We wrote about Vicenç Martí back in 2012 when he won the Who’s Got Game competition at our GamesBeat 2012 conference. He was running Akamon, a company that made social casino games for Latin America and Southern Europe. He sold his company two years ago and then merged it with an Israeli social casino game maker.
Now, Martí serves as the head of Tangelo Games, which targets the Spanish-speaking audience for social casino games. It’s a relatively small niche, with just more than a million monthly players at the moment. Social casino games have become a $4 billion industry, though the market is maturing, and growth isn’t as high as it used to be, according to analyst firm Eilers & Krejcik. That has prompted consolidation, and the sector had more than $4 billion in mergers and acquisitions in 2017 alone, Eilers & Krejcik said.
I caught up with Martí to discuss being a small fish in a big pond. Here’s an edited transcript of our interview.
GamesBeat: Where are you now?
Vicenç Martí: I’m in Vegas. I have a series of meetings here with more traditional gaming companies. They’ve become very interested in social casino, and we have relationships with several of them. It’s become very frequent for us to come to Vegas and explore ways of collaborating with land-based casino companies. Hopefully, in the next few weeks, I’ll come up with something interesting.
Our studio is permanently based in Barcelona, though. There are 48 people working there. Our second studio is in Tel Aviv. That’s where Diwip used to be. We have another 20 people working there. I’m the one that moves around and does the discussions with more established casino companies. We also have a corporate headquarters in Toronto because we’re publicly traded.
GamesBeat: How did that part happen? Was it through a reverse merger?
Martí: Almost like that, yes. You may remember another social casino company called Diwip. Diwip was acquired by a Canadian public company before Akamon was. Then, when that Canadian company acquired Diwip, they understood how challenging social casino was becoming in English-speaking markets. They looked for another asset with which they could leverage their existing assets, and they ended up choosing to buy Akamon. This was two years ago in November 2015. Since then, Akamon and Diwip merged to become Tangelo Games, and I run both companies.
GamesBeat: What sort of games do you have out there now?
Martí: You can divide them into two different suites. There’s a traditional social casino suite, targeted at U.S.-facing customers. This is the former Diwip. You can think of that as mostly slots for high-revenue players, very loyal cohorts. It’s more difficult to grow because social casino in the U.S. has had trouble growing. The other set of games we have is the former Akamon, which is more dynamic. It’s facing Latin America and southern Europe. It has many more monthly active users (MAU), and it’s growing faster because the opportunity for social casino in Spanish-speaking countries continues to be very strong.
GamesBeat: What kind of overall number are you talking about?
Martí: I don’t have our latest public statement, but we’re around [$27 million to $28 million] in revenue. Our operating earnings before income taxes, depreciation, and amortization (EBITDA) is very healthy, north of $8 million.
GamesBeat: What about users?
Martí: We’re around [1.4 million to 1.5 million] MAU combined. But it’s very skewed toward the Latin American and southern European players. Those grow much faster.
GamesBeat: How are you able to subsist or survive on a smaller base than a lot of other social casino companies?
Martí: First, we’re the most geographically diversified social casino company in the world. If you look at Eilers Research, it’s become the de facto research tool for the industry. We’ve always been there. We’ve never lost our position in the top 20 web and Facebook casino companies. Right now, we’re number nine in the world if you look at web plus Facebook.
Diversifying from a geographic perspective, it’s true, gives you a new set of challenges that other companies don’t have. For example, it’s much more difficult to monetize at a high level with a Brazilian or Spanish or Italian player. But from a competition point of view and an acquisition-cost point of view, we have an advantage. We know the space, and we know the industry.
One of the things that I remember us discussing back in 2012, when you have to deal with low-return players, you really need to beef up your analytics. You need to understand who’s going to be profitable against their acquisition cost. You don’t have the luxury of $100-a-month whales. They just don’t exist in southern Europe. You need to understand your cohort analysis very well. I think that has been a core competency at the company for a long time.
GamesBeat: Where have you been growing and adding new markets?
Martí: France is working very well for us. It’s an overlooked country. It has high average revenue per paying user (ARPPU) and loyal customers. Most people don’t pay attention to it, maybe because it’s sitting next to an English-speaking country like the U.K. France has been a success story for us. In Latin America, what I call the eternal promise, which is Brazil, seems to be back on track now.
GamesBeat: What competition looks most similar to you? Is it the bigger companies, or are there smaller companies with a similar strategy?
Martí: There are some smaller ones like Playspace or Piggyback Studios in Brazil that have focused on the Spanish- and Portuguese-speaking players, but they’re much smaller than us. To be honest, I think we’re in a middle that’s both comfortable and uncomfortable. We’re in the rankings. We have a decent size. You’ve seen our profitability and our revenues. But we’re still far away from the very large players in the industry, the top four.
It’s all about renewing our commitment to non-English speaking areas as a growth strategy. We’ll be launching a new mobile suite for Spanish- and Portuguese-speaking players within the quarter. I also think — this is no secret to anyone in the industry, but the mergers and acquistion (M&A) dance isn’t over yet. I see a lot of discussions around consolidating many players.
GamesBeat: Are you going to be for sale, or do you want to buy someone?
Martí: I’d love to answer that question more specifically, but to be honest, we’ve had discussions on both sides. Our margins are very attractive. We have a solid management team with a lot of experience in the industry. There have been no changes in our management team since 2012. We have a unique position in promising markets. It’s true that we’re not as big as others, so we could be interesting for a larger company, but also, we can be a catalyst or a driver of consolidation for smaller players.
GamesBeat: Are you doing some investing as well?
Martí: Yes, the company is definitely investing in new mobile platforms. We’re also investing in a couple of new verticals, which we’ll be announcing soon. We’re looking at things that are adjacent to social casino but perhaps not exactly under that definition. That includes new platforms that might, in the future, be an ideal new territory for social casino. We might also be looking at some advertisers.
GamesBeat: What do you think about using brands in your games?
Martí: That’s been a challenge for us. We have, right now, a standing agreement with the real-money gambling bingo company Zest, which now belongs to IGT. They have an interesting approach to video bingo, which is a very popular game in South America. We have a licensing and co-distribution agreement with them. But we haven’t found a proper license like a celebrity or a football player to date. That doesn’t mean we won’t in the future.
GamesBeat: Is social casino still growing well?
Martí: Right. According to industry figures, it’s growing between 6 and 9 percent. We’re looking at our last few quarters, and they’re very much on pace with the industry. It has become a much tougher industry compared to when it started. Without sounding bad, I think I can say that I was one of the first ones there when we founded the company back in 2011. Obviously, we’re not doing the same things. But it’s still a very healthy industry.
GamesBeat: Have some of the big companies had success with Spanish-language games? Most of them seem to translate into many languages.
Martí: They do but that’s a key question. Translation is only one part of the recipe. You need to think about local affiliation, local distribution, local payment systems, and local customer service. I think the majority of the big companies put in a very small effort.
GamesBeat: Are you looking at anything new as far as new kinds of systems out there, things like blockchain and cryptocurrency? Any of these alternative app stores that are becoming available?
Martí: We’ve been very attentive to the blockchain space. I have to have a relationship there. Within the framework of Tangelo, it’s much more about launching the new mobile suite geared towards new markets. We’re exploring new platforms like instant games that show a lot of promise. Eventually, at the end of Q2 or Q3, when we know what’s going to happen with all of these corporate movements, we’ll make a decision regarding any new development.
GamesBeat: It seems like it’s taken you quite a while to get to mobile. Why is that?
Martí: We have mobile on the English side. We had separate apps on the Spanish side. What’s taken us a long time is taking our full suite, Mundijuegos, which is the more popular app, to mobile. That’s taken a while. The reason for that, as you probably know, South America specifically was not very mature in terms of payment systems, especially on Android, until very recently. Now, we believe this is a time that the continent is mature.
GamesBeat: Is there a strategy to help take market share while you’re late to the mobile market there?
Martí: If you look at the absolute numbers on mobile social casino in Latin America, they’re not very big. The first thing we need to do is make sure that the very large number of players we have in Mundijuegos on web and Facebook understand the new suite. Then, we need to do a decent job of promoting the brand in the local app stores. But I’m confident that we can get a large market share there because there aren’t many competitors there that have done the whole cycle of localization. They’ve only translated, basically.
GamesBeat: Are you expecting to have to hire a lot more people in that process?
Martí: If some of the discussions we’re having around acquisitions and integrations happen, yes. I also think that at some point, we’ll renew our commitment to have a physical presence in Latin America.
GamesBeat: As far as what’s going to affect or change the social casino market, what do you foresee?
Martí: The fact that the acquisition funnel for social casino almost exclusively started on Facebook and the fact that this has driven acquisition prices so high, especially in English-speaking markets — I think what will happen is that people will find alternative ways of serving the social casino player. Not necessarily going through the entire Facebook ad funnel to app installs and all the rest. It may be some of the precursors will be — how close can we get to offering a social casino experience to a player that’s playing instant games?
GamesBeat: Are instant games going to be monetized through ads or some other way?
Martí: We’re going to have to ask Facebook about that, as you know. Right now, ads are what we can count on. But I’m sure if they see the MAU and DAU growing exponentially, as they seem to be, I’m sure they’ll give us opportunities to monetize that somehow.
GamesBeat: As far as relations with land-based casinos, they expanded into the territory of social casino games, but then, some of them have divested. What do people think of that whole theory about the funnel into gambling?
Martí: You need to take those cases one by one. We’ve met with several of these companies, and I think that several of them are super happy with the social casino positions they’ve made. It’s profitable on its own, and it’s allowed them to have a digital presence and a digital team. Some of the others — let’s not forget that some of them divested because they had complicated balance sheets where they needed a high multiple sale to help them become more healthy in their core business.
If you’re talking about the land-based casino companies that made significant acquisitions in social casino, I haven’t found a single one that says, “No, this business is not working, and that’s why I’m selling.” The people that sold did it because they needed the money to improve their balance sheets.
GamesBeat: Is it viewed as a single chain of customers or totally separate customers between real money gambling and social casino games?
Martí: I think there’s a stat — I don’t have the source right in front of me, but I believe it says that 50 percent of land-based casino customers in the U.S. have played at least one social casino app. So, in terms of being the same sort of customers, every demographic indication is that they’re very similar. That would not be the case with the more hardcore online RNG casino customer, but that’s someone different.
However, I think there are enormous benefits for land-based casino companies in owning a social casino asset because of the improvement it applies in customer relationship management (CRM) techniques and data analysis techniques. Social casino is an industry built on data. These companies benefit tremendously from having a social casino business unit within them.
GamesBeat: Does it make sense for you to get to know all the Spanish-speaking gambling companies, then?
Martí: I used to manage a large one myself [laughs]. I spent six years of my life as one of the managing directors at Cirsa, which is a $2.5 billion land-based casino company in Spain. The other large Spanish casino company is Codere, and I know everyone there as well. I speak to them frequently to see what synergies there could be with Tangelo.
GamesBeat: But you don’t have any partnerships in place at the moment?
Martí: Not at the moment. Sometimes, it’s tougher to reach a commercial agreement with people that you know compared to people that you don’t know.
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