka saw revenues increase a modest 1.4% quarter on quarter and 21.3% year on year. Year-over-year revenue growth was driven by its three core titles – Scatter Slots, Infinity Slots, and Slots Era – while the sequential slowdown was largely due to pullback in paid user acquisition spend as the company focused on driving profitability. Its newest game, Slots Tour (previously called NatGeo Slots), has seen strong downloads and user reviews but made a modest revenue contribution in Q1 reflecting the difficulty of launching new standalone games in today’s market.

• KamaGames has not been previously listed as a top-15 publisher in our reports, partly because we were undercounting their mobile revenues in our model. We believe the numbers portrayed in this and future reports will be a much more accurate depiction of their performance and also align with the company’s reported CY17 results. For 1Q18, we estimate total gross revenues increased 15% quarter on quarter, or 40.5% year on year. The company’s flagship game is Pokerist (Texas Hold’Em Poker), which we estimate accounts for approximately 75% of its total revenues. Other notable titles include Roulettist and Blackjack.

Disclaimer
Eilers & Krejcik Gaming, LLC is an independent research firm and is neither a registered broker dealer nor a registered investment advisor.  No information contained in this report shall constitute as a recommendation or solicitation to buy or sell a security