Is there a difference between the state of affairs in the video game market and the gambling industry? This was discussed by Vladimir Nikolsky and Alexander Riddick at the recent WN Conference Cyprus’24.
Yulia Lebedeva, the COO and partner of WN Media Group, moderated their conversation.
Vladimir Nikolsky and Alexander Riddick
Lebedeva: Hey, guys! To start, can you give us a brief introduction about yourselves?
Nikolsky: I've been in the gaming industry since 2003. I founded and was CEO of My.Games. I also founded and led IT Territory. I was CEO of Astrum Online Entertainment and COO at Mail.ru Group (later known as VK Group). Now, I'm the founder of the holding company Utmost Games, investing in games.
Riddick: I'm relatively new to the gaming industry. My team made its first game investment a little over two years ago.
Historically, I specialize in traffic management, having worked in this field since 2008. I started as a freelancer, getting introduced to affiliate marketing. I spent many years as a publisher, dealing with mobile subscriptions, selling discs (such as those for weight loss subliminal messages), promoting goji berries, green coffee, and much more.
Since 2013, I've been in the gambling sector. At one point, I had the first multi-vertical gambling affiliate program, and we were number one in selling download traffic.
Since 2016, I've been the CEO of PIN-UP Partners, which has transformed into the flagship PIN-UP.TRAFFIC project. Besides affiliate traffic, we provide multi-source traffic solutions through Media buying and SEO.
Lebedeva: Great, now that we're acquainted, let's dive into a challenging topic. What do you consider the most important aspect of the gaming business?
Nikolsky: I'll take a step back.
Everyone involved in development or publishing sees the same situation daily: a dozen new games are released, most of which don't even meet the publishers' minimal forecasts.
Why is that?
Players have become very selective and demanding. They're looking for bright, new experiences that justify the time spent on a specific game.
So, the key in the gaming business today is anything that can evoke emotions in the player: characters, the world, the storyline, and how the game fulfills their fantasies.
A game only becomes a hit—a phenomenon that "sells itself" through organic reach—when it evokes emotions in the player, prompting them to share their experiences.
Creating a true hit largely depends on luck, of course.
Buying traffic is always an option, but it's crucial to understand: boosting a hit with traffic is beneficial to the product, while pumping traffic into a mediocre product is a waste of money.
Riddick: As a newcomer to the gaming industry, I have to disagree here.
From my experience in promoting gambling, I believe there's no such thing as a bad product, only bad targeting.
Certainly, you can't spend tens of millions of dollars on a poor product and expect a positive ROI. However, there are niche, non-competitive stories where, with the right targeting, you can achieve a positive traffic influx.
Lebedeva: Let's pause here. You say there's no such thing as bad products in gambling. What distinguishes a great product from a mediocre one in this niche?
Riddick: Let me talk about failures/successes rather than quality.
In our niche, 90% of projects fail.
The reasons for failure vary, with four main ones:
- Poor operational execution;
- Inability to effectively manage traffic;
- Lack of a revolving fund;
- Misjudging geo-specific risks.
Generally, if your game’s GGR is less than a million dollars a month, you're a small operator and likely in the red. Yet, 90% of products don't even reach this level.
A typical failure story involves a former manager of a gambling product finding an investor and convincing them that they can create and manage a casino, suggesting money is all that's needed.
I've heard hundreds of such stories, leading mostly to financial losses.
A successful product in this niche is one with a GGR of $20-30 million a month, and there are no more than 200 such products on the entire market.
Hits have a GGR of over $100 million a month, with only about 30 existing—these are the market leaders.
If we talk about the top 5 in the market, their monthly GGR reaches $300-500 million.
All figures are approximate as no one discloses their numbers, but I believe this estimate is close to the real state of the gambling market.
Lebedeva: Vladimir, how does revenue look in the gaming industry?
Nikolsky: 95% of games earn nothing.
There are only a handful of mobile games earning more than $100 million a month: Honor of Kings, MONOPOLY GO!, Royal Match, PUBG MOBILE, and Roblox.
Games that earn more than a million dollars a month are fewer than a thousand, yet there are about 5 million game titles across all platforms.
Lebedeva: So, are we talking about significant competition?
Nikolsky: Significant is an understatement.
The market is oversaturated with offerings. Games are made by everyone—from individuals to big studios, from enthusiasts to professionals. Any student can develop a game, upload it to a store, and theoretically start earning.
Why theoretically?
Most projects get filtered out by users based on a simple criterion—execution quality.
Ideas by themselves are cheap. Quality execution is an entirely different matter—it's expensive and rare.
But good gameplay, both in terms of concept and execution, is just the beginning. Equally important are monetization implementation, marketing, LiveOps, and audience engagement.
Even if the team excels in all these areas, their project can still be doomed by modern competition's main form—traffic competition. Many genres' monetization doesn't cover the ever-increasing CPI, as companies like Netflix, TikTok, and YouTube also vie for users' attention.
Ultimately, games that survive do so because of a broad funnel (lowering CPI) and deep monetization (boosting LTV). Ideally, a modern game should combine unique and engaging gameplay, a broad funnel, deep monetization, and quality LiveOps.
Lebedeva: That's ideal, but in reality, working in such a market is extremely difficult.
Nikolsky: Despite the vast competition, it's actually easier today to work on the global market than in the past.
Let me explain why:
Nowadays, operating worldwide is another essential success factor, requiring a balance between audience size and spending capacity.
Previously, publishers had to independently enter each locality. Today, platforms and stores handle much of this headache, like payment issues.
Of course, some markets remain relatively closed to such platforms, requiring individual approaches. One example would be China, but that's more of an exception than the rule.
Lebedeva: Let's not stray too far from the competition topic, what's it like in gambling?
Riddick: There are thousands of products coexisting in the market, with less than a hundred being visible.
In other words, competition was, is, and will be present.
The main competition focuses on partner rates (based on ROI predictions) and the budgets each company has. The larger the company, the larger the traffic budget, and the more extended ROI periods it can afford.
Lebedeva: Earlier, Vladimir touched on running operations globally. How is it in gambling? Is there also a need to think globally, targeting the entire world?
Riddick: Product affiliates often operate across all geos, which seems unfeasible in gambling—it's nonsensical.
For most gambling operations, entering a new region takes several months of work, including audience research, product adaptation, and local payment method integration.
The main challenge is payment methods. Games have it easier since stores handle payment acceptance issues across various locales.
It's also worth emphasizing that for gambling, expansion often involves a significant product overhaul, as player behavior patterns differ across countries. What works in one region might not in another, affecting both the product and its promotion.
Lebedeva: Speaking of audience attraction, how does that stand currently?
Nikolsky: In video games, marketing is used very selectively. For clarity, let me provide a brief history overview.
Initially, marketing meant bold decisions and exploring new promotional channels. Marketers formulated positioning, unique offers, and sought ways to interact with the audience.
Eventually, it became viewed as something too broad, leading to "marketing" referring primarily to purchasing.
However, the mass production of creatives, churning out attention-grabbing images, was mainly effective in the industry’s "wild" years.
The popularity of this model among game promoters led to three outcomes:
- The emergence of numerous restrictions (advertising began to be regulated by law, among other things);
- Increased competition in offerings;
- Changed user behavior.
Consequently, slicing creatives became insufficient for gaining an audience into a game. There were just too many offers. This led many market players to reconsider and return to basics, learning classic marketing techniques.
Look at how well-selling games are presented on Steam—partly an example of "classic marketing." Or take note of how much effort Supercell invests in brand recognition, ensuring users immediately associate the company’s IP with its games. It's important to note that Supercell has long engaged in classic advertising and community work. Just a few years ago, no one saw the point in it.
However, there are very few specialists capable of developing such marketing. They need nurturing from scratch.
Lebedeva: And how does gambling attract traffic? Are there similar issues or is the situation entirely different?
Riddick: As someone who has dealt with traffic for over 15 years, it's bewildering to hear that games, able to run ads without fear of a ban, still fail to earn a profit.
I've mentioned before that there are no bad products (or almost none), only poor targeting.
Setting up an ad campaign and controlling traffic spend with a positive ROI is fundamental. We have thousands of affiliates, most of whom operate profitably. Of course, volumes differ, but the minimum ROI that interests them is 30-50%.
In other words, a good product media buy with the right analytics and KPIs can always operate profitably.
Of course, immediate return on investment isn't guaranteed. Careful modeling is necessary, factoring in media influence on performance, using an appropriate payback period depending on the channel, and so on.
Lebedeva: Any advice on traffic sources? What do video game publishers and those in the gambling direction rely on?
Nikolsky: I probably won’t say anything new: Facebook, Google, Applovin, Unity, TikTok, CPA networks, various influencers. They use everything.
However, it's important to focus not on the sources but on the ROI of the purchases. Everyone remembers stories of 100% payback purchases over a year or two. In such cases, any market shock can destroy the entire economy.
Riddick: Speaking of traffic sources in gambling, it's simple—they use absolutely everything: search, media, influencers.
Affiliate stories particularly help with purchases since each affiliate is essentially a separate marketing agency, each with unique approaches, methods, and sources.
Lebedeva: Understood. Thanks for the fascinating discussion. I'm sure it's now clearer how these two markets are both similar and different.
By the way, on December 11, we’ll host the WN iGaming Summit in Limassol, Cyprus, where we’ll delve even deeper into online gambling and its intersections with the gaming industry.