Block Chain 101 (a super-newbie guide)

My goal for this page is to provide block-chain newbies a resource where they can spend a couple hours getting introduced to this world without trying to navigate the endless sea of information on the web.

Where does one start on such a complex subject? Maybe ill start by saying that in no way am I an expert in the blockchain / cryptocurrency world but much like many of my previous subject-matter-addictions, I am well on my way to mastering the information. I have been obsessing over the subject for well over 6 months and can say that its highly likely that I will be spending most if not all of my future career in this space.

My current perspective is that the invention of this technology is undoubtedly the beginning of a fundamental paradigm shift in humanity. If the internet was the revolution of information, the blockchain is the revolution in trust and value exchange. The potential manifestations of this revolution are mind blowing and all encompassing. I have no doubt that the blockchain will make its ways to almost every form of human economic interaction. It even has the potential to reshape the nation state and the global capitalist economic structure as we know it.

This list is in no way fully comprehensive but should give you the basic framework with which to further research the subject. If you have suggestions for additions please do let me know. I of course will update this page every so often.

I suggest watching the videos below in the order in which they are presented.

_______________________________________________________

1) How the blockchain will radically transform the economy: This is one of the first talks that got me interested in the subject. Its gives a concise and high level explanation of what the block chain is and how it can transform much of how we think about value, trust, and intermediary services.


2) How the block chain is changing money and business: Don Tapscott is an early adopter and a published author on the subject. This lecture is a bit more detailed and delves into some more real world examples of potential disruptions that are coming with the block-chain tech. He too gives a good intro for non techies to the concepts and explains how they work.


3) Introduction to Bitcoin: Andreas Antonopoulos is one of the most well know speakers and experts on the subjects of bitcoin and blockchains. He is considered by many as THE expert and has taken it upon himself to teach (some would say preach) about Bitcoin and its underlying tech. This intro below blew my mind and is undoubtedly my favorite video to date about the subject. Although the video is about bitcoin not purely just the blockchain, the two are intertwined and he gives a very good overview of the innovation brought about by the blockchain. His you tube channel is filled with lots of relevant videos. This is definitely the best into out there.


4) Ever wonder how Bitcoin and other crypto currencies work / How bitcoin works under the hood: This is a good place for us non techies and techies who are newbies to blockchain to understand how the underlying technology works. Since this technology is so ground breaking and conceptually so unique I suggest that you watch this even if youre not that interested in the technology. It will allow you to further internalize the potential.


 

Please leave comments below with other suggestions if you feel I need to add something to this 101 intro. Thanks!

Advertisements

Why Double U Games Acquired Double Down from IGT

*Disclaimer: All opinions are my own

Double U Games announced today that it has acquired Double Down from IGT for $825M. The sides have also announced that they will be signing a distribution and services agreement that will give Double U access to IGTs extensive slots portfolio. The deal follows an ongoing trend of consolidation in the market and considering the size of the transaction it will go down as one of the top 3 deals in the past few years. The transaction was priced at a 10.5 EBITDA multiple and is within range of market standards. I can say that the price does not surprise me.

As I have written in past posts, the consolidation trend is expected to continue due to multiple market forces and I have no doubt that this is not the last deal of this size that will happen in the niche.

How will this deal affect market leadership?

Owning a (relatively small) 3.5% of the global Social Casino market share prior to the transaction, Double U Games generated approximately $135M in 2016 a which represents over 20% year over year growth. Double Down on the other hand had a less positive year in terms of growth and generated approximately $280M in 2016, down almost 12% from 2015.

The combined companies will own approximately 11% market share which will push Double U Games to the #2 spot up from its #8 spot. The transaction will also push down Zynga and Scientific Games to the #3 and #4 spots respectively. Playtika still maintains its long lasting #1 position and owns a staggering 25% of the global market.

Of course, all of these are the immediate shifts in the pyramid, but the real impact of the deal on the leadership structure will take time to be realized. If Double U can follow through on the transactions potential, we could see them becoming an even stronger competitor in the future. On the other hand the post transaction challenges are going to be significant and this is by definition not a plug and play deal given the cultural, geographical, and operational complexities that lay ahead of all three sides (Double U, Double Down, and IGT). The hard work has just begun.

So Why Did Double U Games Acquire Double Down?

Several strategies are at play here but I will focus on the two most obvious ones: market share and content.

Content: Those who know the industry well understand that Social Casino is first and foremost a content based industry and that there is such a thing as a bad, mediocre, and great slot machine. A passionate slots player (a.k.a a whale) will always gravitate towards quality content and quality content is by definition not something every company in the niche can claim to have. By acquiring Double Down and gaining access to IGTs proven slots portfolio, Double U Games gains a significant competitive advantage that they did not have in the past. We can work under the assumption that the distribution and services agreement signed between both sides will allow Double U to launch IGT slots in all their social casino games and not just in Double Down Casino. If executed correctly this will drive loyalty, allow for better/cheaper user acquisition, and of course will directly increase revenues.

Market Share: I discussed market share above at a high level but there is another sub-strategy that isnt as obvious from just the leadership numbers. Social Casino players are a loyal bunch and tend to play and pay in a small number of games at any given time. More so there is a limited amount of whales in the market. Double Down Casino is one of the first games ever launched in the niche and given its early entry point back in 2010 it was able to acquire lots of early adopters who are passionate slots players. Given the loyal nature of Social Casino players we can assume that many of these whales are still playing and paying in Double Down Casino. By acquiring Double Down, Double U has acquired a very lucrative segment of users which would be almost impossible to acquire (or just too expensive) via standard user acquisition. Even if they don’t cross promote between their games, Double U has acquired one of the best player bases in the market which will strengthen its position as a market leader.

Why Did IGT / Gtech Sell Double Down?

Established in 1975, IGT has been a leader in the slots manufacturing industry for many years. When the Social Casino niche was emerging in 2010, IGT was one of the first companies to identify the potential and acquired Double Down Interactive (for approximately $500M) which was one of the first companies to develop a social casino game. IGT employed the exact same content strategy that I believe Double U will be doing now. It took its proven offline slots games and integrated them into their new social casino product. The strategy proved itself and Double Down became one of the most powerful companies in the niche.

One of the unfortunate developments during the first years was the Double Downs original founders left the company and it seems that as a result IGT was forced to intervene in the subsidiary. Without speculating too much about what happened inside the Double Down team as a result, Ill say that something went wrong and they lost their business momentum. Their decline over the past couple years speaks for itself. Despite being positioned early on to aggressively compete with Playtika they just couldn’t hold their position.

Fast forward to 2015, IGT itself was acquired by Italian Gtech for $6.4B making Gtech one of the largest players in the global gambling market (reminder: Social Casino is not in the gambling industry). Double Down became a less significant driver of growth for IGT/Gtech because its relative size compared to other subsidiaries. Given the management challenges and declining results, I must assume that IGT/Gtech began to see Double Down as a headache. Its probably at that moment that they decided to sell and focus their efforts on their core business. Of course lets not forget that the timing of the deal was right as well given recent comparative deals which set the price benchmarks higher than in the past.

Why this is a great deal for IGT/Gtech?

Other than having sold the company at a profit (which is always nice), IGT/Gtech gets to maintain some exposure to the social casino niche via the distribution and services agreement. Though the sides have not announced the terms of this agreement we can assume the upside for IGT/ Gtech is significant and thus allows them to generate social casino revenues without the “headache” of operating a social casino business.

What are the challenges that lay ahead?

There are many. As I said above, the hard work has just begun and many questions need to be answered and their answers need to be executed correctly. Here are just a few high level challenges they will be facing.

Cultural challenges: Cross national M&As often come with cultural challenges. Will the new owners know how to bridge the Korean / US cultural gaps? Will the US based team know how to work with the new Korean owners? Of course this challenge is further amplified via not just regional cultural differences but corporate cultural differences as well.

Operational challenges: How will the new organization be structured? Will Double Down Casino operate as a stand alone unit? Or will it be integrated into Double U Games current operations? How will reporting lines be structured and what affect will it have on operational efficiency and game quality?

Content Integration: Unlike in a standard M&A deal where the seller and buyer eventually separate, the distribution and services agreement means IGT/Gtech remains an interested party throughout the agreements term. This brings with it many potential challenges, including technological ones, IP related challenges, relationship management challenges, and much more.

So whats the bottom line?

The bottom line is that time will tell whether this was a good deal or not for Double U (much like every every M&A). On paper, the deal makes sense for all parties and if executed correctly over time will strengthen Double U, revive Double Down, and will generate a short and long term upside for IGT/ Gtech.

As always, I want to congratulate everyone on the deal and wish luck to all my friends in the respective teams.

————————————————————

This post is part of an ongoing series of deal reviews. Here are past reviews:

6 Reasons Tencent Acquired Supercell

Why Activision Blizzard Acquired King

State of the Social Casino Industry Q2/Q3 2016

A few weeks ago I have the opportunity to present an updated State of the Social Casino talk at Casual Connect Tel Aviv.

Casual Connect was hosted in Tel Aviv for the second time and much like the first time around it was a big success. Even more than the year before, lots of high level executives attended and social casino undoubtedly stood out.

Below is my talk and the slides. This, and other relevant social casino lectures will be added to the Social Casino 101 page on my blog where you can get a comprehensive overview of the social casino market.

6 Reasons why Tencent Acquired Supercell. The Perspective of an M&A Guy in the Games Industry

In a similar previous post about Why Activision Blizzard Acquired King, I suggested that additional megadeals are just around the corner…. and here we go… today Tencent announced that it will be acquiring control in Supercell at a $10.2B valuation.

Supercell also announced that they will be able to continue to operate as an independent unit under Tencent. I think this is a smart move for both sides given that Supercell is known for its unique team structure and company culture, both of which, drive their ongoing success.

The below is a “quick and dirty” review of some of the strategic reasoning that drove this deal.

Disclaimer: all opinions are my own.

So why Did Tencent buy Supercell?


To increase their global market share: Tencent is already the largest games company on the globe and even before owning Supercell their share of global market is substantial for any one company. While Tencent generated more than $8.7BN of revenues in 2015, Supercell generated $2.3BN potentially bringing them to a combined revenue of over $11BN. That’s a staggering 11% of the global games market which generated a total of $91BN in 2015.
Newzoo_Global_Games_Market_Revenue_Growth_2015-2019-1

Source: NewZoo


To increase their EBITDA: Supercell generated almost $1B of EBITDA in 2015, and we can assume that 2016 will be even a better year given the company’s growth via Clash Royal. Acquiring Supercell would add that EBITDA to Tencents financials and strengthen its financial position. Of course this benefit is subject to the financing structure of the deal itself which would bring with it financing costs. Tencents ability to make this a successful deal would rely on the fact that Supercell would be able to generate enough cash over the coming years to pay for the financing.

Capture

Source: Tencent


To become a “Mobile First” games company: Though Tencent leads the global games market, the market itself has been shifting towards mobile over the past few years. Mobile games are the fastest growing segment in the industry and are expected to generate more than 35% of global games revenues in 2016 (estimated at around $99.5B). Tencent “only” generates about a third of its games revenues from mobile platforms at the moment and the rest being mostly from web based MMOGs. With Supercell in its portfolio, the share of mobile revenues from Tencents games would be more than 50%, formally making it a mobile first company and thus on track to maintain its global leadership in the games market. The fact that engagement in Tencents MMOG’s have been in decline (probably because users are shifting to mobile) further strengthens their need to make a stronger move into mobile.

Concurrent Users in Tencents MMOGs

Concurrent Users in Tencents MMOGs

Source: Bloomberg


To diversify their risk: It’s no secret that the Chinese economy is in a general downturn. This increases the risk profile of Tencent given that it is exposed to macroeconomic market changes. Tencent is China’s largest digital company and owns many of China’s leading online platforms (QQ, Wechat, and more). As the Chinese market moves from superfast growth to slower growth revenues from online advertising, e-commerce and social networks are already affected due to “a challenging macroeconomic environment” (Tencent Financials). This trend is expected to continue in the near future. Further strengthening its non-chinese revenue by acquiring Supercell would essentially act as a move to lower this potential risk and hedge against the Chinese downturn.

Tencent Revenue Breakdown

Source: Tencent


Because they can create an upside via cross promotion in China: Supercells games are one of the only western games that has been able to top the charts in China. This proves the Supercells games have a market in China. Once Tencent will put its full weight behind Supercells games via cross promotion on its existing games and social networks in China, we can assume that Supercells games will further dominate the top grossing ranks and will enjoy from a wider distribution on China’s multiple app stores and games platforms.

Newzoo_PrioriData_Top_20_iOS_Games_July_2015_China

Source: NewZoo


To learn from the one of the best games companies in the world: Supercell is one of a handful of companies in the world that have been able to achieve such amazing success in the games industry. Generating over $2.3B of revenue with only 180 employees and only 4 games. How do they do it? What’s their secret sauce? That’s what Tencent is looking to answer and their goal will be to learn, replicate, and repeat the success in other teams within Tencent. Of course that’s easier said than done but we can assume that knowledge sharing is one of the goals of such a deal.

Capture

Source: Supercell

Join the Playtika Biz Dev Team in San Francisco

It’s not often that I open a role in the Playtika Biz Dev team. I am looking to hire a Director of Platform Relationships in San Francisco. If you or someone you know are the rock star I’m looking for please contact me.

DIRECTOR OF PLATFORM RELATIONS

Playtika is looking for an energetic, self-learning, multidisciplinary, hardworking, Director of Platform Relations to join our Business Development team in San Francisco.

The Director of Platform Relations will report directly to the SVP Business Development located in Israel.

This role will require working in a semi self-managed environment which bring with it multiple challenges.

The candidate should be the autonomous type who is able to thrive, succeed, and conquer despite such challenges. The team member will be working from a co-op office space such as WeWork.

JOB DESCRIPTION

  1. Maintaining, managing, and expanding Playtika’s relations with platforms such as Google, Apple and Facebook
  2. Developing a deep knowledge of the platforms, their stakeholders and identifying untapped platform related opportunities
  3. Educating our global teams about current and future platform related opportunities, features, trends, and regulations
  4. Educating platform stakeholders about our business strategy and needs
  5. Liaising between platform and studio stakeholders on all platform related matters

REQUIREMENTS:

  1. Engineering or Product/Project Management related experience in the mobile or tech industry
  2. Familiarity of mobile ecosystems
  3. Familiarity with the games industry is a big plus
  4. Excellent written and verbal communication skills
  5. Strong PowerPoint & Excel skills
  6. Fluent or native English
  7. Strong time management skills with a “get things done” approach
  8. Ability to work in a cross-departmental environment across multiple time zones
  9. Willingness to travel 4-8 times a year to Playtika’s headquarters in Israel as well as other global sites

Please submit applications here