The Insiders: C2Rewards CEO Jack Hakim Discusses iGaming Opportunities in the U.S.
A small casino in Northern Wisconsin called Lake of the Torches has taken the first step toward offering real-money online gambling. The casino, which is run by the Lac du Flambeau tribe, has launched a free-to-play site with the help of C2Rewards, a Vegas-based company that looks to prepare casinos for a future in iGaming while building loyalty that translates into more brick-and-mortar visits and wallet share in a cloud-based solution.
Essentially, C2Rewards give tribes a head start on iGaming, providing an integrated marketing platform that enables the casino to integrate the marketing and promotions between brick and mortar and online play and helps pave the way by providing a base system/platform that can be adapted to different tax regulations and legislation. In addition, the company continues to help their clients by building deeper and more complete patron profiles.
C2Rewards, which utilizes the OnGame Poker Network for its offerings, is comprised of a strong leadership team that includes Director of Strategic Sales and Marketing Communications Frank Teklitz; CMO/Product Management Timothy May; CFO Albert Babbitt; and CEO Jack Hakim.
According to his bio, Hakim, who is based out of the San Francisco Bay area, "is an experienced scientist, business leader and machine learning analyst with a strong background in software architecture for big data and social platforms … Mr. Hakim has delivered market successful large scale platforms and solutions to many top companies, including Business Objects, Amazon.com, Regulus, Vulcan Ventures, Market Metrics and Kodak, and has successfully served as a CTO/CIO/Marketing and Product Management, and for both small high-growth and large companies."
PokerNews recently spoke with Hakim for the latest edition of The Insiders.
PokerNews: Can you tell us a little about C2Rewards' origins?
Hakim: It really got off the ground because Frank brought to me an opportunity. Based on Frank's experience in the industry and his work at Compudigm, he believed that the casinos didn't have a really strong behavioral analytical story for better understanding how to utilize inventory and better reward casino patrons. So he was looking for a company that could in fact provide those deep predictive analytical capabilities. He brought an idea about how we would work with some other folks he knew were interested in better understanding and rewarding players and facilitating automated virtual hosting for the masses.
We liked the idea. Once we realized the casinos invest a large amount of money in marketing and promoting, but they don't have a deep understanding on who the patrons are, so today they cannot understand what they want and when they want it. That's the kind of analytic work we do, behavioral analytics. We said, great, this is the sort of market place that can leverage the kinds of skill sets and technologies that we have.
Starting around 2009 we created an automated virtual hosting system prototype and validated it with focus groups and casinos. By 2010 we were validating a mobile strategy with focus groups. In 2011, we realized that there were two challenges we were going to face. First, how were we going to get casinos to pay for the upfront integration without proof points for them? Two, the people who had all the budgets were the marketing people, and we had to provide an integrated solution for the marketing people.
The fundamental thing to think of us is an analytics marketing and social play, but we then provide different services and revenue stream by partnering. We aren't writing games. Out poker games come from Amaya and Shuffle, our casino comes from Amaya right now. We have a backend that allows us to integrate other gaming engines and content providers.
In 2012 we had the iGaming validation in England and the U.S. We pitched the Northwest coalition tribes, which was a nine-month RSP and in that process that's how we met Lake of the Torches, they were one of the lead tribes in that coalition. The whole Tribal Internet Gaming Alliance (TIGA) agreed to use C2Rewards.
If TIGA were to get other tribes to join the alliance, would those tribes then utilize C2Rewards?
TIGA would recommend C2Rewards, tribes have a choice, and they retain their sovereignty. There are two different aspects to that. We understood right away when we started talking to the tribes and the coalition that there would be not only liquidity challenges, but also liquidity opportunities.
A lot of the small tribes in particular, but even many of the larger ones don't have networks like Caesars. You can't effectively collaborate and run tournaments with other smaller and mid-size tribes. If you have your people going to Las Vegas, who are you feeding them to? Where are you getting some value back?
On our social network, each tribe gets a completely branded portal. That means it spends its marketing dollars to get its people on that portal, and then those people play poker and various other games. They play for fun before it's a legal jurisdiction, and once it's a legal jurisdiction it's played for money. Our poker platform, OnGame provides immediate liquidity .But what happens if you want to run a tournament with a group of other tribes?
Our network is designed to play across a single game model. We really manage the wallet across players and game content, so we're able to let casinos combine or not combine with other casinos, their choice. That allows us to set up a single large tournament for any casino portals that wish to collaborate. Suddenly it's a much larger prize and event, but for each player playing in a specific casino's portal, they still see it branded for that casino. That's the first value, the liquidity and being able to have a network effect.
The second is related to TIGA; since I live in California, I'll use it as an example. It may be difficult in California for a small tribe to secure, market and afford to pay for a license by themselves. They could join TIGA they could have a single California license and they could decide how to share and then proportionately chip in and decide how they each market to players – they can set up different models – and we can support them on C2Rewards Casino lifestyle network.
We're enabling tribal coalitions to set up their own separate portals, but then have them collaborate under a single license depending on what's legal in different jurisdictions.
We've spent a lot of time working with regulators in different jurisdictions already. We're used to working in regulated markets and still do. We can't ever go afoul of the law, so we will make sure that whenever we're in a given state we are consistent with what's legally allowed.
What is your opinion on the iGaming market and what's going to happen? Do you want to see some sort of domino effect?
Folks who understood the space better than me predicted Florida would become regulated a long time ago. It still hasn't happened, and I am not the person to make a prediction on which states will be regulated next and how it is going to happen. I do believe that there are lots of states that continue to have economic shortfalls and will be motivated to legalize iGaming. It's a political battle between tribes, casinos, other interests and states that need money, so I believe iGaming will continue to expand.
I want to say something else though because you asked if I wanted it to happen. If I look at the small and mid-size tribes in Wisconsin, I would say that they are better off right now if legalization doesn't happen instantly, and I'll say why. We negotiated a deal where we're the operator for "play for fun," we won't be the operator for "play for money." What that allowed us to do is negotiate a very good deal, which we then passed on to the casinos for the use of the play-for-fun services. So we're able to give them the opportunity to have a branded presence without having to spend a lot. One of the big challenges with online gambling is retention, but if they build these communities with "play for fun" games they become part of a social network that plays together and sticks together.
They can then invest, and it's much cheaper to invest on "play for fun," and there isn't as much competition. So they can secure their local markets and expand them. Using all the integrated data, our analytics, and our social engagement tools they can better understand the wants and needs of their players and treat them really well. Once iGaming becomes legalized in their jurisdiction, not only will they not see cannibalization of their players, they would be the ones cannibalizing, since they would be providing a better personalized service, and the transition should be simple since the play for fun games, such as OnGame poker would be exactly the same as the real money version. Even the small and mid-sizes players would be able to compete with the big boys.
Is C2Rewards focused exclusively on tribal casinos?
We realized there was a serious need for a solution for small and mid-size tribes. We didn't think we'd have tremendous competition, so it was a good way to get started, and we thought it was a worthwhile thing to do. However we have seen significant interest from larger casinos when we present at shows, they recognize that once you have good games, the advantage will go to those who can best retain, market and cross promote their patrons. It's better for both the patrons and the casinos. Those are the areas in which we excel.
We have a partnership model with the casinos, so we don't charge massive setup fees. We take the risk with the casinos. We're collecting small amounts of transactional fees – we make a small percentage of play for fun, and a much smaller percentage of the play for money. We become successful by creating that larger network. We do benefit significantly if we're really successful at targeted advertising and driving additional revenue above and beyond what I've already said. If the tribes are not successful and growing their communities, we won't make much, so our best bet is help make these tribes successful both short and long term.
How did the partnership with OnGame come about?
With my background in science, I believe in research. So I researched on the web and in the player forums and attended iGaming conferences; I looked at who had long success at building the right kind of popular games and also had the ability to covert "play for fun" to "play for money." Also, who was successful early on in regulated areas.
On the casino side that was Amaya, on the poker side our poker researchers said it was OnGame. I got to meet Darcy and others from Amaya and we've built a good relationship. I think of Darcy as a friend, and Amaya as more than a vendor. Initially it was a matter of picking these two companies and then discovering that one was going to be acquired by the other. It was a no brainer.
How easy is it for you to transition a site from "play for fun" to "play for money"? Is it as easy as flipping a switch?
Yes and no. Our contracts support play for money, but the casino will be the operator and gets the license. The two groups of games have the same look and feel, but for the first casino that goes live to play for money, there would be number of additional services with which they would need to become familiar. The iGaming real money stack is significant, and we would expect at least a few months of validating operational processes and integration. From their point of view though, from the time the laws pass to the time they're ready to go live, which will take some time, we'll end up with more lead time than we need.
You don't just flip a switch. You'll have to ask – what're going to be my benefits? How do I want this to look? How am I going to market it? We'll work with them to come up with a rollout plan. Our internal "flip the switch" time will be much shorter than the time they'll need. So from their point of view it is essentially flipping the switch because it's the same games, in the same context, with the same social community. The steps are understood, but not trivial. There are operational, process, regulatory approvals as well as backend integration of our systems with theirs.
Has C2Rewards explored any opportunities in New Jersey, Nevada, or Delaware?
No. Right now California is one of the states on which we are focusing some of our attention. The only way we can do that is either with a big tribe, because they're going to be the only ones who can afford the marketing and the license, or a coalition of small tribes who're all agreed upon how they want to proceed together. So that's the place we would look next if we were looking at a place where we think it'll become legalized soon.
Many of the tribes we spoke to in California have said they would want California closed off from other states. They have enough liquidity and they'd rather not share it.
Finally, C2Rewards is powered by ECWise, a company where you are also CEO. That company was launched in 1998 and is a leading company in the areas of platform development, business intelligence, analytics and integration services. Can you tell us a little about the relationship with C2Rewards?
ECWise is a collaborator, an investor, and a builder for C2Rewards. They're serious investors, so they're just as committed as anyone in C2Rewards. EC Wise is one of C2Rewards differentiators; C2Rewards continues to benefit from advances that are happening in different market places in social, behavioral analytics and marketing.