07/08/2013 10:36 BST | Updated 06/10/2013 06:12 BST

A Short History of Social Gaming and How It Is Being Monetised Today

Social gaming is as old as humanity. Board games dating as far back as 3000 BC have been found in ancient Mesopotamian tombs, although today we tend to think of the advent of Dungeons and Dragons as the dawn of social gaming. More recently, there has been an explosion of massively popular multiplayer online role-playing game (MMORG) - the internet playing a key role in widening the age, gender and geography of participants. Meanwhile the even more recent explosion in global accessibility of mobile devices has further contributed to the increase in social gaming, via the likes of Facebook and gaming apps.

According to Morgan Stanley's Social Gambling: Click here to play report, 12% of the world's population (estimated to be 800 million people) play at least one form of social game per month. The merchant bank suggests that social gaming will be the next boon for gambling providers - it expects to see market size grow from a present market size of approximately US$1.7 billion to US$2.5 billion by 2015. At present, Asia comprises 36% of the market, with North American players slightly behind at 35% share.

Social Casino Metrics believes that strong performance in the US has been due to widespread acceptance of social games as well as the limited options for online gambling. However, Australia is the region that monetises most strongly: the Australian user base of 2.9 million people produced revenue of US$6.3 million, double that of Italy, where revenue was US$3 million among an audience of 5.4 million people.

With many games offering free options or 'freemium' models, how should providers be looking to monetise their offerings? It could be seen as a big step-up for users who are used to playing free of cost. The challenge, according to Hussein Chahine, Founder and CEO of Yazino, is bridging the gap between free and engagement - "make the experience as immersive as possible so that they not only stay with the game, but start to pay for the game," says Chahine. "It's all about engagement and a good user experience." (WorldPay Social gaming and gambling: chapter one)

The average conversion rate for social gamers into paying customers is between 2% and 3%. With online gambling, Chahine expects that rate to be between 5% and 6%.

"The user needs to trust you, and feel that the game is fair. Unlike online gamblers, social gamers are driven by more than monetary reward. Merchants need to tap into the right emotive triggers such as achievement, recognition, and social standing among their social gaming peers. The role of the community is very powerful."

A key factor that can help facilitate payment is understanding the cultural preferences that affect which payment methods players prefer to use. While social gaming allows users to engage with other players regardless of geography, their preferences for how they pay for any additional services or features will be determined by culture preference. For example, in Germany transactions are predominately made using Sofort, in Japan i-BANQ, Australia POLi, UK Intercash and Todito Card in Mexico. By understanding these cultural preferences, providers will be able to maximise transaction acceptance rates.

The second consideration is to make the payment option as frictionless as possible. Consumer frustrations are driven by additional 'surcharge' fees, pop-ups and redirections to other sites during the gaming experience. Similarly, having to visit another site and recall passwords is another bugbear for gamers. One option being explored by gaming providers is in-app purchases, allowing gamers to purchase purchases of power-ups, virtual currency and unlocking levels, which we can expect to see more of in the near future.

It's an exciting time for the social gaming landscape, and it's fair to say that many operators are still at the beginning of the path to monetisation (and a more immersive experience for all). The key to success here will be personalisation and accounting for cultural preferences, as well as making the payment experience as seamless as possible.