Odobo is the new HTML5 Games Developer Program created to help games developers move from thinking to selling with the minimum of fuss. They were one of the sponsors of the recent mGaming Summit in London, and in preparation for the event they commissioned H2 Gambling Capital to take a look at the current state of the online gambling market. The mission, that they chose to accept, was to predict what it would look like four year from now, and their laborious work unearthed five key talking points.
1. There will be significant market growth in global online gambling to 2015 and beyond.
Tiger Woods drops a blade of grass from up high in order to get a snapshot of how he is going to hit the ball, and there is no need for anything more when it comes to the future of online gambling. If you are immersed in the gambling industry then you just know that the only way is up. The New York Times best selling author Malcolm Gladwell calls it ‘Thin Slicing’. I call it ‘gut feeling’.
In 2012, online gambling revenue was only 8% of global gaming revenue. But that’s still €21.7bn, not bad when you consider that the cyber-space portion only weighed in at €6.6bn back in 2003. The number crunchers at H2 Gambling Capital believe this growth will continue at a rate of 30% within the next three years, so you are looking at a market worth €28.24bn by 2015.
As technological advances continue to act as the glue that forces our Gluteus Maximus to stick to it’s beloved chair, that 8% market share is going to grow like beans buried by a kid called Jack. It’s the way of the world these days. Why leave the house when everything is available 24/7 on the Internet? Even our choices are becoming narrower as more retail shops are suddenly realizing that the Amazon approach to life is just so cost-cutesy. As they pull the shutters down for the last time we shrug our shoulders and chew on another piece of beef jerky. When you wake up in the morning what is the first thing you do? Do you roll over and give the other half a kiss, or do you roll over and switch your mobile phone on to see if you have any important messages? Mobile is the future, and it’s billions of users are another vital reason this 8% will look like chicken feed in the near future.
2. Casino and poker provide the largest sectors of growth.
The online gambling market is dominated by sports betting. The horses, football, basketball and novelty bets on when the world is going to end accounted for €11.5bn of the market in 2012. The casino business was next with €5.5bn, poker was €3.1bn before bingo rounded things off nicely with €1.6bn.
By my calculations that’s a 53% market share for sports betting, and the reason for it’s growth can be found in your trouser pocket. Having the ability to place bets at any time, and from any location, through your mobile device, has been the key. In simple terms mobile provides sports bettors with exactly what they need.
But H2 Gambling Capital believe the other three are about to mount a serious challenge to the throne. Collectively it is felt that casino, poker and bingo is predicted to grow at a rate of 9.7%, equating to €14.2bn in 2015 (casino €7.5bn, poker €4.6bn and bingo €2.1bn). Sports betting is not going to be a slouch though with growth anticipated to take them to €14bn by the time the year 2015 ends up on your calendar.
I assume this rate of growth is expected in the hope that the U.S online gambling market will be allowed to wake from its slumber, coupled with the introduction of more innovative, and needed, mobile products in the casino, poker and bingo space.
3. The U.S will be a significant market as states start to regulate.
Sometimes I don’t realize how lucky I am. I could log on right this minute and gamble on anything without paying a single penny in taxation. That’s if I win anything to begin with, which is not very often. But if you live in the U.S then you are more likely to own a gun than to put a dollar into a virtual slot machine and press ‘play’.
Things are changing though; dictated by the mess that the economy finds itself in. Delaware, Nevada and recently New Jersey have all passed legislation to allow some forms of online gambling to flourish. Nevada have been the first state to pull their finger out with the emergence of Ultimate Poker – the first real money poker site that saw action just last week.
As I type, the U.S online gambling industry only accounts for 11% of the global market. That’s pittance for a country as mighty as the U.S.A. H2 Gambling Capital believe that will grow to €5.5bn by the end of 2015, taking it much closer to 30%; but it is resting it’s data on the success of the three named states to have made some decent headway by then.
4. Affiliate conversion through casino games provides a greater opportunity for game developers.
It seems that the gambling and affiliate industries are joined at the hip with up to 50% of the gambling population sent that way by the affiliate companies. Taking a modest estimate that affiliate revenue rates are paid at around 30% of player life time value, and that affiliates can drive up to 50% of traffic, it is not unreasonable to suggest that the NGR dished out in affiliate payments is somewhere in the region of 15% of total NGR.
Full Tilt Poker (FTP) has been struggling to attract player numbers since The Rational Group performed mouth-to-mouth back in November, when it launched without the aid of the affiliates that once helped turned it into such a monster. But given the statistics that I have just unveiled it was only a matter of time before FTP rolled out the red carpet to welcome them back. May 1st, to be exact, and soon they will both be scratching each other’s backs at much more regular intervals.
The online gambling affiliate industry generated over €2.1bn of gross win in 2012.
5. Social v regulated real money gambling converge
When the play money casino and poker games started to attract so many eyeballs in the social media landscape, there were slight palpitations in the gambling world. Imagine the revenue that could be generated if they could be turned into real money gamers?
Facebook made that thought a reality when it welcomed real money gambling onto its platform back in August 2012. Gamesys were the first developers to hop on aboard the bus that has since seen Zynga also hitch a ride with the introduction of ZyngaPlusPoker and ZyngaPlusCasino.
But as both Gamesys and Zynga has found it isn’t that easy to migrate play money customers to the new real money offering. Maybe they were getting what they wanted all along and don’t want the intrusion…thank you very much. There are other issues that relate to developers with the cost and legality of licensing and compliance also providing a few more sizeable barriers.
Nevertheless, H2 Gambling Capital believe there is growth to be had. In 2012, they estimate that the social casino gaming industry generated gross win of €1.25bn, a figure they expect to see rise by 19.1% to peak at €2.12bn in 2015.
So five key reasons why H2 Gambling Capital believe the future is a bright one for the global online gambling industry, and why clever cookies such as Ashley Lang are creating solutions such as Odobo.
I’m more of a thin slicer myself.
