In the fog of war generated by the current spate of sectoral M&A manoeuvrings, the debate about whether online gambling is genuinely engaging its customers is in danger of getting lost in the tumult.
Like worrying about the design of the street furniture when the tanks are already rumbling down the boulevard, focusing on innovation in the shadow of large-scale M&A is a tough ask. Yet the corporate flux currently afflicting the online gambling industry is more than simply a distraction; indeed a cynic might argue that the spate of transactions is both a cause and effect of stifled business creativity.
Paradoxically this is happening at the same time as other consumer-facing sectors are experiencing huge levels of technology-led disruption. Such news from elsewhere should act as a spur to innovation, but it also stands as a warning that the consumer environment is not a static animal.
Crispin Nieboer, director of corporate development and innovation at William Hill, is the man in charge of launching the company’s new incubator William Hill Labs. He says companies should be looking at how upstarts have emerged in other new industries and swiftly stolen huge market shares.
“People are perhaps waking up to the fact that they can’t afford to be complacent any more, with so much disruption happening in other consumer tech markets, and the barriers to entry in regulated gaming not really being that high,” he says.
Nieboer notes that gambling has seen its fair share of industry disruptors – Betfair being perhaps the most obvious example. But the world of technology doesn’t just offer object lessons about the dangers of getting swept aside by new innovative business ideas. It has also opened up social media interaction to an extraordinary degree.
Dominic Hawken, chief technology officer at gaming technology specialists Grand Parade, notes that the behemoths of the online and social media eco-system have not only been investing hugely in R&D and developing coding technologies to enhance their product, but have been sharing the results too. “It’s open source,” he says. “Google Analytics, Bootstrap, Firebase – all our developer led programs that are changing the way we deal with data. Google and the likes of Twitter and Facebook are developing code that is revolutionising the speed at which our systems can communicate and process transactions.”
Hawken suggests it offers the opportunity for all comers to stand on the shoulders of giants. “That kind of innovation is the tipping point,” he says. “We are building tools that leverage the work being done by these big social companies and using it in our sector.”
Analytics is one of the buzziest words in the sector at present. Ivor Jones, analyst at Numis, points out that at a recent gaming conference, Mor Weizer, chief executive at Playtech, suggested companies should be paying more attention to the work that can be done with their existing player base and product suite rather than searching for major new innovations and ideas.
Weizer might be guilty of talking up his own shop here, but Jones suggests there is more than a grain of truth to the observation. “Some of the operators are getting this stuff right,” he says. “There used to be a focus on product, but now they are focusing on the customers they already have.”
The notion that online gambling has moved from an era of customer acquisition to one of customer retention is not new. It also chimes with debates taking place in the wider business community about how the injection of discipline and simple rules can aid the rejuvenation of a core business as much as the introduction of radical new ideas.
A recent article by Donald Sull, a McKinsey alumnus and senior lecturer at Massachusetts Institute of Technology’s Sloan School of Management, points out that the current widespread fascination with disruption “obscures an important reality”.
“For many established companies, incremental product improvements, advances in existing business models, and moves into adjacent markets remain critical sources of value-creating innovation,” says Sull.
In online gambling the opportunity is opening up for brands to leverage their own customer data to better deliver ever-more personalised betting experiences to the customer. Says Nieboer at William Hill: “As device sizes get smaller – some say the website is already ‘dead’ – we have to use data to provide customers with what they want, with the fewest interactions possible, and use machine learning to make the right recommendations and suggestions, just as Uber is doing for transportation or Spotify is for music.”
William Hill has turned to CRM and data analytics specialists Featurespace to help with its aim of gaining a greater insight into the motivations of its customers. David Excell, co-founder and chief technology officer at the Silicon Fen-based firm, points out that unlike with other online retailers, online gambling companies represent hugely complex environments in terms of the product set available and the randomness of the data collected.
“The analysis can be done in real-time, which is cutting-edge,” he says. “But you don’t always need to make a decision instantaneously. It’s about how you can handle large amounts of data; monitoring huge volumes of data, and being able to process the data, and take the meaning out of it without getting overwhelmed. From that data we can predict what the customer will do in the future.”
Hawken from Grand Parade concurs on the complicated nature of the gambling business, and the need for learning from experience when it comes to handling data. “Betting as a business is really weird,” he says. “It’s fundamentally different to other retail businesses. You can’t apply the logic from elsewhere.”
He points to the work Grand Parade has done recently with Sky Bet on the Sky Sports News website, providing contextual ads embedded within the news-page content. “We worked out the best banners to sit embedded within the content,” says Hawken. “We could see what worked through the clicks. We can see what is working for all the banners, what clicks we are seeing, it was a nice seam to mine,” he says. “We’ve learnt our lessons about content; we react to the latest click. You have the measurement, you can work out in real time what to show them. It’s like a newsroom. It’s all about real-time clicks, optimising every single product and reacting.”
Hawken says he likes Sky Bet’s willingness to test ideas and concepts. “It’s a huge challenge if you can’t measure the results,” he says. “You really should allow your customers to dictate what they want and how they interact with you site. Companies need to be happy to use focus groups.”
His point is echoed by Fintan Costello, co-founder at another digital marketing agency Revenue Engineers, who says that most operators are at this stage still “running blind” when it comes to using their own data. “The biggest problem is getting clean data,” says Costello. “It will never be perfect. Getting anything to a starting point where you can actually use the data is the difficult part. It’s about smart analytics.”
Companies which innovate will reap the rewards from blazing a trail. But the more forward-thinking operators will know one of the inevitable truths about pushing out new ideas: the successful ones will be copied, and quickly. In a presentation to investors given at the end of last year, Betfair – which has recently had some success with its newer product and marketing innovations such as ‘Cash Out’ and ‘Price Rush’ – put a limit of six months for any successful new enhancement before the competition brought out its own copycat product.
That may not sound like a long time – but it’s enough to have helped Betfair to a 52% rise in customer numbers in the financial year to April, and prompted analysts at Morgan Stanley to suggest the successful repositioning of the business as a mass-market sports-betting and gaming provider was being aided by its innovative approach. “Key product differentiators should increase customer loyalty, driving strong long-term returns,” the analysts added.