Consolidation stories continue to hit the headlines as gambling companies continue the merger game in a bid to drive growth via scale.
GVC added Bwin.party to its portfolio, Paddy Power and Betfair joined forces in February to create an online gambling giant worth over £4bn and now the merger between Ladbrokes and Gala Coral looks likely to be confirmed imminently. The process is inevitable, it’s a sign of a maturing (and still growing) industry in which the perceived wisdom seems to be that big is always better.
Where does that leave smaller operators?
Is there still room for them to be competitive? Will consolidation inevitably mean a less innovative and differentiated industry?
Innovation and differentiation have played a key role in shaping the igaming industry and stimulated the current offering players can now experience. Betfair was a hit when they launched in 2000 with a radically different product and they helped re-shape the traditional bookmaker offers approach of online gambling, pushing them to offer more aggressive prices.
Paddy Power is a textbook example of how a rather traditional gaming business has managed to elevate their profile by adopting an innovative (and controversial) approach to marketing communication. It’s hard to imagine many other industry players having the guts to offer markets on the first species to be driven to extinction by the BP oil spill in the Gulf of Mexico in 2010 or showing sight impaired footballers kicking a cat in a TV commercial aired in the UK – just 2 examples from countless other brilliant marketing stunts from their ‘department of mischief’.
It takes courage, focus and great ideas to be at the forefront of both innovation and differentiation, but it also requires funds to execute great ideas and this is perhaps the most disturbing aspect of this rush to merge. Operators are far from equal when we talk about investment capabilities, particularly in marketing. Sports Betting in the UK is well known for being a big player only market. The top 5 operators (Paddy Power, William Hill, Bet365, SkyBet, Ladbrokes) control over 80% of the market, leaving the rest to fight over the remaining 20%. Some smaller operators still manage do very well, particularly in the casino space where we see a wider range of medium and smaller size players competing, but it’s not a level playing field.
The big five dominate TV advertising, saturating the networks with seven and eight figure ad buys around major sports events – the estimates for 2016 UK TV advertising for gambling are looking at upwards of £125m, a 52% increase from 2012. Big betting companies also dominate sports sponsorship and have driven the price upwards, leaving the smaller operators scrabbling for what’s left over.
Of course the competition between the big five hasn’t always run smoothly either – The price dumping strategies that came to the fore at The Cheltenham Gold Cup this year prompted Jim Mullen (CEO of Ladbrokes) to say “The sector went mad” – It did. This race to the bottom has not just been confined to racing, we are seeing it in the football market as well as in casino bonus offers.
So where does that leave the smaller operator? Technological innovation is expensive – another reason for companies to merge and share the burden. BetStars introducing their Spin & Go feature recently was a good example of innovation that engaged customers immediately, but the ability to produce and market that effectively would probably have been beyond many smaller gaming companies.
Leo Vegas took a single minded approach from launch, recognising the importance of mobile, they focused on the fact that improving connection speeds and better devices would lead to a mobile market – their mobile first approach solved a genuine problem and by offering customers a great mobile experience they were able to carve a niche in the market. Of course It came with a neat brand and marketing identity, and a fun TV campaign, but the result was that they propelled themselves to an IPO valuation of over $300m and one of the leading European mobile casinos.
The behemoths that now dominate our industry are here to stay – if anything they will continue to get even larger. It would take very, very, deep pockets for a new entrant to mount a serious challenge to any of them now. Despite this, and despite the soaring cost of doing so, many second tier operators seek to replicate the marketing strategies of their bigger brothers, fishing in the same pond, with the same styles of communication but with a lot less money.
It’s time to think smarter.
Of course TV is important but if you can’t afford to buy around the big games, make your ads work harder for you, be creative, be distinctive, be cool or funny or even better, both.
Creative agencies have a poor reputation for urging clients to “be brave”. It’s an easy thing to say – much harder for a CMO to commit budget to an untried idea, but to compete, it’s never been more important to be distinctive and innovative in order to get noticed. Whether it’s innovation in product or user experience or indeed marketing, success will only come to those who dare to be different.
The Tsunami of betting ads on TV is in danger of causing viewer fatigue. Their distinctiveness is actually their lack of distinctiveness – often viewers have little idea of who the advertiser is, yet time and time again we see the same creative approach adopted across the board. It’s an approach that screams of “if it ain’t broke…” but for smaller companies, with less recognisable, or familiar brands, it’s a strategy doomed to failure. The herd mentality, the strangely ironic aversion to risk, that the gambling industry often seems to exhibit in their marketing, has created a homogeneous mass of advertising with little or no differentiation. And that is where smaller operators have an opportunity. Where smaller companies have an advantage is the ability to move quickly, the bigger the ship, the more time it takes to turn round, the same is true of companies.
Agile, lean, hungry operators are often in a better position to innovate – simply replicating the strategy of the big boys is not the way to win, they will outspend you every time but being smart, cheeky, creative and being willing to constantly refresh creative can put you at the front of the queue for noticeability and share-ability across digital media. Look for market segments you can target, however niche, and formulate a strategy that appeals to that segment.