In it to win it: Lottoland CEO on expanding beyond online lottery

Lottery-based gaming is one of the oldest and most readily accessible forms of gambling, with state-sponsored lotteries operating successfully in over 100 countries across the world for decades and draws taking place on an almost daily basis. At its heart, the core lottery operating model and ethos has not changed in that time; individuals buy tickets to win certain prizes, be they monetary or otherwise based on a random set of numbers being drawn. The prizes may have changed and increased, but the overall mechanics of the game have stayed largely the same.

For Lottoland CEO Nigel Birrell, however, the fundamental aspect of lottery-based gaming isn’t about increasing chances to win; it’s about appealing to customers dreams and selling a lifestyle choice. As he explains: “It’s not thinking you’re trying to be an incredibly skilful poker player or having some sort of system – it literally is about how do I change my life tomorrow.

“It’s very much about what does the ordinary person want to buy if they were to get this life-changing sum of money? It’s about fostering those dreams,” Birrell adds. While the fundamentals have not changed, the delivery method of lottery has expanded to now include online sales, scratchcard gaming, instant win gaming, the list of games goes on.

As Birrell confirms, much of the Lottoland office and philosophy is centred around giving its customers dreams of winning big jackpots, with one crucial difference. These dreams are achieved not through the mundane method of just buying a ticket, but through the ability to place bets on the results of lotteries taking place all over the world.

“Our business model is to put as many lotteries with very high jackpots in front of our customers as possible,” Birrell explains. “What we offer is the ability to bet on larger lottery draws on a much more regular basis, as prize draws of £10m-£15m don’t necessarily interest people in the same way as say £100m lottery draws do. It all boils down to giving them that dream of winning.”

Building a better lottery

Lottoland has enjoyed something of a meteoric rise since its inception in 2013, a few months before Birrell became CEO. The firm, which was initially formed in Germany but soon relocated to Gibraltar, has grown to more than 350 employees and 200,000 daily players, making it one of the biggest lottery betting operators.

Birrell, for his part, has been involved with the business since those early halcyon days of working in Spanish villas with small teams, shepherding the business through its greatest period of change. However, he is reluctant to say the business has gone through massive changes during his tenure, but just a gradual evolution as comes naturally to any business.

“Sometimes you can grow very quickly without pausing for breath and without putting in place the necessary infrastructures such as finance, legal, HR, etc., and just focus on generating money, and that’s what we did for the first year. We looked at whether we had good products, good tech and robust insurance, things like that,” Birrell explains.

Much of the credit for the Lottoland business rests on the business’ founder, David Von Rosen, for having the vision to take a chance on a gap in the market, growing a business operating crucially with first-mover advantage. “David is a very bright entrepreneur who used the advantageous environment to build a profitable business pretty much straightaway, then used that money to further build the business,” Birrell explains.

Another notable point in the maturation of Lottoland was the addition of insurance-led backing on its jackpots, allowing it to offer larger and larger jackpots. It has enabled the business to even feature in the Guinness Book of Records, following the payment of a £90m jackpot to a German woman last year, the largest online lottery jackpot ever paid (to date).

Indeed, Lottoland hit the milestone of 10 million customers in July 2019, having increased its customer base by 67% over the preceding two years. However, Birrell believes that while these milestones may make for good public relations, the fact that the business has reached them within five years is far more noteworthy.

Success, though, has brought its own obstacles and challenges to the business, leading Lottoland to make a few changes along the way. Perhaps the highest profile move was the decision to split its B2B and B2C businesses into two distinct entities in November, something which Birrell explains comes out of a need to be able to sell its products to its competitors as well as to consumers.

“There are some companies out there where we might try to sell them our products, but they choose not to take up the opportunity either out of reluctance if you are a state operator from dealing with a perceived disrupting competitor, or a fear lottery betting might cannibalise its own product,” he states.

“I firmly believe cannibalisation is pretty unlikely because it’s a very different type of business, but if our ALOT Solutions business goes out and sells that sort of product to them rather than Lottoland it doesn’t confuse the issue in the same way, so that’s the rationale behind it,” Birrell adds.

Having a separate entity run by its own executive and in its own buildings allows it to operate without fear of having these issues, effectively allowing for a white-label-style lottery betting offering. “We can provide the know-how, the insurance underwriting and absorb all the risks, with the operator having the ability to sell tickets through their own website and under their own branding at any integration level,” Birrell explains.

State of play

Lottoland now operates in 15 markets, including Sweden, the UK and Australia. The business has three core activities (pillars) on which all its operations are based: growth, experience and culture.

“Our mission is to grow our business, to truly deliver innovative, superior and versatile jackpot products to our customers globally. We have three core pillars on which all our business activities are based on, which are growth, experience and culture,” Birrell adds.

Independent of these, there are other high internal standards and talk about people’s honesty, resilience and integrity, which are some of the things that form part of Lottoland’s central values.

The core objective for Lottoland, however, remains unchanged: to be the biggest and best innovative online lottery operator in the world. However, Birrell states that while the Lottoland business is very small when compared to the larger state-run lotteries, the independence of the business makes it a bigger player than might necessarily be apparent. “Our online business is dwarfed by someone like Camelot, but in terms of independent lottery companies, we are one of the biggest ones out there and that is something I want us to continue, both in terms of growth and innovation,” Birrell adds.

Expanding on the innovation point, Birrell asserts his belief that this is something the sector clearly is lacking. “It’s an old sector which has been around for decades, but we’ve only seen the start of innovation over the last couple of years,” he says. Much of that lack of innovation is down to those state-run lottery firms, which have become very profitable companies off the back of successful land-based lotteries but have not felt the need to move with the times.

Qualifying this statement, he explains: “Camelot is the exception to this, because there is a lot of scrutiny on Camelot and the returns it provides to good causes. However, in other parts of the world, they don’t seem to have the same type of pressure on competition that the traditional publicly listed companies have or even some of us in the private sector, so they’ve become quite complacent on this.”

Under pressure

Lottoland is capitalising on the gap in that market, something which adds a whole new segment of players to the traditional lottery/player mix and ultimately could come to complement state-run lottery operations. “On the one hand, they are competitors, but on the other hand, we should be able to work side-by-side. Some of our discussions with state lotteries are very cordial and very beneficial to both parties because we bring them something they might not have.”

However, the reverse is often true with many jurisdictions, in that Lottoland finds itself in conflict with rather than working with state-run lotteries. “We believe in free competition and that we’re adding to the market, but that attitude is not always shared by state operators, which wrongly see us as a threat.”

Faced with a new competitor operating in the same market, most operators – be it in the lottery, betting or egaming sectors – would up their game, launch new products and, in the case of significant brand identity, leverage that relationship to grow market share. It is a challenge Lottoland undoubtedly lays down when it enters a new market, but as Birrell asserts, rather than upping their game, most state-run operators would rather there be no competition at all.

“What we do see quite often in several markets is pressure from the incumbent which does not welcome any competition, often someone who’s probably quite close to the government and uses that undue influence to try to get rid of that competition from the market, Australia being the most obvious example for us,” he explains.

In 2019, Lottoland won a protracted legal battle against the Australian Communications and Media Authority over a prior ruling that its jackpot betting products constituted a game of chance, which is illegal under Australian law. The presiding judge in the case ruled in Lottoland’s favour, despite there being significant pressure from local lottery operators. The business has also had run-ins with regulators in Germany and state-run operators in Sweden over its lottery betting offering.

While clashes with state-run lottery operators each have their own individual factors to consider, some of the main regulatory issues come from a lack of understanding about lottery betting. Indeed, Birrell explains that even the gold standard UK regulator had its own issues with the firm in the early days. “There were several staff at Camelot monitoring everything we did and making representations to the regulator about certain things we had to change,” he explains.

“We weren’t allowed to talk about a lottery ticket, but rather a bet on the lottery and we had to be very clear in our marketing and our interface about that difference to make sure there was no confusion. We obviously had a few slip-ups along the way, but very quickly we complied with what the regulator wanted from us. They figured out that we were delivering that and, touch wood, it’s been a very good symbiotic relationship since.”

Home sweet home

Lottoland’s home base of operations is Gibraltar and the firm has stayed true to this jurisdiction, even with the threat of Brexit looming large. Indeed, the operator grabbed the headlines last year when it issued an appeal to staff affected by bet365’s decision to relocate a chunk of its workforce to Malta that they would have a home at Lottoland going forward. The key for Birrell in understanding this fierce loyalty to the market is in its strong relationship with the Gibraltar government, typified in recent days by its decision to meet with egaming firms before publishing its budget for dealing with the effects of coronavirus.

As Birrell explains, all these things are plus points for Lottoland. “We’re in good company here. We have the ear of government, we’ve got a great regulatory regime, which has been around longer than pretty much all the other gaming regulatory regimes, and it knows its responsibilities in terms of responsible gambling and all the other issues. It’s probably one of the most sophisticated ones to be around and have as our base really.”

Lottoland’s future can be summarised in one word: diversification – most notably with the launch of its debut sportsbook offering in partnership with Altenar. Focusing initially on the German and Austrian markets, Birrell reveals the early stages of the project are going well, with these markets serving as a good testing ground for the firm. “It’s been doing quite well and we’re very happy with it. Altenar is a good partner. We’re generally happy with the steps we’ve taken, and numbers were growing well,” he explains.

Elsewhere, Birrell refuses to be drawn on whether Lottoland will be submitting a proposal to run the UK National Lottery when Camelot’s licence expires in 2023. He tells EGR Intel Lottoland does not have the land-based know-how to make it work effectively, but does go on to say that the firm might be willing to work with a more established land-based entity on a bid.

“We would be happy to perhaps submit a bid with a partner with experience or ambitions in the land-based retail sector if the conditions were right and the right partner was there, and we’ve had several discussions with some very well-known partners,” Birrell explains.

With the shift towards online gambling becoming ever more prevalent and the UK government’s tender process calling for increased innovation, Birrell asserts that the Lottoland business has value to add and could do so through launching new ways to win.

“What we’re really trying to do is bring more big jackpots in different types of products, revolutionising casino games so you can win not just a couple of million based on an accumulated jackpot, but 10 or 20 million or more based on the spin of a wheel or turn of a slot.”