Seattle’s becoming the new Barbary Coast.
First it legalizes marijuana. Next it’s likely to become the hub for online gambling.
The city’s already on the forefront of online casinos, with Seattle companies building some of the leading virtual-gambling operations on Facebook and mobile devices such as Apple’s iPad and iPhones.
For now they’re using virtual chips — not real money. But the federal government may legalize online gambling within the next year or two as a way to boost tax revenue.
An early sign of this gold rush came in January, when Las Vegas gambling giant International Game Technology (IGT) bought Seattle video-game company DoubleDown Interactive in a deal worth up to $500 million.
IGT paid $250 million in cash and promised another $250 million if revenue and retention goals were met.
IGT’s primary business is making actual slot machines and other gaming systems used in casinos. Last week IGT finally revealed in its quarterly earnings report what a good bet it placed.
DoubleDown helped IGT grow its revenue from interactive games by 302 percent in the quarter and 293 percent in its fiscal year that ended Sept. 30, to $144 million.
DoubleDown operates one of the largest digital casinos. It had 5 million players per month on average during the quarter. On a daily basis, about 1.4 million played.
Players may pay DoubleDown $2.99 to receive virtual chips “worth” $150,000 in the casino. It’s like buying digital Monopoly money.
“They were leading when we got them and together we’re moving even faster,” IGT’s chief financial officer, John Vandemore, said last week.
DoubleDown’s growth suggests there’s still good money to be made in the social-gaming business. It helped IGT blow past analyst expectations and its stock rose 5 percent the day after its earnings report. That’s in contrast to social bellwethers Zynga and Facebook, which are struggling to gain investors’ favor.
IGT’s giving DoubleDown everything it needs to keep growing the operation in Seattle, according to DoubleDown Chief Executive Greg Enell, a veteran of Microsoft, Wild Tangent and Big Fish Games.
When I interviewed Enell last month in his office a few floors below Paul Allen’s penthouse near CenturyLink Field, Enell employed 128 people. Now it’s up to 147 and the company’s moving this week into adjacent offices that will double its space.
“There really are no restrictions, any kind of hiring cap for us,” he said. “We’re building out as fast as we reasonably can, without sacrificing the quality of the people we hire.”
DoubleDown started in 2010 with a handful of people in a little office on North Lake Union. Back then it was just another one of the dozens of small startups in Seattle trying to make a go building games.
The venture was more deliberate than a roll of the dice. Enell had previously sold another game company to Big Fish, then started a profitable online trivia-game company that provided funds to start DoubleDown.
“The idea was let’s go build the biggest gambling-oriented audience online in the world. If we do that and online gambling legalizes, we’re going to be really valuable,” he recalled. “We saw a clear exit, and our exit happened a little sooner than I thought it would, but it did happen.”
The team had expected legalization of online gambling to come between 2013 and 2015. Enell still thinks it could happen in the next year or two. But he’s leaving that issue to the experts at IGT and staying focused on building virtual gambling games for Facebook and mobile devices.
IGT has a big library of slot-machine games that DoubleDown draws from to expand its online lineup. It adds about two games a month.
DoubleDown’s also working to extend its global presence by localizing its games in different markets. It’s also been building its own suite of tools to build browser-based games using HTML5 technology.
Meanwhile Enell’s former employer, Big Fish, in August launched an online casino that’s now making more money on Apple devices than DoubleDown.
But DoubleDown still has the lead on Facebook, where it’s the fifth-highest grossing app, behind Zynga’s Texas HoldEm Poker, FarmVille, ChefVille and FarmVille2.
Since this is all virtual currency, I’ll make a bet of my own: The success that IGT’s having with DoubleDown is going to draw other big gambling companies to Seattle, looking for expertise building online audiences and virtual games. Maybe a gambling company will finally put enough money on the table to buy Big Fish.
It’s hard to predict the future, though. Just ask Enell’s parents, who weren’t enthused about his love of video games when he was growing up in Bellingham.
“My dad always thought it was such a waste of time,” he said.
Brier Dudley’s column appears Mondays. Reach him at 206-515-5687 or email@example.com
About Brier Dudley
Brier Dudley offers a critical look at technology and business issues affecting the Northwest.
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