Opinion: Six predictions for egaming in 2016 (Part 1)

Mobile first becomes mobile only

If 2015 was the year of mobile first then 2016 is set to be the year of mobile only. In the sportsbook sector we’re seeing mobile comprising north of 70% of revenues in some markets and casino and bingo are moving towards the 50% mark. The trend is only in one direction with mobile’s importance rising with every quarter.

The driver behind this is in part the improvement in product from the major operators and suppliers, but mostly the dramatic shift in consumer behaviour. An Ofcom study in August showed the majority (52%) of adults use a smartphone or tablet as their primary device to access the internet, and this with only 66% owning a smartphone.

The under 30s are increasingly a mobile-only generation for many activities and there is some evidence that this is also true for males over 40. The truism is that users expect to be able to access content whenever and however they want, but what they want is a good mobile experience.

What this means in practice is creating products designed solely for mobile with functionality that allows users to do everything on their hand held device. We’ve already seen some moves towards this in sports betting with Ladbrokes rolling its mobile front-end onto desktop and Sky Bet launching its cash out on mobile only (it’s only just gone live on desktop).

Gaming has lagged some way behind, but with operators mostly getting on top of the Android discovery and onboarding issues and HTML5 clearing many of the hurdles around fragmentation and performance on older devices this should be the year of strong growth. The big operators are investing in casino products while bingo suppliers have already massively raised their game in this area.

Mobile only doesn’t mean the death of desktop, and it will remain a key platform for poker as well as some forms of casino gaming. But operators will be forced to invest in product that allows consumers to do everything on mobile devices without compromise and with a UX that exceeds all other platforms.

It’s a real challenge, but the feeling is the industry is ready to rise to it.

Product convergence

In online gambling fear has always been the mother of innovation with declining revenues seeing creativity spike as operators look to find a solution. One vertical where this has been obvious in the second half of 2015 is bingo. Suppliers have invested heavily in bingo product to make it more mobile friendly and to extend its appeal beyond the traditional daytime mum-at-home demographic.

Bingo has long been as much about the side games as the bingo rooms, with the majority of revenue coming through slots games, but this year has seen a real convergence between the two. The line between bingo and casino is becoming blurred and the games used not only to extend LTVs from existing customers but as an acquisition tool for other verticals.

These softer games appeal to customers who may have played Candy Crush or social casino games in the past as opposed to the more traditional hard-core casino players. And with a wider move towards gamification in the casino sector that vertical is moving in a similar direction with the rise of a softer more social experience.

With Amaya’s acquisition of PokerStars we’ve also seen the death of the last significant single vertical operator and arguably they are pushing the convergence angle as much as anyone. Its hugely successful Spin & Go product provides fast-action jackpot fuelled games that feel more at home on the casino floor than the poker room while its casino hosts hold’em themed games.

And it’s about more than just the cross sell. What we’re seeing is a move from seamlessly integrated but separate verticals, often with different KPIs and reporting lines, towards one single brand gambling product with products for different moods and motivations. The product being sold is entertainment and the vertical definition between casino, bingo, poker or even sports betting becomes less relevant.

With the unstoppable rise of in-play within sports betting and the impact of cash out we would even expect to see more gaming style products introduced in the vertical. Suppliers such as Metric Gaming are pushing 10-second markets and fast settlement and this is a trend likely to be built upon during the year.

The hard-core casino and sports betting gambler isn’t going anywhere, and there will always be sites that cater to this market. But a broad entertainment driven brand that offers more seamless crossover between products is where some of the smarter operators will be headed in the next few years.

Supplier Squeeze

A quick glance at the exhibitor list for the upcoming ICE conference proves there is no shortage of suppliers in the online gambling sector right now. The growth of API solutions has opened the field up to smaller game studios while the huge growth in sports betting means there are a host of new suppliers trying to gain some market share as more gaming brands expand into the vertical.

But against this backdrop we’re seeing external factors offering some major headwinds for egaming suppliers. The unstoppable rise of regulation, a shift towards in-house development at the major operators, tax and regulatory compliance costs and operator consolidation all present potentially tough obstacles to overcome.

What’s notable from the last set of results is the growth posted by Playtech and NetEnt, with the latter showing revenue growth of 28.8% and a near 4% rise in margin. The story here is the same as in the operator sector with scale becoming increasingly important. Suppliers, much like operators, need scale to invest into new regulated markets and a broad product set or risk getting left behind.

But the biggest threat to all comes from the operators themselves. With the likes of Paddy Power Betfair, bet365 and William Hill all investing heavily in their own technology and front-end solutions if suppliers want to maintain margin they need to continue to offer new solutions with strong CRM and data tools.

It’s set to be a transformative year for the supplier side. We should see some consolidation, but it will also present opportunities for niche suppliers focused on specific verticals or even sub-verticals or with a strong regional focus. The likes of NetEnt and Playtech can’t be everything to everyone and innovation in table games, bingo or softer games could offer a real opportunity.