An existential threat to online gambling?

When it comes to the battle of man vs machine in online sports betting, the machines won some time ago. Algorithms rule the roost, and in-play is all about making sure you have the right model and you’re tracking the right numbers. Things can go wrong, sure, but generally if you trust the model everything runs smoothly. But what do you do if the model is broken?

In sports betting the answer is simple. You fix the leak as fast as you can. But what if the model is so much more complex and touches every part of your business? What if the very model of online gambling itself is in question? What do you do then? It’s an issue the European industry increasingly looks like it’s going to need to put some serious thought into over the next few years, because the regulatory push back is becoming seriously intense.

A ban on advertising

The news from Italy of a proposed total ban on gambling advertising should have struck fear into everybody in the regulated egaming industry. This wasn’t a long orchestrated campaign, but the sudden crack from a slow build-up of pressure both public and private. A new populist government swept into power with the gambling industry square in its sights as a social evil that needs to be fought. And it’s naïve to think it can’t happen elsewhere.

Back in the UK, the Gambling Commission CEO Neil McArthur recently issued a low-key threat that contained no shortage of hidden menace in a conversation with EGR Compliance. “If lessons aren’t learnt, operators will find themselves faced with a regulator prepared to relentlessly escalate the enforcement actions it takes,” he said. And while the current government is taking a careful approach, the country’s Labour party has made it clear it views gambling as something more akin to a scourge with a pledge to ban betting sponsorships in football if it gets into power.

And there’s more. Spain’s opposition party Partido Popular called for the government there to ban gambling companies from sponsoring sports teams and for morre tax take to be diverted toward problem gambling treatment , just as yet more deals are struck in the growing Spanish market. The background to this is, yet again, the issue of problem gambling and the impact advertising and marketing on a scale never before seen in Europe has on this. As with the FOBT debate it’s not really about data and proven causality it’s about public perception and the need to be seen to be pushing back against an industry that seems to have forgotten where the brake is.

All over bar the shouting?

One of the biggest issues the industry now faces is advertising. The entire value of a regulated market is in its marketing availability and the egaming sector has not been shy to use any and every new channel opened up to it. In Italy, the UK, Spain or anywhere else there is a lot of shouting and almost all of it is in an effort to win new customers or steal market share from its competition. There is a lot of noise and very little is concerned with the longer term. This, it appears, is something of a problem even if an Italy-style ban remains unlikely elsewhere for now.

In the UK it’s noticeable the Gambling Commission didn’t comment on the extent of gambling advertising in its report, but merely on the nature and fairness of it. But as has been said before, gambling remains uniquely susceptible to sudden shifts in power, and a new government can do a lot of damage very quickly. With the support of the media it can be hard to stop.

Operators have long held the view that any restrictions on advertising are unlikely, but there is increasing media and public discontent with the onslaught of gambling ads in the UK not least around football. A new football season with yet more gambling sponsors and new brands trying to get share of voice is unlikely to mitigate this a great deal. And it’s an issue repeated in nearly every regulated European market. Because the model is proven and nobody wants to change it.

Rinse and repeat

Major digital acquisition campaigns, big sponsorship deals, TV advertising, and rinse and repeat as the players churn. This is the egaming model. Some firms tweak the level of acquisition intensity, but everyone has a big net with a lot of holes and a constant need to refill it on a regular basis. There is gradually a move towards more brand-based marketing, but it’s still the exception and not the rule and the way gambling is packaged as a product still focuses on bonuses, big wins and cold hard cash.

The reluctance to change is understandable, but a dependence on near the knuckle marketing and light-touch VIP management has had dire consequences for some firms and this is an industry that tends to learn its lessons the hard way.  So what is left for the regulated egaming sector? Does it simply make hay while the sun shines and wait for regulators to act or can it start to shift its messaging and operational structures in advance of what is beginning to feel inevitable.

That said, some would welcome the inevitable. A total ban would benefit nobody but a reduction in advertising availability, even one that is quite stark, may actually be a boost to many of the bigger brands, especially those with land-based visibility. It would drive short-term profits and leaves newcomers in a perilous position. It could even drive more M&A as operators see yet further benefits of scale in the long-term.

And it will certainly be a benefit to those operators who are masters of the dark arts of SEO and affiliate marketing. Although a fully regulated and regulatory watchful sector looks very different to the nascent days of the early noughties and that model is unlikely to work either. And things feel as if they need to change.

Finding a new model of success

New advertising campaigns from major brands feel remarkably similar to what has gone before, and nobody is willing or indeed able to back down in terms of spend and share of voice. If anything we should expect more ads, more shouting and greater marketing intensity than ever in the tail end of the year. It’s likely going to take legislation to curtail the extent of advertising but that’s not to say the industry may not accelerate the process by its own actions.

McArthur raised a question that it behooves the industry to try and answer seriously. “What has the industry done to deserve good press?” Because without it, it’s going to be a long uphill slog to stack on track. What is the industry doing to ensure it remains a part of the mainstream leisure industry? How is it adapting to the times? What tweaks are being made to the model to ensure it remains profitable long-term?

Italy’s ban could still yet be overturned or watered down considerably, and perhaps it will remain an anomaly within Europe. Perhaps. But in the meantime what is the industry doing to help itself? The answer to that is worryingly unclear.