It’s no secret that online gambling operators that have spent time on the stock market haven’t always had the best time of it. Volatile markets, regulation, de-regulation, black markets, grey markets, lawsuits, indictments and just about everything else to create doubt in the minds of financial analysts has contributed to some pretty poor results for many of iGaming’s biggest organisations.
On the principle standouts in the unsuccessful iGaming PLC club has been Betfair. After IPO-ing spectacularly the betting exchange operator has struggled with share price issues often being attributed to investors being unsure of whether they’re a tech company or a gambling company.
Those that have placed themselves in the tech category have fared better with Playtech continuing to perform well – all the while ensuring that everyone who comes into contact with the company is well aware of its status as a software company.
In all news released by the Israeli-company, the section describing Playtech as a company is very clear about how it sees itself. The emphasis is well and truly on the software platforms and ancillary services that the company provides rather than the industry within which the company operates.
Of course, given that Playtech is predominantly a software provider rather than an operator, the argument that they are a genuine tech company much easier to make. In addition, they’re much less vulnerable to big wins and unfavourable sporting results making them less of a risk to investors.
There’s further evidence of the importance of tech when returning to the subject of operators with bwin.party providing an example of a company who has actually dealt with this aspect fairly well by stating the importance of their proprietary software and technology to their business. Betsson and Unibet, the other operators in the top five of Global Betting & Gaming Consultants’ iGBGC Index released at the beginning of this year, have both had success in Scandinavian markets and operate at a slightly lesser scale compared to those previously mentioned.
Looking at the iGBGC Index’s top ten as a whole it’s immediately apparent that the companies which are doing the best (or at least working at the highest volume) are those which are creating their own technology. Given that more than half of these companies do so and have had success with such ventures, this sends out a pretty clear message that creating your own software is a major help when looking to prosper in the current markets – regardless of whether you’re a public or private company. Bearing this in mind, are iGaming companies putting enough energy into their own technology?
Little and large companies alike
The importance of technical skills isn’t just relevant to large companies. Mid-sized operators, affiliates and start-ups can all benefit from having a stronger software offering.
Chris Griffin, chief executive of Betable told the New York Times earlier this year that the traditional power structure of gambling within the United States could be set to change dramatically and it was pretty clear how he was hoping to grab a share for his company.
He said: “What potentially becomes an interesting counterweight is all of a sudden thousands of developers in Silicon Valley making money overseas and wanting to turn their efforts inward and make money in the U.S.”
Betable themselves have been placing their focus on their technology by setting up in San Francisco in order to harness the best developer talent around. This strategy worked well for them in terms of being able to attract considerable investment last July. As multiple news outlets were rolling out puns on investors gambling on Betable in a country where the products couldn’t even be used, more and more developers were turning their attention to iGaming.
BetButler grew rapidly as a sports betting affiliate after having created a system where they fetch prices from their featured operators for whichever bet the user is interested in. Affiliates tend not to push the boundaries too much when it comes to technology those that are prepared to take the plunge have much to gain.
Meanwhile even the smallest software developers constantly remain an acquisition prospect with the products of the likes of Sheriff Gaming, Ash Gaming and others continuing to increase in popularity. In fact, it’s hard to imagine a situation where an operator wouldn’t benefit from the acquisition of a small design studio.
It doesn’t take much to see how much of a positive impact investing in your own technology can have for any company but this impact is doubled for iGaming companies. Being able to provide potential investors and shareholders with something tangible which they can see is of value makes the company seem so much more stable. Taking this into account, iGaming companies need to be doing all they can in order to be projecting the image of themselves as tech companies – fortunately the answer may be about to drop right in their lap.
As Silicon Valley becomes increasingly interested in iGaming thanks to regulation across American states, we’re likely to see an uptake in innovation across the industry. Even if the focus is initially on the US, the trend will filter out across most markets with iGaming firms being in the priveliged position of being targeted by those with high quality tech skills. This position won’t necessarily last for very long so online gambling operators should make sure that they take full advantage while they can.
