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23 April 2012

Facebook drives growth of social gaming developers

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The networking giant has put a British firm on route to Nasdaq...

London Riccardo Zacconi will always remember Christmas Eve 2003 — it was when his company almost went bust.

Instead of jetting off to spend time with his family, Zacconi and his then business partner, Toby Rowland, son of the late Tiny Rowland, were hunched over the office fax machine waiting for a letter of fin-ancial support that would keep their online gaming operation afloat.

At the last minute, the vital document arrived, with the promise of backing from an old colleague. Nearly nine years later, that vote of confidence looks likely to prove a shrewd investment.

The company,, has evolved into Britain's leading player in the fast-growing social gaming market, taking on the likes of Zynga, creator of Farmville, and other American rivals such as Electronic Arts. could even emulate Zynga and pursue a lucrative listing on Nasdaq.

Social gaming is booming. It is estimated that the amount spent on such games will hit more than $8 billion (Dh29.4 billion) globally this year, and nearly $15 billion by 2015.

Many of the most popular games are played by Facebook users. Apple's App Store has become a centre for developers of smart phone applications. Similarly, the social network's huge worldwide membership makes it the prime destination for games creators.

It is this that has helped propel to the front ranks of the industry. When Zacconi, a 44-year-old dotcom veteran, and Rowland started the company in 2003, it foc-used on internet versions of board games, word games and quizzes on its own website.

Funding hiccup

After the initial funding hiccup, it went well, turning a profit every year since 2005. By the summer of 2009, however, Zacconi realised the market was evolving. "People were moving away from large portals to play games on Facebook," he said. "Initially, the quality was low, but you could play with your friends." needed a new strategy to compete. The solution was to set up a team to develop products for Facebook in parallel with the existing website. The company calculated that many of the games could be adapted for Facebook. The first to make the move was Bubble Saga, which quickly took off.

It was soon followed by a Facebook version of mah jong. went from about 300 million games played a month to more than 2.5 billion after joining Facebook. Bubble Witch Saga, launched last September, helped make it the fourth-biggest gaming company on the site. Zynga is comfortably on top, followed by Electronic Arts and Wooga.

On Zynga's trail

Zacconi has Zynga, which clocks up more than 50 million daily users, in his sights. "We are going after them," he said. has quite a way to go — it attracts less than 20 per cent of the players Zynga has — but it is growing fast. The most recent accounts for the London company show turnover of €35 million (Dh169.59 million) and pre-tax profits of nearly €1 million — down from €4 million in 2009 because of the investment required to expand into social games.

Zacconi is coy about discussing the group's latest figures, but they are up substantially. He expects revenues to top €100 million this year, thanks to income from advertising and from players buying extra lives to help complete the games.

The stock market is likely to come calling, not least to provide an exit for two venture capital firms, Apax Partners and Index Ventures, that invested in 2005 — an age ago in tech terms.

The business has already made Rowland, who left in 2006, and Zacconi wealthy — they were able to take money off the table when the venture capitalists bought in. The deal valued at €75 million.

Zacconi would like to follow Zynga onto Nasdaq. The American firm was valued at $7 billion when it listed in December. "It's something we are thinking about. We have an option next year to go public," he said.

A sale is another possibility, particularly as social gaming companies are changing hands for big bucks. In 2009, Electronic Arts, famous for sports games such as Fifa 12, picked up Playfish for $300 million. In January, Double Down Interactive, which has a casino game, sold for about $500 million.

There could be increasing convergence between social gaming developers and their online gambling cousins. Bwin Party Digital Entertainment, which runs poker, sports betting, roulette and bingo, is examining the market and has helped set up an investment fund dedicated to social games.

"It's an area that is of great interest to gambling companies," one City leisure analyst said.

There is even talk that Zynga, or one of its ilk, could expand by buying an online gambling group. Either way, future Christmases promise to be rather less stressful in the Zacconi household.

PartyPoker And PartyCasino Owner Digital Entertainment Plans Return to US Market...

Online gambling firm are set to return to the US poker market after almost six years away following their application for a gaming licence with the Nevada Gaming Control Board.

The Gibraltar-based company – which owns online poker room PartyPoker – have submitted their application to add their name to an ever-growing list of firms showing massive interest in taking advantage of the expected legalisation of online poker in the USA.

Bwin.Party Digital Entertainment plc was formed in March last year following the merger of Bwin Interactive Entertainment AG and PartyGaming plc to create the world’s largest publicly traded online gambling company that is now listed on the London Stock Exchange.

PartyGaming Left US Market in 2006

This merger came almost five years after PartyGaming took the decision to suspend all real-money games in the USA, before then exiting the market three days after the US government’s passing of the Unlawful Internet Gaming Enforcement Act (UIGEA) back on September 29, 2006.

In April of 2009, PartyGaming decided to reach a settlement with the US Department of Justice (DoJ) in which they agreed to pay a $105 million penalty over four years as part of a non-prosecution agreement for providing online gambling to American customers before the UIGEA was passed.

As an element of the agreement, PartyGaming put its name to a “statement of facts” in which it admitted that, before October of 2006, they had aimed to attract American citizens that resulted in the processing of transactions “contrary to certain US laws”.

This deal ensured that PartyGaming were not prosecuted and also made sure that they could return to the US market if – and when – new laws are put in place to regulate all internet gambling in the North American nation.

Partnership Provided Opportunity to Return

Bwin’s merger with PartyGaming last year also paved the way for the new company to partner with Nevada-based gaming firms Boyd Gaming and MGM Resorts International late last year in what was considered an “anticipatory” move ahead of the hoped-for legalisation of online gambling in the States.

The venture has resulted in owning 65% of the company as they provide and maintain the software for both gaming businesses, while MGM – which also runs hotels – holds 25% and Boyd Gaming just 10%.

Boyd Gaming and MGM have previously applied for licences with the Nevada Gaming Control Board to operate as online poker providers.

PartyPoker Still World’s Second Biggest Poker Room

PartyPoker had been the world’s biggest internet poker brand – if based on their number of players and cash game revenue – before pulling out of the US market, although it still holds the position as the second biggest behind PokerStars.

While Jim Ryan,’s chief operating officer, recently told media that the joint venture is unlikely to see them regain the 50% share PartyPoker enjoyed before the introduction of the UIGEA, he does expect to see a “very meaningful liquidity pool” in what will be a highly competitive market.

Stay tuned as well follow up the story.

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