To the tech successes of the Start-Up Nation, add social gaming – a category which includes “gambling” games, like slot machines, where players get a taste of the casino experience without having to put up “real” money. Israeli companies have emerged as some of the top “players” in this space over the past few years.

In fact, the entire social gambling business, where users bet virtual “money” to win at casino games, was invented in Israel, specifically by Tel Aviv-based Playtika, creator of some of the top social gaming titles on the Internet. According to the company, Playtika games are played by more than 5 million people every day in 190 countries.

Playtika’s crown jewel is Slotomania, an online video slot machine – introduced in 2010, and immediately a big hit with web users. Slotomania’s performance was so impressive, in fact, that Playtika was snapped up just a year and a half later by Caesar’s Interactive Entertainment, the online gambling division of Caesar’s Entertainment, the biggest casino and gaming company in the US, with properties in Las Vegas, Reno, Atlantic City, and elsewhere. After an initial investment, CIE quickly upped its share in Playtika, becoming a 51% owner of the company in 2011.

CIE’s first web foray was running an online casino, where web users could bet real money on a variety of casino-style games – a lucrative business, to be sure, but one that by definition is limited, both in terms of the kind of users such sites appeal to, and the regulatory issues that gambling sites are subject to.

But regulation is not an issue in social gaming, said Elad Kushnir, Vice-President of Business Development at Playtika. “There is no money involved in any of the games we provide, so there is no issue as far as regulators are concerned. Our games are regular online apps that let users accumulate points, get virtual rewards, etc. This is social gaming, not online gambling.”

Elad Kushnir (Photo credit: Courtesy)

Elad Kushnir (Photo credit: Courtesy)

That distinction between “real” and “fake” gambling is an important one, especially for a company based in Israel that is the lynchpin of CIE’s social gaming business, now the largest in the world (a title that CIE took from rival Zynga last year). Israel also happens to be a world center of real online gambling technology; Playtech, which people sometimes confuse with Playtika, for obvious reasons, is in a completely different business, said Kushnir. The games Playtika offers may have some similarity to the games Playtech and other gambling tech companies offer (last year, for example, Playtika launched the World Series of Poker app on Facebook) – but the Playtika business model is nothing like Playtech’s.

In fact, said Kushnir, the business model Playtika uses for Slotomania, WSoP, and its other titles is the same as that of Candy Crush. Like CC, Slotomania and Playtika’s other games work on a “freemium” model, where users play the game for free, and then (the company hopes) use real money to buy virtual game currency to upgrade their experience. “Nobody plays our games with the hopes of making money. Instead customers spend money to ‘buy’ an experience,” said Kushnir. Ninety seven percent of users do not buy any premiums at all (that’s a social gaming industry average, said Kushnir).

And like CC – which its owner, King Digital, is filing for a half billion dollar IPO, with the company valuated at $7.6 billion – Slotomania and Playtika’s other games are big money-makers as well, even though the vast majority of players don’t pay. For example, Playtika helped increase CIE’s 2013 revenues to $316.6 million, up from $207.7 million just a year earlier. As a part of CIE, Playtika has grown from a small operation with a dozen employees in Israel to a 700 employee-strong organization, with offices in California, Canada, Romania, Belarus, and even Beijing. “In four years, we went from nowhere to everywhere,” said Kushnir.

Because there’s no money involved, Slotomania and other Playtika games are open to all – including kids. But kids aren’t the ones responsible for the growth of Playtika games – and not for the growth of Candy Crush either, said Kushnir. “The main demographic for Candy Crush, as well as for our games, is a 40 year old woman from Middle America,” he said. The experiences in Slotomania and Candy Crush may be different, but they touch the same nerves, Kushnir said.

World Series of Poker screenshot (Photo credit: Courtesy)

World Series of Poker screenshot (Photo credit: Courtesy)

And even though Playtika sees Candy Crush as a chief rival for the time and money of its potential customer base, CC’s steamrolling takeover of the social gaming space has only done his company good. “Candy Crush did us all a big favor – it turned many non-gamers into gamers,” Kushnir said. “Candy Crush reminded moms and dads that gaming could be fun for them, not just for their kids.” Now that they are hooked on gaming, Candy Crush users will be more willing to try other games – giving Playtika access to new groups of users.

That he believes he will be able to wean players away from Candy Crush is thanks to the DNA of gamers, said Kushnir; they’re always looking for something new. “There’s a lot of big data analysis going on in this business,” he said. “We keep track of what users are doing, both in the Facebook and mobile versions of our games (these are the two main user interfaces for Playtika games, with usership split about evenly between both), so we can see what interests them and how to tweak games to increase engagement.” For example, even though the basic Slotomania game remains the same, Playtika engineers are constantly coming up with new approaches and tweaks to keep things interesting.

The big data expertise needed to succeed in the social gaming business is part of what makes the industry a big Israeli story, said Kushnir. “Big data and mobile technology are mainstays of Israel’s tech scene, and both those are very important in social gaming. In addition, Israel’s entrepreneurial spirit is made to order for the gaming business.” Anyone with a good idea and the programming skills can invent a top-grossing game – witness Flappy Bird, invented by a long-time Vietnamese developer, and for awhile the top-downloaded game in the App Store, before it was mysteriously pulled by its owner. “The business has become democratized, so anyone with a good idea can succeed, and the technology for widespread distribution is better than ever,” said Kushnir.

And social gaming provides other opportunities as well, said Kushnir. “It’s a very young industry, and all of us are still finding our way – which means there are no experts out there with years of experience.” Playtika has plenty of job openings for smart, flexible engineers for the gaming, mobile technology, and mobile ad components of its business. “As time goes on there is more competition in this field, but we have managed to remain in the top ten social gaming companies because, I believe, we are located in Israel,” said Kushnir. “The talent pool here is great, and even more important, people here know how to think out of the box – exactly the kind of thinking skills we need to make this company even bigger.”