Online gambling would appear to have a problem with innovation. Such at least would be the conclusion from the activity we have witnessed recently extolling the virtues of nurturing entrepreneurs and start-ups within an industry which, perhaps surprisingly, has a poor record of encouraging new ideas.
Surprising, perhaps, because online gambling was among the first wave of industries to explore the countless opportunities offered by the internet. But David Mills, the head of research at Matchbook who heads up the company’s new incubator project mLabs, believes there are good reasons for the creativity gap at the top operators in the space. He pinpoints the regulation of gambling as a major issue.
“One of the reasons could be due to the regulatory control,” he says. “In other sectors it is easier to release something in beta stage and see how it goes. If it succeeds great, if it fails then just withdraw it and move onto the next idea. In a regulated industry there is often a lot more process involved in releasing a new product so the operators need to be more confident that it will succeed before investing the time and capital.”
Instead of disruption, many operators choose instead the path of imitation, looking at what the competition does before rushing into the same space. It may not be the most creative solution, but it is cost-effective. “When one operator launches a product that succeeds all other operators race to release their version of the same thing rather than concentrating on their own ideas,” says Mills.
Start-ups aiming at the gambling industry need to be aware of the regulatory backdrop and the limitations it will inevitably impose on their plans. One of the initial partner companies for mLabs is DiscountIF, a social e-commerce platform rewarding customers with cashback on events they follow. It was founded and launched by ex-Betfair leaders, and aims to leverage their experience from the gambling space into the e-commerce industry.
Chief executive Lewis Holland believes that regulation has indeed acted as a retardant on innovation in the sector, but he believes there are examples that can be followed to guide innovators through the regulatory maze. “Regulation around the industry has potentially hampered further innovation,” he says. “But other industries such as the finance industry have managed to overcome this.”
Regulation and how to deal with its restrictions is just one area where guidance from those that have been there before can be just as valuable as seed money. This is arguably why the idea of incubation – stolen direct from the masters of the art in the tech sector – is flourishing in the gambling sector right now.
For mLabs the process is about handpicking ideas and start-ups that stand out, and then giving them a helping hand with advice. Says Mills: “mLabs is a community where like-minded people can share their ideas, help each other, improve, grow, collaborate and see their ideas evolve together.”
Mills says mLabs is unashamedly stealing ideas from the social networking sphere. “Showcasing ideas with mLabs takes your company beyond simply having an ‘about us’ page on a website. Companies are made of people. People have stories to tell and they can share those stories at mLabs.”
Holland from DiscountIF likes the idea of mLabs bringing together a community of like-minded people. “Share success, share challenges, and potentially use the network of affiliated people and companies to solve those challenges,” he says. “I see it as an online start-up incubator without any strict commitments by either party.”
Mills points out that above all mLabs is about the learning experience. “It may help highlight some strength or weakness of an offering that the entrepreneur was not aware of,” says Mills. “It will certainly provide helpful insight about bringing something to market and the challenges faced.”
In gambling in particular, prior industry knowledge is one area where start-ups really do need to be fully equipped. “A gambling product requires a certain level of liquidity before it becomes a viable product,” says Mills. “Gamblers want to know that there is real potential to make money. I think this can be a barrier to entry for start-ups that are not heavily funded, especially in the sportsbook or exchange market.”
But Mills is far from suggesting new start-ups in the industry should limit their expectations. “It’s not a bad thing to aim big,” he suggests. “We live in a time where companies see explosive growth and go from nothing to multi-billion pound companies almost overnight. With the right idea and the right delivery this is possible.”
Matchbook itself might be able to help with the ideas coming out of DiscountIf, and the two companies are exploring how they might collaborate on the possible incorporation of social ecommerce on the Matchbook platform. Giving start-ups a direct route to the consumer, with a platform on which to work through the teething issues, is an obvious example of how collaboration can help both parties.
“Social ecommerce is an area which is still being fully explored, and the teaming up of Matchbook and DiscountIf, via mLabs, shows how our experiment might bear fruit quite quickly,” says Mills.