Star treatment: PlayStar's CEO on how a personal touch can snare rivals' churned players

New Jersey may have had regulated igaming for approaching a decade now, yet PlayStar CEO Per Hellberg is adamant there is a gap in the market in the digital realm for a product and service to replicate the “white glove” treatment provided by land-based casinos. And it seems his GiG-powered casino run by a remote team – mainly in Europe – of skilled online gambling industry professionals has been exploiting that gap since soft launching in August. “We are outperforming our wildest forecasts so far – it has been amazing,” the former Catena Media chief enthuses.

Even the homepage, with its computer-generated video of a drone-like camera sweeping into a fictitious PlayStar property and hovering above a packed casino floor, suggests this isn’t your run-of-the-mill online casino. But PlayStar, which has access to New Jersey’s online market via a deal with Ocean Casino Resort, is more than just flashy intros; the company has cherry-picked the best tools out there that, for instance, create fully automated player journeys in real time by harvesting live data, thus boosting customer retention.

“After four months we are still holding 50% of the customers we acquired, which is unheard of,” Hellberg tells EGR Intel. With an impressive start in New Jersey under its belt, along with $15m of funding to arrive from Meyer Global Management, this lean and efficient startup has targeted neighbouring Pennsylvania in the first quarter of 2023 via an access agreement with Caesars Entertainment. PlayStar is certainly one to keep an eye on if and when regulated igaming expands stateside.

EGR Intel: PlayStar soft launched in New Jersey last August. Why launch in the US and not Europe?

Per Hellberg (PH): The majority of us [here] have been involved in igaming on most of the continents around the world, and obviously quite soon you have to focus on the US, which probably has the largest monetary growth you will see in the coming decade in terms of revenue. The other thing about the US is that the player value is extremely high. But it’s not easy to focus on the US because you need to have a licence, which means you need a reputable company. So, that is where the problems begin for a startup. How do you convince anyone like Caesars or Ocean to give you a licence if you don’t even have a business?

EGR Intel: Can you tell us more about what PlayStar’s business plan was?

PH: The ‘PlayStar’ brand is much better suited to casino than sports. Casino has no seasonality and has been around in the US since the country was born. Obviously if you focus on casino, you should be able to have a more stable margin and not spend as much cash to launch, but you can probably not be number one in the market focusing [just] with casino. Most operators have launched a sportsbook-first product with a casino adapted to cross-sell customers, so if casino is a more historical and more accepted product in the US because of land-based casinos, why don’t we create a casino-first product that is the preferred option for casino players with the best product experience ever?

Also, the reason the player value is so high in the US is because a lot of people have played in land-based casinos. If you play a lot, you get a personal, white glove service. You get a concierge, treats and so on. Bricks-and-mortar casinos haven’t managed to bring their land-based presence online, so why don’t we offer more personalisation and everything that is best for the player? That’s how the concept – a human-touch casino – emerged.

Per Hellberg

EGR Intel: PlayStar has a remote team of about 45 staff. Can you tell us about your key personnel and setup?

PH: We already had Adam Noble from Play’n GO onboard from the start as co-founder. After that, we took Dan Alexander, who was head of casino for bet365 worldwide, to become the COO. We took Jon Bowden, who was one of the key marketing directors at Entain, to become our CMO, and Gustav Vadenbring, who was previously CFO for affiliate Acroud, as our CFO. I myself was the CEO of Catena Media. So, we knew from the beginning we would have a very competent management team, which is a problem for the other US operators. There is very limited experience and knowledge of online in the US, so we decided to build the operations in Europe where people have 20+ years of running online casinos extremely efficiently.

We started to build the product in 2021 but it took a year and a few months to launch it. We found GiG to be the best platform for us, and then we added the best CRM and predictive modelling tools. We have been cherry-picking from suppliers, and the key thing we wanted was a fully automated player journey managed in real time with real-time data. Nobody else has that. It means we react within a couple of minutes of something happening to the player rather than having to wait two days for a report and contacting them, and by then it’s too late. So, it’s about having the most modern technology to create superior retention. We soft launched in August, and we are outperforming our wildest forecasts so far – it has been amazing.

EGR Intel: How does the US differ to Europe from an igaming perspective?

PH: We spent an awful lot of time studying the market. Pre-Covid, in 2019, 44% of the adult population in the US had visited a land-based casino at least once. So, almost half the population had set foot in a casino. It’s not like London; in the US people go to a casino to eat, drink, listen to music and play. They have a budget to play and they accept losing money. However, it tends to be the same [land-based] experience right across the US, so we have tried to make it local. If you know SEO and how to rank pages, localisation is very important to rank highly and get good attention. So, why not do that to make it feel like it is a New Jersey casino and more than just another webpage?

EGR Intel: How important is the $15m equity investment from Meyer Global Management?

PH: Obviously being a startup it is essential to get funding. But we probably couldn’t have picked a worse time to do this. Everything has gone sour; crypto has collapsed, there are recessions and wars. When we started [building PlayStar] DraftKings were valued about $27bn. They are valued $6bn today. These companies wasted money on things that maybe don’t matter that much and they cannot show a path to profitability. You can try to sell a fancy product but what you need to sell today [to investors] is a financially viable business model.

EGR Intel: How did you demonstrate PlayStar was viable to would-be investors and Meyer Global Management?

PH: Our position in the US market is unique: we are casino-first. We are not focusing on a market share to be number one; we are focusing on a very profitable market share, and to do that we believe somewhere between 3% and 5% is the ideal area to be. If we can maintain efficiencies, we will do more.

In the US today, the key is to get people to try online gambling through advertising. The cost for this is high but the amount of conversion is quite small. It’s a very high cost to drive that [customer acquisition] funnel. We don’t want to do that, and rest assured we will never sponsor the Super Bowl, but once players come in and you teach them how to log in, do the KYC and deposit, they understand how online works.

They then need a good experience, or they will churn. Considering the rather poor quality from the majority of operators because they have sports as a focus and casino as an add-on, there are a lot of people who want something better. What do they do? They start to search for information online. And that’s how you connect with them via affiliates, Google PPC and social media. We only acquire [customers] digitally and don’t spend any money on brand building. Why would I build a brand for someone who isn’t interested in playing my product? But the person who is interested and who fits the persona I want to sell to is who I target extremely efficiently. You can then design a much more efficient return on investment based on acquisition cost and how soon it should pay off.

EGR Intel: Can you give us an indication of CPA rates in the US in 2023?

PH: The primary problem in the US is that you have extremely high acquisition costs compared to Europe. It’s ridiculously high but the player values are high if you manage it well. The most important thing for me is how soon they [the customer] pays back. I’d rather pay $1,000 instead of $500 if I have someone paying me back that money in 45 days instead of paying back $500 in 18 months. But then you need to know in which ocean those fish swim and use the right net to get them onboard.

When we looked at it, we saw a lot of different CPAs. You can buy customers for $200, or you can buy customers for $1,500. The difference is obviously what they give back in player value. We budgeted in the first year for an average of about $700-$750. People might think that is extremely high but define ‘high’. We find that we get that kind of money back in about five months on average. We originally thought it would take 11 months to get it back, so we are operating much better than anticipated.

And after four months we are still holding 50% of the customers we acquired, which is unheard of. You would normally be at about 32% or 36% but we have 50%, so that shows we are providing something different. And if you can hold them for a long time you don’t need so many new customers all the time like you do if you have a high churn [rate]. Would you rather have a highly profitable 3% market share in a $25bn market or 20% [market share] loss-making? If you have 3% of a $25bn market and you are making large profits, you have a pretty interesting operation.

EGR Intel: In New Jersey, which has had regulated igaming since 2013, there are more than two dozen casino brands. How has PlayStar looked to compete in what is now a saturated and mature market?

PH: When I was at Catena Media, I had the opportunity to be around New Jersey when it opened. We thought after a while it [GGR] would reduce but it hasn’t – it is constantly increasing. While the market is quite saturated, we have to remember there can be a maximum of 45 casino brands in New Jersey, but you have 250 licensed brands in Sweden with a similar population.

Because casino has a random number generator, some people will be hit by unlucky outcomes and will look for other things. That’s why you have so many brands in Sweden – because people churn. A superior product that retains players better is super important. Our business is about making a living from churning players and providing those people with a better journey.

EGR Intel: Will you eventually glue on a sportsbook, primarily to prevent your customers from going elsewhere for a sports bet?

PH: No. The US, in terms of online, is a pretty new market. What is interesting is that to get hold of licences for a state, sports betting is traditionally more expensive than casino, which is very weird considering you have higher profitability with casino. You need a big wallet for market access in the sports states. Then you need to look at sport in terms of seasonality. There’s a rather limited season for sports in the US compared to Europe, hence you have the operational cost for the full year while revenue is coming in only during a limited part of the year.

It’s financially inefficient […] you need to pay a lot for licences in a lot of states, you need odds compilers, risk management and other staff. And someone can change a positive outcome to a negative outcome in the last minute of the game. Given that, and the fact the sports [betting] scene is saturated, why would you do it? You could say, ‘I’ll cross-sell 20% to 40% of my customers to sports’ but for us the cost would be so high; it would be far too expensive.

Sometimes it is better to be smaller but extremely focused. I compare it to the coffee industry. You have Starbucks and all these [other] guys on the top but they are not the best and you get very little personal service. However, they are good enough, and people go there because they are everywhere. Then you have the small Italian on the corner who gives you a hug when you go in – and it’s better coffee. It’s more expensive but you feel recognised. We want to be that preferred one, the Italian coffee shop for the coffee connoisseurs.

EGR Intel: Is it still the plan to launch in Pennsylvania in Q1 2023?

PH: Yes. It’s keeping us busy, so no sleep here. We are in the final technical setup planning stage.

EGR Intel: With Pennsylvania having an effective tax rate for online slots of 54%, how challenging will this be to overcome?

PH: Even if you have that high tax rate, you can still be profitable if you have very little overhead costs. We should be able to pay for all operations of the company out of the business we are doing in New Jersey. This means a state like Pennsylvania requires a couple more customer support agents and a state specialist to make sure we give exactly the right promotion to people in Pennsylvania. Other than that, it is a very limited cost, and you use the same retention model [as New Jersey]. Pennsylvania is a much larger state with about 40% larger population than New Jersey and there is less competition.

We see that as a benefit because no one can come into the US and launch in Pennsylvania as a first state and build up their entire cost structure there. You need to be in New Jersey or Michigan, and then add Pennsylvania. Because of the [high] tax [on slots], CPAs and player values are a little bit less. Looking at the bottom line, you can model quite a nice business there. But you can’t if you need 40 or 50 people running it.

EGR Intel: Are you surprised that only six US states have regulated online casino so far?

PH: Yes, I am a bit surprised. But if we look back at Europe, it took some while [to regulate]. The UK was very quick to regulate, and a lot of countries followed. There is a lot of casino gambling going on in the States but predominantly from two parts: land-based and the illegal offshore market. Like it was with the UK, regulators want to control gambling to make sure there are good people running it with no money-laundering. And, of course, they want to tax it. But it takes time and education.

Also, not all states that will have sports will have casino. Utah will likely never have it, Alaska will likely never have it, Hawaii will likely never have it. But casino is still estimated to become 60%-70% larger than sports [betting]. Regardless of what you do, people will find a way to play. What is your option, not legislating [igaming]? That would create more longer-term problems because people have no protection from dodgy businesses. And you don’t get the tax revenue. So, there is literally no benefit in not legislating it.