Analysis: Adapting to Italy’s gambling advertising blackout

Italy was seen as a trailblazer back in 2006 when it became the first EU member state to legalise online gambling in a comprehensive manner, creating what is Europe’s second-largest regulated market today. Yet 13 years on and Italy is poised to disrupt its egaming space with the official roll out of a near-blanket ban on gambling advertising. On Monday (14 July), the new standards fully come into effect and the gambling sector gets to grips with trying to acquire and retain players, as well as maintain brand awareness, when most advertising channels are off limits.

This new era comes almost a year after parliament gave the greenlight to the controversial Dignity Degree introduced by the coalition government, led by Italy’s populist Five Star Movement. Reflecting on the decision to ban advertising, Moreno Marasco, chairman of Italy’s online gaming association and country manager for bwin, says: “The advertisement ban was established a year ago by the unfortunate and improvised coalition between two populist wings that are capturing media attention throughout the EU. However, restrictions were already in the air,” he states philosophically.

For those online gambling companies licensed to operate in this southern European country, it is a case of having to cope without the ability to deploy above-the-line (ATL) marketing. This includes TV, radio, print and online ads, and, perhaps most importantly, sports sponsorships. Those companies found to have flouted the rules could face fines equal to 20% of the value of the advertising deal. The minimum sanction will be €50,000 per infringement. From 14 July, AGCOM, Italy’s independent telecoms authority, is expected to start targeting those in breach of the new standards.

Sifting through the remains

In April, AGCOM finally issued guidelines relating to Article 9 of the Dignity Decree. While there is a certain degree of ambiguity and lack of clarity, it isn’t a total marketing blackout; a few, albeit limited, options are still available. Although paid search and display ads aren’t allowed, operators can maintain an “informative” presence online. So, SEO seems set to become a hard-fought battleground as operators look to leverage organic search to rank for various betting- and gaming-related keywords.

That said, companies are forbidden from including ‘calls to action’ in their informative communications. Likewise, content produced by affiliates has to be informative and non-promotional. Affiliates are allowed to use gambling logos, such as for comparing odds or bonus offers, but shouldn’t induce users into gambling, which kind of handcuffs them in the traditional sense of affiliate marketing. While the industry probably feels it’s feeding off scraps in Italy compared to when marketing was unconstrained, Mauro De Fabritiis, founder of MDF Partners, an international consulting company in the gambling sector, sees some positives.

“The guidelines defined by AGCOM have not completely limited operators’ communications. There is still room to create visibility in the market if the messages are transparent, not misleading and with no promotional emphasis.” Fabritiis suggests that despite there being “strong limitations”, it doesn’t mean there aren’t still opportunities. “Operators should explore different ways to communicate, acquire and retain their customers, through ‘info-communication’. The Italian case is not isolated as there is a general trend in other countries to adopt forms of restriction on advertising.”

The strong get stronger

The main beneficiaries of the ad ban would appear to be operators with sizeable retail estates, principally because the land-based footprint can be used for brand reinforcement and converting customers into online players. For example, multi-channel sportsbook Goldbet, which was acquired by Gamenet Gruppo last year, boasts a network of some 990 betting shops.

Meanwhile, Snaitech’s Snai retail betting network comprises of over 1,600 points of sale (Playtech acquired a 70.6% stake in Snaitech last year for $1bn). One of Italy’s largest online operators – Planetwin365 – has around a thousand shops. Francesco Gaziano, CMO and country manager for Rome-headquartered parent company SKS365, says: “Obviously, our retail network is an important asset for the company, and even before the ban, one of our main targets is to implement, develop and valorise our land-based shops.

“Every single shop represents the first and main media for the company to keep our client well informed and protected from illegal gambling. This is the reason why we are experimenting with new retail formats, [as well as] innovative and cross-offer, in order to give a renewed image to the shop, and consequently to the company.”

The big players online

In the digital sphere, SKS365 vies for the lead with international online behemoth bet365 in terms of sports betting GGR, according to regulatory body Agenzia della Dogane e dei Monopoli. In June, bet365 racked up online gross revenue of €7.6m, narrowly ahead of the €7.5m achieved by SKS365. Leading the chasing pack was Snaitech (€6.8m), Sisal (€5.5m) and Goldbet (€4.8m). Bet365’s market share in May based on sports betting GGR was 13.6%, narrowly ahead of SKS365 on 13.3%.

Bet365’s strong brand presence and existing customer database in Italy should stand it in good stead to negotiate these difficult conditions. But some of the smaller, pure-online brands look set to struggle to be heard and increase revenue. For instance, Marathonbet had just 0.04% of the online sports betting market in May based on GGR. The ad ban could lead to certain online brands entering retail, either through M&A or tenders, to increase their market share.

On the other hand, they could decide the shackles of the restrictive marketing laws, combined with the prospect of fines for stepping out of line, mean it’s time to say arrivederci to Italy. The Five Star Movement’s anti-gambling position also doesn’t help. “The populist wave indeed makes Italy a less attractive market for pure-online operators,” says Marasco. A spokesman for SportPesa’s Italian business tells EGR Compliance: “The new conditions are making it harder for the licensed online operators and will inevitably have a negative impact on the market growth and the economy as a whole.”

Death and taxes

If the ad ban wasn’t enough to deal with, from January 2019 online gaming taxes jumped from 20% GGR to 25%, coupled with a sports betting duty increasing from 22% to 24%. Italy certainly isn’t without its challenges if you’re a licensed remote gaming operator. It’s also a fragmented and not particularly large online market compared with land-based gambling. Indeed, Christian Tirabassi, senior partner at Ficom Leisure, says online accounts for just 7% of the total market.

Addressing the consequences of the ad ban, Tirabassi says: “It will be more and more challenging for companies with online-only offerings to acquire and retain customers, which will push them to evaluate any kind of retail presence of their online offering. Affiliation will play a big role for operators as well as any compliant business model that will give direct access to players. Other consequences will be that the players will not be able to identify the legal from the illegal offer.”

Indeed, critics of the ban argue it plays into the hands of the black market. If you’re a smaller online operator in Italy, you may question why you’ve gone through the rigmarole and expense of being licensed, and are paying quite hefty taxes, but you can’t advertise to players also targeted by unlicensed sites. Marasco stresses the black market will “thrive” because illegal offshore operators are outside AGCOM’s jurisdiction. He also suggests the DNS blacklist provided by the regulator is “merely palliative”, adding that the blocking of payments has “never really been on any government’s agenda”.

No sporting chance

Another knock-on effect is the hit to sport. Betting companies were thought to be shelling out around €120m annually sponsoring Italian sports teams before the Dignity Decree. “The prohibition of sponsorships is also a serious problem for all those minor sports that, with the support of bookmakers, found a vital source of livelihood, if not survival,” says SKS365’s Gaziano. The majority of this money was directed at clubs in Italy’s top football division, Serie A, with over half of the 20 sides previously having sponsorship and/or partnerships with gambling companies.

For instance, Marathonbet netted a multimillion-euro shirt sponsorship deal with Serie A side Lazio just last summer. Like other European markets, sponsorship and pitch-side advertising was a powerful user acquisition and retention tool in this football-mad country. “The big online operators that used to sponsor certain teams will be affected in terms of brand awareness, so they will have to find new ways to communicate, De Fabritiis emphasises.

So, with all these new restrictions has the Eurozone’s third-largest economy lost most of its shine as a leading regulated online gambling market? De Fabritiis says: “Some operators that applied for licences in Italy before the advertising ban have decided to interrupt the application process. And current Italian operators are looking at new international markets to reduce risks and enter newly regulated markets.” Clearly, this new era of prohibition has deterred some, though it will be particularly challenging for most operators, none more so than the online-only licensed brands. Whether some firms decide to exit Italy remains to be seen.