SBC News Voice of the Sports Betting Industry
With global betting and gaming markets becoming increasingly competitive, igaming operators are finding that they have to go above and beyond the traditional advertising strategies in the hope of attracting bettors to their website.
With the competition hotting up, we’ve seen more creative player engagement campaigns emerge, but alongside that, there has been an exponential rise in the costs of player acquisition.
To discuss the rising costs and the strategies igaming companies can use to gain a competitive edge, we sat down with Andy Foster (Chief Business Officer at Enteractive), Ross Parkhill (CEO at Rhino Entertainment), Sam Brown (CEO at Rootz) and Simon Lidzen (CEO of FastTrack).
The four experts dive into some of the pitfalls that face operators when it comes to retention before outlining the ways the industry can recoup some of those initial acquisition costs.
SBC: In your view, what has caused the exponential rise in the costs of player acquisition as of late? Is there one major contributing factor, or is it a mix of reasons?
Andrew Foster (Pictured, right): While our insights into acquisition are somewhat limited, due to the nature of conversion and reactivation services for operators, it seems that the industry trend leans toward prioritising higher quality traffic over mere volume, which may have been the case in the past.
With margins becoming smaller, the days of casting a wide net and hoping for success is no longer viable.
Consequently, there’s increased demand for players with proven, reliable player value, and therefore, with intensely competitive markets, suppliers find themselves in a position to charge more for these players. Additionally, as competition for organic traffic generation intensifies, especially with the rise of riskier affiliates, acquisition costs across all segments are more costly.
Sam Brown: I don’t believe there is one major ‘global’ factor for rising CPA costs, but typically within each market there is one prominent factor affecting either demand or supply that is largely responsible for higher CPAs. For example, in many markets the supply of available compliant inventory can be very restricted (advertising bans & policies etc) which drives prices up – this is true of many locally regulated markets.
In other new or low entry cost markets, there is a seemingly endless increase in demand (the ‘gold rush’ effect you see from tier 1 operators on media assets in North American markets for example) competing for a relatively fixed supply of inventory – again driving prices up.
As individual operators we are powerless to tackle these macro-economic factors on CPA. However, we have all the tools to affect the other side of the ROI equation (revenue creation) and our ability to perform here is what ultimately counts.
Ross Parkhill: I think there are a few factors. One for sure is the increasing costs and competitive challenges in acquisition channels themselves. If we look at the affiliate landscape, then keeping an SEO site ranking top is becoming a more costly business and black hat PPC is the same, with the operational costs of keeping accounts up and running and competition driving keyword prices up.
Some operators aren’t helping the situation by overpaying for traffic or paying ever larger listing fees, which is artificially increasing the prices quicker than the cost should have developed. We’re all very eager to grow so I can understand the drive but ultimately, they are pushing up the cost and the payback period and I very much doubt some are actually looking at data or modelling what this means for their business.
Simon Lidzen: From a helicopter perspective all high performing operators have one thing in common – they are completely in sync with their identity, purpose and values. They understand their position in the competitive landscape, how they will differentiate and therefore have a very clear focus. They do not let themselves be distracted and invest in the wrong places.
SBC: From your experience, what are some of the biggest mistakes that igaming companies are making when it comes to retaining their player base?
Andrew Foster: I think, in general, customer retention has become a much greater focus area for iGaming operators, as evidenced by the surge of iGaming-focused CRM providers like FastTrack and Symplify. There is a definite trend for operators to drive better long-term engagement through gamification, highlighted by Soft2Bet as a USP, and by the growing popularity of free-to-play games from the likes of Thunderbite for instance.
Historically, a significant challenge was operators’ inability to adequately personalise the offers and experiences for each player on the right channel at the right time. Personalisation is key in a world where people are spoilt for choice and where there is a lot of “noise”, so operators need to utilise all the tools available to them to maximise player engagement effectively.
The biggest mistake I believe operators made in the past was thinking they needed to do everything themselves. There are amazing new third-party providers that, when combined, give you a massive edge over the competition, and operators need to be savvy in selecting what they keep in-house and what they outsource to optimise ROI and efficiency. Pairing these with good data driven strategies, operators will reap the long term rewards.
Simon Lidzen (Pictured, left): I do not believe this to be the case. I believe that most (if not all) operators are doing everything in their power to both achieve high conversion and to retain their player base. The difference is that the early lifecycle (welcome offers) are more similar between brands and therefore certain norms have been developed which meets players expectations and most brands adhere to, whilst the retention efforts are entirely dictated by the operators individual strategies and focus.
I know for a fact that most operators are struggling to manifest their CRM strategies and scale due to limitations in partnerships and tech, which is the core problem Fast Track solves. There is more alignment in what is expected. As an industry we have achieved a higher degree of automation in the early stage.
Ross Parkhill: As a casino operator, I think the biggest mistake is not having the fundamentals nailed down very tight. We have the data and tools now where we can treat players on a more personal level and can do all the testing and optimising that should be needed to have solid retention.
I don’t think we should forget that due to the nature of our products and the ups and downs of gambling, some players will churn almost no matter what you do. Plus, now you have even more players opting out of marketing so your options can be limited.
Your teams shouldn’t be sending offers for the sake of sending, you need to have a well thought out and data lead strategy, then if you want to excel in retention you need to keep grinding the small incremental improvements. That could be in anything from the content you use, smarter product features, utilising CRO or whatever it takes to target small groups of players and ultimately small improvements.
Sam Brown: The most common is investing in the wrong players! This usually involves either over-investing too early in the players lifecycle or misunderstanding the key indicators of value when applying segmentation.
To compound these mistakes companies often apply rigid limits/ratios to incentive costs. Companies that treat incentive costs with an investment mentality and find optimal ROI with a fluid view of top line revenues are typically more successful in retaining players.
Another common mistake is not utilising the key moments of engagement. Many companies’ CRM strategies revolve around the retrospective re-engagement of their players through channels which themselves have dying levels of engagement (email and SMS). They miss the key moments ‘on site’ or ‘in-app’ to ensure that an engaged player knows exactly when and why to return in the future.
Lastly, is the belief that ‘automating’ customer comms will improve retention rates. Many examples of ‘automation’ focus on efficiency (increasing output at lower cost) rather than relevance. The result is a dramatic increase in the volume of comms but a drop in engagement. Improving retention rates is an on-going iterative process of testing, learning and consistently improving relevance. Only when this process is automated will you see improved retention rates.
SBC: As an industry, are we far too focused on that initial engagement that we forget about keeping those bettors on our sites?
Ross Parkhill (Pictured, right): I don’t really agree with that. Yes, the initial engagement is important and actually vital, but I see most of the established operators working hard to ensure that their products and offerings are tailored to keeping players active. I think we’ve all realised that for long term growth it’s better trying to keep players longer than relying on constant aggressive acquisition.
Andrew Foster: It’s hard to answer this as operators are required to focus or balance acquisition/retention differently depending on where they are in terms of maturity as an operator. Start-ups, with their limited player base, naturally direct their energies more towards acquisition.
Conversely, for an established operator, the challenge of player acquisition will have already been addressed, so the focus then shifts to keeping those players engaged and optimising Lifetime Player Values, underscored by a strong commitment to CRM and engagement strategies.
The sense of a focus on one part without the other is unavoidable whilst operators go through the growing pains, and the best performing operators are those that can balance both of these factors initially and drive organic growth as quickly as possible whilst keeping players active and driving good LPVs.
Simon Lidzen: The primary, long term driver behind high conversion, high retention and low churn is to be completely in sync with the identity, purpose and values. This is how you ensure that there is a red thread in everything you do, a cohesive player experience and narrative. Being consistent and staying true to the reason why players should play with you will always result in a more loyal and engaged customer. There are however tons of best practices which will accelerate value.
Having a CRM like Fast Track, which works with real-time data, allows you to have a more accurate segmentation, be able to react to behaviours and do more effective retargeting (onsite and other channels). What we call 1:1 experiences, predictive models to help optimise time to engage, choice of channel offer size and offer types have proven incredibly effective and have a significant impact on engagement and to drive up LTV.
Another truly impactful initiative is Greco. Greco’s current solution is focused on identifying and eliminating bonus abuse in real time, from a CRM and retention perspective however its vastly powerful as it provides you with a player quality segmentation. Bundling this both eliminates abuse as well as ensures you only target and optimise your rewards for legitimate players.
Sam Brown: Almost every gaming company will have 50% of the depositing players in their databases that have only deposited once. Why? Well because most operators over-invest in the initial engagement and get punished. However, it’s also because of the industry we are in where for most operators 80% of the depositing players they acquire will never cover the CPA.
As we get smarter at predictive modelling, we get better at identifying loss making players and not compounding it with additional investment. So, whilst some may ‘forget’ about keeping players on site I hope that for most it’s more of a conscious decision not to invest in the wrong players.
SBC: Many have estimated that the cost of player acquisition is now several hundreds, if not thousands, of euros. What would be your advice to those looking to increase the LTV of their customers? Is there a secret behind recouping some of those initial acquisition costs?
Sam Brown (Pictured, left): Excel at predictive modelling to identify the investment opportunities and risks in your database! The quicker you are at accurately predicting LTV, the less money you will waste on negative ROI players, and hence the more you will have to incentivise the right players.
Don’t focus on GGR with rigid bonus costs targets, as you will limit your ability to react to the ever changing nature of your database. Instead, be fluid with the relationship between GGR and bonus cost to maximise your NGR.
Andrew Foster: Though securing players can be straightforward with ample funding, the key is to identify the quality of the players being acquired and quickly close down any unprofitable acquisition channels. Operators are becoming far better at analysing this data and can make quick decisions based on short-term insights, and can expand on the player sources that are showing the desired returns.
By merging efficient acquisition strategies with compelling on-boarding experiences, and by rewarding loyal players while sidestepping those who only seek initial bonuses, you can find value relatively quickly. This sounds like an easy task, but there are unique challenges in each market making this simple solution more difficult to achieve.
To me the biggest factor for success in almost every facet of life is buying at the right price, enabling a decent upside when you sell, or in this case retaining the customer in the long term. Buy right, sleep at night.
Ross Parkhill: If you can’t recoup all the acquisition costs you don’t have much of a business. The quicker you can recoup the quicker you can reinvest those funds, so increasing the average LTV is one of our key focuses as a business.
I don’t really believe there is any secret or silver bullet here. It’s a pretty boring answer, but again improving the fundamentals is how you improve LTV. So not randomly jumping from one quick fix to another, or worse, just talking about improvements you’d like to make.
It’s quite hard to really differentiate your product or offering. We all have the same or similar games, payments, bonuses, tools etc which is fine because our customers, the players, are coming for those things.
So, you need to focus on building a solid product that your players will enjoy, keep optimising your user experience, operations, and grinding out little 1% improvements, then you can get LTV’s that will allow you to pay the CPAs. It’s tough and unlikely to get much easier so just having that constant mindset and drive is as good a tool as any.
Simon Lidzen: Player acquisition cost is controlled by the market, and determined through the amount of operators that are competing for the same player. The player acquisition cost is for example very high for this reason in the US, as everyone is fighting to achieve a certain market share.
