Social casino: Q3 update

Although typically a quieter time of year, in Q3 the social casino market grew by almost a quarter against last year, with SciGames, Product Madness and Playtika all showing ever stronger growth, says Adam Krejcik at Eilers & Krejcik Gaming.

We estimate the global social casino game market grew 7.4% q/q or 23.4% y/y in Q3 2017. We estimate social casino revenues generated on Facebook were down 0.7% q/q, while mobile was up 10% q/q. For TTM, we estimate a total market size of $4.30bn or +28% y/y. The stronger than expected growth in what is typically a seasonally slow period has caused us to increase our CY17 and future five-year market sizing projections.

Performance among the top 15 social casino publishers was largely mixed. Key standout performers this quarter included Playtika, Product Madness, Huuuge Games, Tencent and Murka. It was a challenging period for Double Down Interactive, GSN and Super Lucky. Key movement in the ranking charts from last quarter included: SciGames becoming #2 publisher (and firmly ahead of DoubleU), Product Madness  moving into #4 position (now ahead of Zynga and the #2 publisher worldwide on mobile), Playstudios reaching #7 (now ahead of GSN) and Super Lucky slipping to #15 (previously #13).

Company highlights
•  Playtika, which is owned by Shanghai Giant Network Technology, saw revenues increase 7.8% q/q and 26% y/y. The sequential improvement was surprising given Q3 is typically a slow period and it speaks to some of the key new features and innovations that Playtika is constantly introducing across its portfolio of games. We believe the company was able to grow revenues sequentially for every single title this period, with standout growth from Bingo Blitz, Slotomania and House of Fun.  In terms of KPIs, we believe Playtika was able to grow DAUs this quarter, but the majority of growth came from improved monetization.

• SciGames Interactive saw revenues increase by 4.5% q/q or 34.5% y/y (keeping it firmly ahead of DoubleU Games). Our Q3 estimate includes the acquisition of Spicerack Media (Bingo Showdown). In terms of individual game performance, we believe Jackpot Party Casino was flat, while Quick Hits, Hot Shots and 88Fortunes were the primary growth drivers.  Finally, SG Interactive B2B social casino revenues were essentially flat and Blazing 7s (its newest game) was negligible as the company is still experimenting with the app and has yet to do any paid marketing. 

• DoubleU Games, which acquired Double Down Interactive (deal closed on June 1, 2017) remained the third largest social casino publisher worldwide (note: all of our numbers in this report are on a pro-forma basis). Overall it was another challenging quarter for Double Down and we estimate revenues on a standalone basis were down 6% q/q and 10% y/y, despite the launch of DoubleDown Classic (new stepper/3RM slots title). DoubleU Games fared a bit better with revenues up an estimated 4% q/q and 3% y/y on a standalone basis.

• Product Madness (owned by Aristocrat) was the fastest growing social casino company in Q3 2017, with revenues increasing a staggering 34% q/q or 62% y/y, resulting in significant market share gains and propelling it ahead of Zynga in our ranking charts. We note Product Madness is now the #2 publisher worldwide on mobile.  Growth in the period was driven by both Heart of Vegas, which benefited from the addition of new slot content including Lightning Link (the most successful new slot machine in the land-based casino market over the past year) and the incremental contribution from its newest title Cashman Casino (now available on iOS and Android).

• Zynga had a relatively healthy quarter, with revenues up an estimated 4.3% q/q and 15.2% y/y. Revenues were driven by Zynga Poker, with mobile revenues up an estimated 19% sequentially, while its slots were down on a sequential basis due to weakness in Hit it Rich and Willy Wonka. 

• Big Fish (owned by Churchill Downs), had a relatively strong period with casino bookings up 8.6% q/q or 21.6% y/y, marking the third consecutive quarter of positive sequential growth. The sequential improvement was driven by Big Fish Casino, thanks to new features that have helped drive monetization and Jackpot Magic Slots, which has allowed the company to expand its user base.

• PlayStudios saw revenues increase 4.5% q/q or 46% y/y, which puts it in the #7 position in our ranking charts (now ahead of GSN). Growth in Q3 was largely driven by POP! Slots, which continues to expand its user base thanks to unique and innovative gameplay features. The company’s franchise game, myVegas, which underwent a major overhaul earlier in the year, saw a modest decline in revenues while Konami slots saw low single-digit growth this period. 

• GSN/Bash Gaming (majority owned by Sony) had another challenging quarter with revenues down an estimated 2.6% q/q or 0.6% y/y. The decline was largely due to weakness from GSN Casino, and to a lesser extent Bingo Bash, the latter had been on a promising growth trajectory for the past few quarters.

• Huuuge Games continued its strong momentum, with revenues increasing 17.2% q/q or 347% y/y, resulting in market share of 3.6%. Growth in Q3 was largely driven by its marquee title, Huuuge Casino, which also launched on Facebook this period. Additionally, Billionaire Casino continues to provide incremental revenue gains and does not appear to be cannibalizing Huuuge Casino.

• Murka saw revenues increase a healthy 10.5% q/q and impressive 83% y/y. Revenue growth was primarily driven by its three core titles: Scatter Slots, Infinity Slots and Slots Era. Its newest title, Scatter Poker, which incorporates many of the same themes and graphics found in Scatter Slots and Slots Era, continues to move up the ranking charts and serves as an alternative product for casual poker players. Finally, the company launched Nat Geo Wild Slots on Facebook this period and our checks indicate underlying KPIs are off to a strong start.

Other
It was a relatively challenging quarter for Super Lucky (-22% q/q) and Penn Interactive (-4% q/q), with the latter remaining outside of the top-15 rankings. Both companies were negatively impacted by the new Apple policies and both companies have pulled back significantly on UA spend recently. High 5 Games and Novomatic both remained in the top-15 despite sequential revenue declines of 1.5% q/q and 3.2% q/q, respectively.

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.  Individuals receiving this report should consult with an investment advisor or registered representative before making an investment decision related to any information contained in this report.  In addition, Eilers & Krejcik Gaming, LLC either does, or may seek to do business with any company mentioned in this report. 

Eilers & Krejcik Gaming, LLC is a boutique research & advisory firm focused on servicing the gaming equipment, technology, and interactive gaming sectors within the global gaming industry. For more information about our firm and services please visit www.ekgamingllc.com