Focusing on the Gen Z and millennial demographic was going smoothly and without a hitch for Rivalry until Q2 this year, when the firm revealed that its margin had been negatively impacted by some behavioural changes among this audience.
Despite this, CEO and Co-Founder Steven Salz explained to SBC following its Q2 earnings call that the group would continue doing what it does best and maintaining engagement with its go-to audience – and is taking onboard lessons from the past three months.
Following the influencers
As Salz and Rivalry EVP of Corporate Development, Billy Levy, have previously outlined to SBC, the group places a uniquely strong emphasis on content creation and influencers as part of its engagement strategy.
Around 80% of the firm’s MEBs are under 30, Salz outlined, whilst an overwhelming 97-98% can be classed as either Gen Z or Millennial. Whilst a successful target audience for the most part, this was the root cause of its demographic hurdles encountered in Q2.
The firm’s CEO explained: “We had some margin issues in the quarter that were pretty atypical for us, mostly due to some abnormal events and some nuances.
“We find that Gen Z and millennials, under 30 betters, who are majorly in casino or in sportsbook, will be very active in similar patterns to the influencers that they follow, which is a little different I think than the traditional sports bettor.
“We dealt with a little more swinging and volatility which ended up negatively affecting us in the quarter just across the board. There were a lot of really good trends and then we got hit a little bit on the revenue side from margin.”
Overall, Q2 was a quarter of continuing growth for Rivalry, with the esports-focused operator – licenced in its native market of Ontario as well as Australia, but also holding an Isle of Man licence – reporting year-on-year revenue growth of 60% to CAN$8.5m (Q2 2022: $5.3m).
Driving this was an uptick in betting handle of 192% from $38.4m to $112.2m. Salz highlighted how customer acquisition costs have also been cut by over 40% despite overall user numbers increasing, with handle per customer also rising.
He did note that, relative to larger operators such as the Entains and Flutters of the betting world, Rivalry’s margins are smaller. Given the huge size, relative maturity, and reach of these groups, this is hardly unsurprising, however.
Rivalry is therefore planning to keep its foot on the pedal regarding its engagement with Gen Z and millennial audiences although the ‘peaks and troughs can be quite large’ as Salz put it, referring to the aforementioned effect customer behaviour has on margin, this is a market the group knows best.
“We understand it better than anybody because that’s been our focus for so long,” he said. “There is a certain operationalisation of it that only we know. It’s not just the more classic vanilla things you can do from an operational perspective, it’s even the way that you market or connect with the audience.
“I think we have a good understanding of it, but also if you take a long-term view and are a disciplined, patient operator, 90 days is just not a huge amount of time and is not a thing that worries us really.”
This is not to say that the firm is not leaving its strategy completely unadjusted. As alluded to above, the company is diversifying its product range and seeking to add more ‘high margin’ products, such as same game parlays (SGP), branded as Same Game Combos.
Entertainment, innovation and growth
Last year also saw the addition of igaming to Rivalry’s portfolio in the form of Casino.exe, a proprietary casino platform blending 90’s nostalgia with interactive entertainment, which the company’s CEO explained has driven handle 30% alone, which as the group asserted in its Q2 report provided a bulwark against esports seasonality.
Company leadership expressed to SBC that the performance of Casino.exe is “proof that an entertaining and innovative product, even if it’s the classic stuff but just presented in a novel and engaging way, drives growth.”
Salz added that the group’s product breakdown is now looking more like that of a ‘traditional’ operator, albeit with a stronger focus on esports, – around 50% of revenue is from casino, 35-40% from esports and the remaining 10-15% from traditional sports.
The CEO continued: “Flutter’s NGR margins in the US are reaching 12-14% I believe, it’s insane, and SGP products for traditional sports are insanely popular products, it’s something like 30-40% of channel mix so it’s a high-margin product.
“We’re adding higher margin products into the mix, and we’re adding more casino depth, which is a low margin product but it’s a stable and consistent product overall.
“We are slightly tweaking and tuning our marketing, rather than focusing on content creators that are suggesting a single parlay for an upcoming weekend, which leads to many people doing that parlay, we’re providing more options on upcoming ways to play on that upcoming weekend.”
Closing Q2, Rivalry has found ‘very different seasonal trends’ than in previous years, but has also seen its geographic reach grow, with Ontario in particular getting bigger and bigger in the 17 months since launch in April last year.
Although still active in the market, Australia is less of a focus for Rivalry – Salz told SBC through the company’s ‘crawl, walk, run’ perspective on market development, explaining that its Australian business is still in the ‘crawl/walk’ phase.
This is because priority on the most highly profitable markets and getting a return on investment in the short-to-medium term is the company’s core focus right now, but the company will ‘probably circle back to spending a bit more time and energy in Australia”.
But are there any other markets on Rivalry’s radar? For Salz it ultimately comes down to the demographic factor, whether or not a country has the right mix of millennial and Gen Z audiences who enjoy betting and esports in equal measure.
Salz elaborated: “If you look at the sheer volume and density of people who are in their 30s and mobilly connected with cultural proclivity for gambling and are esports fans and gamers, South America and Southeast Asia, which are covered by Isle of Man and Gibraltar licences, are just further ahead and more popular than you would find in other markets.”
Ontario – entertainment over calls to action
Back in the firm’s founding location of Ontario, some regulatory rumblings have occurred of late. Notably, the Alcohol and Gambling Commission of Ontario (AGCO) issued a ban on the use of celebrities and athletes in marketing material.
For a firm such as Rivalry which incorporates influencers heavily into its marketing, this could be perceived to be a major problem. However, the firm is confident that its focus on entertainment and not on ‘calls to action’ by directly promoting betting means the ruling will have little impact on its marketing.
Salz remarked: “Rivalry’s success has been because our marketing with this demo is very entertainment driven and in many cases doesn’t actually talk about betting – in some markets it is, in others it isn’t.
“In Ontario we do very little marketing, but there is not a large degree of that which is action-oriented betting marketing. It’s very much entertainment, grassroots stuff, hosting watch parties etc.”
In contrast, this pivot from having direct calls to action to a more entertainment-oriented brand might be difficult for some other operators. This is because customers will have to get used to a new style of engagement that the company has not done before.
Although licensed firms can still use celebrities to promote responsible gambling policy, in Salz’s view, the main winner of the ban on direct marketing featuring influencers may in fact be the black market.
By eliminating the option for regulated operators to continue leveraging influencers, this leaves black market firms as the only ones able to do so. These firms are ultimately the ones that will not observe any rules around player protection or the province’s long-standing ban on betting inducements and promotions.
Salz reflected that Rivalry had been promoting the benefits of Australian or UK style measures – such as a whistle-to-whistle ban on betting advertising during sports within 15 minutes of the beginning and end of a match – in its engagement with the AGCO.
“We’re kind of handing a chunk of the market on a silver platter to these guys,” he said. “By making the people you’re regulating unable to differentiate from each other because you’re cutting off every single way for them to market to customers. That’s really the downside of this.”