Double Down Interactive, the Seattle-based maker of casino-style social games, started the year by announcing its acquisition by gambling technology giant IGT for up to $500 million. Double Down is ending the year by moving into a new space, next door to its previous headquarters in another part of Seattle’s Union Station complex.
The space is Las Vegas-meets-Pacific Northwest, blending elements such as casino-style carpeting in one section and natural wood paneling in another, for example.
There’s capacity for 180 people. About 150 of those seats are currently filled, with about 33 open positions remaining on Double Down’s software development teams. The company — which operates the third top-grossing game on Facebook, DoubleDown Casino — is looking to secure additional space in the building to accommodate additional growth.
Among the new hires: The company recently added former T-Mobile executive John Clelland as chief marketing officer, and Adobe and Intuit vet Shan Chinnasamy as chief technology officer.
Some of the financial nitty-gritty: Under terms of the acquisition, IGT paid $250 million in cash up front, and $85 million in retention payments, with another $165 million in cash payable over three years, if Double Down meets financial targets. So far, so good: The social gaming unit of IGT, which is driven by Double Down, posted $35.8 million in revenue, up 20%, for the quarter ended Sept. 30.
Earlier this week, GeekWire toured the new space and talked with Double Down CEO Greg Enell about the company’s growth, hiring trends, its shift to HTML5 for mobile games, its relationship with Facebook, and Double Down’s outlook on “real money” wagering online. (Double Down focuses on casino-style casual games, with no money at stake, for now.)
How’s the hiring going?
Enell: Hiring software development talent in this town is tough. It’s very competitive. We’re after Java talent and JavaScript talent, more and more. We’re not hiring as much Flash talent as we were. We’re really transitioning the whole front-end to HTML5. But the whole backend is Java. And it’s very competitive in this town for Java. Facebook, Amazon, Google. We have 33 open headcount just on the development team alone. Our current team is about that size. We’re looking to really double the size of our development team.
Will you reach a point where you need to expand beyond Seattle?
Enell: I don’t think so. I hope not. We don’t want to have to do that. But what we will do is expand the scope of our recruiting efforts. Get out of the Seattle market. Start recruiting in San Francisco, Manhattan, if necessary. Start recruiting around the country but bring people here. We don’t have any intention of having any satellite offices for DoubleDown at this point. We want to keep everything aggregated in Seattle.
Can you talk about financial milestones, and where you are following the acquisition?
Enell: For now we’re tracking really well, and we’re really optimistic that through the three-year period we’ll collect that full $500 million. Which is pretty rare. Most earn-outs are pretty disastrous. I remember when we were negotiating our deal with IGT, we took a lot of pause over the earn-outs, and how they were structured. We all knew, and our investment bankers counseled us wisely, that most of those earnouts never pay out. Our deal was well-structured, and fortunately the business is really thriving, in part due to the strategic nature of our relationship with IGT. All this great content that they’re bringing to us is super valuable, super valuable. For example, we launched DaVinci Diamonds and Cleopatra. Those slots outperform any other slot that we’ve had by 5-6X. And we’ve had some great slots — Brady Bunch, American Idol. We’ve had some really good products of our own, but you bring out their brands that people are familiar with from the casino floor, and boom, 5-6X on top-line performance.
Have you seen any difference in the organic traffic coming through from Facebook in recent months?
Enell: The heyday, the days when there was lots of free traffic, from my perspective it’s been over for a year — at least a year. … I think that Facebook has a challenge. There’s people in their games organization that would like to drive free traffic to games, because that drives games revenue through credits, but there’s people in the advertising business that don’t want to drive free traffic to games, they’d rather have developers pay for the traffic through marketing spends. So they try to balance that within their ecosystem. The result has been that there’s been less virality, less free traffic in the last year, and increased marketing spends, and increased cost-per-acquisition or cost-per-install to get new users. It would be very difficult to come into this space right now, even with a great product, and say, oh, we’re going to do what DoubleDown did. … Those days are definitely over.
Do you worry about being too dependent on Facebook?
Enell: Yeah, we do. You never want to have a single point of failure. Facebook is a great partner, very valuable. If it weren’t for Facebook, none of this ever would have happened. We’re very loyal to Facebook, we meet with them regularly. We’re always exploring new opportunities with them and ways to optimize our business on their platform. But at the same time, we’re also thinking about other channels. Our HTML5 product is running across all Android and iOS devices. We have a nice little business running on the Kindles. We’re also looking to sign other manufacturers, OEM, to put our games on different devices, whether they be phones or tablets. We’re also working with carriers to get distribution opportunities with carriers for our mobile game. Another big thing we’re doing is we’re turning on a globalization effort. You’ll see in the March-April timeframe we will have a localized product for five-six different international markets. By March, we’ll have gone from an English-only product to truly a global product, which will create a much larger target audience for us to go after. It creates a lot of different distribution opportunities. We’re exploring and trying to tap into all markets, and all distribution mechanisms within those markets all around the world. It’s key to our growth strategy.
Windows Phone or Windows 8 — any plans there?
Enell: We’re in a wait and see mode on that. We’ll see how that market shapes up. … Given our limited resources that we have here, we have to make decisions about what we’re going to invest in. We haven’t made a decision to invest in that yet. We’re waiting to see how it does before we pull the trigger. But if we do decide to pull the trigger, the good news is we have the HTML5 framework, which makes it very easy to extend our mobile product into those platforms if we go there, but we’re still waiting.
What’s the status of real online gambling, and how does that affect DoubleDown?
Enell: It’s a very interesting opportunity in the U.S. — but who knows how that’s going to unfold in the U.S.? It’s going to take time. In Europe, it’s wide open. There are opportunities that exist, but when you talk about ‘real wager’ we default back to IGT, which is the real wager parent company, but we certainly have dialogues and conversations going on about what we want to do in that space.
