This document summarizes John B Lin's presentation on social casino games in the Asia Pacific market. Some key points include: - The APAC social games market is large but also very competitive, fragmented, and with different cultural preferences across regions. - Countries like China, Japan, and Korea present challenges to enter due to native genres, regulatory issues, and strong local competitors. - Southeast Asian markets are growing rapidly but remain fragmented. - To be successful, companies need to commit to the region, localize heavily, and experiment with new genres that combine social and hardcore gameplay features preferred by Asian mobile gamers. Early entry provides opportunities.

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The Exciting yet Competitive but Massive
yet Fragmented APAC Social Games
Market: Why Even Try?
John B Lin
PlayStudios

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Introduction

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Tel Aviv
Founded in 2011, PlayStudios has 230 team members across 5 offices worldwide
Las Vegas
Austin Hong Kong
San Francisco

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myVEGAS Slots
myVEGAS Blackjack
POP!Slots
myVEGAS Lucky Life
Konami Slots
Our games feature original content as well as leverage real world resort brands

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Operate the Dancing Fountains at
Bellagio Las Vegas
Guangzhou to Ha Long
Bay Cruise with Dream
Cruises
Chef’s tasting menu at
Wolfgang Puck’s Lupo
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Play 1:1 vs Shaq at his Orlando
mansion
Our secret weapon: Real Rewards from iconic resort and entertainment destinations

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PlayStudios is the only privately held company among the top 10 global revenue
leaders in Social Casino
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25.1%
8.3%
8.0%
6.3%
6.2%
5.7%
4.3%
3.6%
3.2%
3.0%
2.2%
0.9%
0.7%
0.4%
0.2%
0% 5% 10% 15% 20% 25% 30%
Caesars Interactive
Williams Interactive/SciGames
Zynga (Social Casino)
Aristocrat/Product Madness
IGT
Sony/GSN/Bash Gaming
Churchill/Big Fish Games, Inc (Social…
DoubleU Games
Playstudios
Tencent (Social Casino Only)
Boyaa
High 5 Games
Diwip
DGN Games
Intertain/Gamesys
Market Share by Company
3Q16
4Q16

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Social casino: How did we get here (so fast)?

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Free to Play Games have been around for a long time…
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Facebook conquered Social…then opened a game channel
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Source: Facebook, Inside Social Games

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iOS and Google Play conquered Mobile…then opened game channels
• xxxx
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Source: App Annie, IDC Gaming Research

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Source: Eilers Research
Social Casino monetizes Great!
$1,200 $1,255 $1,207 $1,096 $986 $838 $687 $550
$828
$1,524
$2,145
$2,714
$3,170
$3,569
$3,876 $4,077
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
2013 2014 2015 2016 2017e 2018e 2019e 2020e
Facebook Mobile

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Strategic Capital enters the space – over $7.7bn in transaction value since 2011
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2017
2016
2015
2014
2013
2012
2011
Source: Eilers & Krejcik Gaming research

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Challenges of the rapid maturation of Social Casino
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• ARPDAUs elevated by proliferation of real casino games
• Tsunami of Strategic Capital inflates CPIs
• Discovery diluted by flood of new entrants
• ROIs declining and major challenges to scaling
…so where are the white space growth opportunities?

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Social casino in the Asia Pacific arena

15. casual connect – 16-18 May 2017 Singapore 15Source: Superdata Research
2016E
ASIA
SOCIAL CASINO
REVENUE
$926mm
2016E
NORTH AMERICA
SOCIAL CASINO REVENUE
$1.7bn
Social Casino revenues in Asia Pacific are still only 54% of North America

16. casual connect – 16-18 May 2017 SingaporeSource: NewZoo 16
CHINA
$10.0bn
+41.1%
NORTH AMERICA
$7.2bn
+9.2%
WESTERN EUROPE
$4.2bn
+12.7%
JAPAN
$6.5bn
+4.4%
KOREA
$1.9bn
+4.8%
REST OF APAC
$2.6bn
+50.9%
APAC
$21.5bn
+24.1%
…but Mobile Games revenue in Asia Pacific continues to be the world’s
largest AND fastest growing
ANZ
$0.5bn
+5.6%

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Japan
• Deep native cultural preferences
• Highest CPIs, highest ARPDAU in the world
• Strong native genre: pachinko / pachislot
• No Integrated Resorts yet – legislation
passed, but several years away
• Voracious content consumption
• Japan’s social casino market will
develop fast and native real-world game
content will win; ceiling for slots and
traditional casino genres is relatively low
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Social Casino in Japan is evolving fast

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China
• Mobile ecosystem dominated by Tencent, Alibaba, Baidu – each of which integrate
discovery, payments, social
• Generation of one-child millenials that are worldly, high disposable income, and instant
adopters of new technology [livestreaming, esports, mobile payments]
…and are also overwhelmingly hardcore in their game preferences
• Nuanced regulatory sensitivities
– SAPPRFT license required for mobile games operation
– Poker, Mahjong, DoDiZhu = Great
– Baccarat and Slots = Don’t
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Chinese social games of chance have leveraged native genres, although Poker
has done very well

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China’s social casino players will be responsive to hardcore RPG and CCG features
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• Despite the massive scale of the overall mobile games market, China’s social
casino market will evolve and penetrate slowly and unevenly

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Korea
• Closed market to non-Korean companies
• Google Play only, no iOS for Social Casino
• Native genres dominate
– Badugi
– Go-Stop
– Sudda
• Well-capitalized, government supported, innovative and aggressive competitors:
Netmarble, NHN, Nexon, NCSoft, among others
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Southeast Asia
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Source: eMarketer, NewZo & GMGC

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Indonesia
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Source: eMarketer, NewZoo & GMGC

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So…

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Where are the opportunities for social casino in Asia?
• China, Japan, and Korea are massive but present (in some cases significant) challenges to entry
• Southeast Asia markets are showing world-beating growth rates but are fragmented
• Strongly different player backgrounds mean strongly different player preferences and behavor
– Today’s mobile game players are yesterday’s hardcore PC gamers
– Therefore, their expectations differ from North American or European players, where mobile
games (re)introduced gaming to a generation of casual gamers
• significant volume of game content
• deep and multi-layered progression
• VIP status and achievement to be visible and to be flaunted
• PvP competition & Clan cooperation
• Paying is not an admission of defeat, nor is it cheating
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Social Casino in Asia Pacific: is it worth the effort and risk?
• Be early
• Commit and be aggressive – localization is a half-step
• Experiment! Although native genres have a strong resonance, the
opportunities to add depth, complexity, social features have not yet been
fully exploited
• “Don’t pick fights you can’t win” – Niko Vuori, Rocket Games
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thank you
john@playstudios.asia