Every dog has its day, and a recent report would suggest that the UK online poker industry is lying on the floor, paws in the air and in the early grips of rigamortis. However, keep the garden spade in the shed for now because it’s not yet over for the nation’s egaming companies.
It was the market research company Mintel who published the results that found internet poker to have reached its zenith and commencing its fall to earth. They reckon that the industry will decline by 7% this year with gross gaming yield falling to £247 million from £265m last year – pretty bad considering that between 2004 and 2007 it had grown by 74%.
But Mintel’s survey failed to include Poker Stars and Full Tilt in their analysis, which is a gross oversight considering they are the two largest online poker sites in the world. It’s a bit like talking about famous people caught with their pants down and not mentioning Tiger Woods.
The other aspect they have overlooked is that the aforementioned companies are bucking the general industry trend and continuing to grow. Customers it seems are abandoning the smaller Europe-facing sites such as William Hill and Ladbrokes and joining Poker Stars and Full Tilt due to the greater liquidity that comes from their US- customerbase. In other words the Big Two are getting bigger and the others are getting smaller in a virtual vicious circle.
For competing UK websites the duopoly of Poker Stars and Full Tilt leaves them in a quandary. Is there any point in throwing money at the problem by launching an aggressive marketing campaign in the UK, when players will go to the sites which have the unfair advantage of a US customers anyway?
The delay of the UIGEA does give British egaming companies hope for the future in terms of scrambling for territory in the US, but by then the liquidity of Poker Stars and Full Tilt have be even bigger as they continue to make hay while the sun shines. In fact, had the UIGEA gone through on 1 December, the smaller players might have had more of a chance of competing in the UK market, as the air supply of Stars and Tilt would have been suddenly sucked from them, as with PartyGaming back in 2007.
There are two schools of thought on the matter. Dominic Kofert, the CEO of Pokerstrategy.com, believes that there is no point in giving up on advertising campaigns because if you don’t let people know you are there, they aren’t going to come to you? Kofert pointed out recently that poker sites are getting so caught up in keeping VIP players happy with fancy big-prize promotions that they are overlooking the need to bring in new customers.
“There are fewer TV campaigns than two years ago,” he rues. “Why? The return on investment of these campaigns is no longer there. This will not change until the industry focuses on generating deposits as well as rake.”
“Poker sites undervalue the recreational, net losing players. As a result, the ROI on large scale marketing campaigns is miscalculated and those campaigns are stopped – which is not only terrible for the poker site, but also for ambitious poker players, as we rely on fresh money coming in.”
Manfred Bodner, the CEO of Bwin, disagrees about taking on the competition through advertising, however. He believes that the secret lies in technology and differentiation. “The next ten to 15 years in this industry will be about innovation,” he said last week. “The last ten years have been about big branding and being the industry’s Red Bull, but the next ten will be about being an Apple, and offering consumers something new that revolutionises the market. Media spending will not be the answer.”
After all, once a market has been cornered it is difficult to attract a market share – unless you have a unique selling point, which is where PKR.com come in. The critics scoffed at their 3D software when it was first launched, but they are the only Europe-facing poker site that have managed to keep growing.
“Stars and Tilt are able to leverage unlimited acquiring resources from the US into Europe, and revenues are 30-40% down for poker-focused European brands,” says Malcolm Graham, PKR’s CEO. “However, 50,000 people turn 18 every day, and don’t want to play a 2D vanilla product. We’re the only non-US facing poker room still growing, as our differentiated product is resonating among new, younger players.”
So the key for UK’s poker companies is to re-invent themselves a la PKR? Video cam girls poker anyone?