bullseye_orig_full_sidebar

Betting is nearly as old as human civilization itself, as demonstrated by writings and artifacts found in ancient tombs and other archaeological sites. It’s not surprising then, that with the emergence of casual social and mobile gaming, players have gravitated toward putting money on the line wherever possible.

Capitalizing on this trend, Skillz launched a real money gaming platform three weeks ago – in the form of an Android SDK – with one significant departure from the rest of the companies in this emerging category: It’s focused entirely on games of skill, rather than games of chance, hence the name.

Skillz surpassed 1 million downloads and 100,000 real-money gaming registrations in its first two weeks and has seen continued rapid adoption in the days since. The size and engagement level of a gaming audience is especially important when money is at stake so as to ensure sufficient liquidity in the marketplace.

Over this same time, the average player participated in five tournaments per day, with the average bet size being $1 – the platform allows for bets between $0.25 and $5 per contest. At launch, Skillz announced 10 publisher partnerships and has since grown that number to 15, including the addition of Office Jerk maker Fluik and G-Gee developer GMO.

The difference between games of skill and games of chance is subtle, but determines on which side of the gambling laws a game developer falls. The threshold, in the eyes of the law, for a game to be considered one of skill is that the top 10 percent of performers must defeat the bottom 10 percent at least 70 percent of the time. Skillz also relies on this ratio for each of its games to determine the odds and payout algorithms for its contests.

“Gambling,” as it’s called when wagering on games of chance, is highly regulated and only legal online in Nevada today. “Betting,” on the other hand, categorized as wagering on games of skill, is legal in 36 US states for those over 18 years of age.

In explaining his decision to focus on games of skill rather than games of chance like the majority of his competition, CEO Andrew Paradise – a fantastic Las Vegas card shark name if there ever was one – argues that, based on population and wealth, the US represents one-third of the $100 billion global real money gaming opportunity, making it more attractive than any other international market. While this may be true, most others have argued the opposite, that the international market is collectively bigger than the US and also more active in mobile and online gaming, as well as real money play.

Zynga, for example, began offering real money gambling to UK players of its casino games. Real money gaming platform Betable has similarly partnered with a handful of publishers to enable UK gaming – something made possible because it holds two rare and difficult to obtain UK online gambling licenses.

As I wrote previously:

Casino gaming may be the most obvious place to start in the RMG category – it’s familiar after all, and easy to implement – but expect the companies that emerge victorious to be the ones that add real money play to other, non-casino experiences like strategy and adventure games. Whether its head to head wagers directly between players, tournaments with real cash prizes, or simply the ability to cash out the myriad of real game virtual currencies already in place, there are no shortage of avenues to add RMG to non-casino games. Don’t be surprised to see [developers implement a variety of these models] in the near future.

Real money gaming is relatively new everywhere around the world, and the opportunity remains enormous. It is likely that the market winner(s) will offer both games of skill and games of chance, regulations permitting.

The rub with real money game play, both skilled and unskilled, is that in addition to improving monetization – dramatically – it also increases user engagement and retention. Seeking to maximize this impact, Skillz also allows developers to implement betting using in-game virtual currency as opposed to real money. Publishers typically serve ads in virtual currency tournaments (as well as sometimes in real money play), making increases in engagement particularly impactful. To date, 10 percent of players have chosen the real money path, with nearly all of the remaining 90 percent betting using virtual currency (as opposed to playing without betting).

Skillz has built an 18 person team, two-thirds of which fall under the product and engineering roles. The company raised $1.3 million in a November 2012 Seed round backed by Atlas Venture, NextView Ventures, and Mark Jung. The company chose to launch on Android first because of the platform’s reach and because iOS has typically monetized better for developers. That said, the company is looking to expand to the Apple platform as soon as possible.

For game players, adding a few cents or a few dollars to a casual game may be enough to keep a game interesting beyond the first few days of intrigue. At the same time, integrating real money play should be a no-brainer for most developers as it solves their biggest obstacles including raising awareness (through the sex appeal of betting real money), driving engagement, and increasing monetization. For Skillz, creating a gaming environment most amenable to user engagement and retention is something of a game in itself. A game, within a game.