CEO Patrick Southon talks to Gambling Insider about what these results mean for the business as it aims to push on in 2017.
What is your reaction to these results, and which areas would you highlight as most significant?
For us, it is another step on our journey from being a start-up to getting to where we want to be with regards to being a very profitable business. It’s getting close to breaking even – our last half was profitable, and everything seems to be heading in the right direction. I am cautiously happy with the results, and I think 2017 will be a really good year for us.
Where do you hope to be this time next year?
As we’ve said from the beginning, our objective as a business is to create mobile games targeted at the softer, female end of the market. The ethos of the business is to have a differentiated, end-to-end product that gives the consumer something different to the standard offering. Everyone internally has bought into that strategy and it is bearing fruit, but externally we would like to see big profit and revenue figures to underline to the market that this approach is succeeding.
All the things we have been working on feed in to this aim. We have built our own platform to hit mobile, we’re building new types of games catered to our target market and we’ve bought the biggest social game in the world in Slingo. These are all major developments in recapturing the Foxy Bingo market that we had seven or eight years ago. That strategy is paying dividends, albeit in a slower manner than everyone at the company might like. We have had to grind through losing £4m a year, to losing £1m last year, to making £4m this year and pushing towards £8m - £10m in 2017, a process that is part of the nuts and bolts of any business.
Gaming Realms recorded a 22% increase in daily social publishing revenue in 2017. Could you expand on why this an important part of Gaming Realms’ growth strategy?
We don’t really differentiate between a social player and a real-money player in terms of the motivation to play and what they are looking for in a game, but obviously there are big distinctions in aspects like legality and marketing. In London we are building softer, entertainment-based games, and when we launch them online for the real-money audience we also wrap them with a social meta-game, marketing them to a social audience. That is predominantly US driven, marketed to an international audience rather than one 100% based in the UK. The strategy is working well, and we are seeing growth from what is essentially the same product that we are building in the UK, but marketed further afield. You get less value per player, but you can bring in a lot more players in terms of the standard social model. We have a unified cost base, and are able to defer development costs over both the social and real-money sides of the business. This is a strategy we undertook last summer, and it is starting to pay dividends seen in reduced losses and the social growth.
Gaming Realms' marketing spend remained fairly consistent through 2015 and 2016. Do you anticipate similar marketing costs this year?
We are planning on spending more money this year because we have our customer acquisition model more firmly in place, but I wouldn’t expect that increase to be a hugely significant one. As you start a business you obviously need to spend a lot on acquiring customers. The percentage of marketing spend to our revenue will reduce as we grow.
What challenges do you expect to face in improving on these results in 2017?
The way we described it to our staff at the beginning of the year is that we are modelling our approach in a similar fashion to Olympic athletes – we are focusing on making marginal improvements. I think we have got our basics right, and it is now about getting that extra five percent here and there, in areas like bringing down our cost per acquisition or getting our retention per player slightly higher. Those cumulative improvements will drive us forward. Unfortunately there is no magic wand we can wave to equal massive growth – it is all about doing everything slightly better, which comes from having the end-to-end technology stack and knowing what does and doesn’t work.
In the coming months you will see an increasing news flow of licence deals that we are doing. We have a high demand for our products, but we still have the process building an RGS and going through the necessary licensing procedures in certain jurisdictions. We have started that in New Jersey and we are progressing on other licensing discussions around the globe. A lot of the groundwork for this has already been put in place; it is now just a question of getting ourselves out there commercially and getting these processes completed.
We have just signed three deals with New Jersey casinos through our recent agreement with Spin Games, which shows the demand for our content. New Jersey is the home of Slingo, and players there are familiar with the quality of the product.
The report also highlights a number of strategic brand deployments which took place through 2016, including Britain’s Got Talent and The X Factor. Can we expect to see more deals of this nature in 2017, and how will you ensure that your own IP still stands out to players alongside established brands?
These games are effectively re-skins of our existing content. Because we are a young company we do not have the brand cut-through for our own products at the moment. These deals are a convenient way to reduce our cost-per-acquisition, and trading off trademarks like Britain’s Got Talent works, strategically speaking, very effectively. Our plan is to carry on doing these kind of deals, and we will be announcing more of them this year, but at the same time our plan is to invest more heavily in Slingo and build that up as a brand in its own right.
To that end we announced a sponsorship of the Jeremy Kyle Show a few months ago, because this is something we knew worked really well while we were at Foxy Bingo. Advertising alongside such an established brand really adds to the product’s credibility, and you don’t get that credibility from games based on the X Factor and Britain’s Got Talent, because you are just trading off their names. We’re trying to undertake a twin approach where we will bring down our cost-per-acquisition with branded games, thereby allowing us to invest in our own brand.
Slingo as our main brand has only existed for 18 months. It will take time to get it up to the level of the Jackpot Joys and the Tombolas in terms of UK consumer recognition, but that is what we are aiming for and something we are confident we can achieve.
