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Two brothers gamble on social media

While companies such as Jumbo Interactive Limited (ASX: JIN) have taken the online gaming industry to the next level, Melbourne brothers Toby and Josh Simmons have discovered the potential that a social media platform for sports punters could have.

The brothers describe their venture, Favourit.com, as the “Facebook for sports”, offering users access to the opinions of fans and punters alike, while ultimately providing an experience which ‘makes sports betting better’.

According to the Australian Financial Review, Tabcorp Holdings’  (ASX: TAH) online bookmaker Luxbet signed up to partner with the website in January, with general manager Andrew Vouris admitting that social media is a “growing part of wagering that we need to be involved in”.

Individuals have also recognised the website’s potential, investing $3.5 million in the company. Having recently launched an iPhone app, the brothers are now targeting global expansion with plans to involve European bookmakers soon.

Whilst Favourit is a stand-alone social media platform based solely around sports betting, Facebook (NASDAQ: FB) has also largely proven the success of online gaming on its site.

Aristocrat Leisure Limited (ASX: ALL) and Zynga (NASDAQ: ZNGA) are two companies that have realised large success by making their games available on Facebook.

After having purchased social casino game maker Product Madness late last year, Aristocrat has recognised the future of online gaming. Although Product Madness’ games do not offer the option of real-money gambling, it is estimated that 2% of the games’ users will purchase extra ‘credits’ for premium game-play, according to SuperData Research. Not only will this offer Aristocrat revenue, but also a platform to advertise its well-known pokies brands.

Zynga’s current market capitalization is sitting just under US$3 billion, after having released globally successful games such as Farmville and Zynga Poker. Recently, however, shares in the company have decreased in value significantly. Having been valued at $14.69 a little over a year ago, shares have fallen to as low as $2.09 this year, amidst fears that the company relied too heavily upon Facebook gamers for its revenues.

Whilst those fears still remain, punters rejoiced after shares gained around 15% on Wednesday after the company announced it would offer real money gambling in Britain in its social media casino games.

Foolish takeaway

The potential of an online social network based around sports punting is enormous, and some of the world’s largest gaming facilities are recognizing it. However, in order to continue succeeding, the creators of Favourit.com and the more established gaming companies alike will need to be able to function with stricter regulations that are likely to be introduced in the near future, due to the industry’s highly addictive nature.

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More reading

The Motley Fool’s purpose is to help the world invest, better.  Click here now  for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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