Product differentiation in a market that accepts very little is tricky. When PKR launched its 3D poker concept in 2006, many in the poker community expected it to quickly dominate and spark a wave of virtual reality gaming that would put an end to the existing format that even in 2006 seemed far from modern. Whilst PKR remains a player in the market today, it sits way below the likes of early movers Party Poker and Pokerstars in the regular online poker space, whose differentiation to the untrained naked eye is a different coloured baize. PKR creates an experience like no other, but it is arguably too slow a game for the “real” online poker player.
This “real” online poker player is the man we need to examine. He’s familiar with what’s on offer, knows how to play it and consequently drop his hard-earned bank balance in to achieving success. However, for every one of these customers, there are any given number of potential customers waiting on something new to engage them into switching operators for something more appealing… they just don’t know it yet.
This unknowing majority hasn’t had much to get to know in recent years. Alongside PKR, you would probably need to look as far back in time as the year 2000 and to Betfair, as the other stand out operation that has introduced wholesale differentiation to the market, to great success. Betfair’s exchange proposition saw P2P betting come to life, although you may argue that the idea of betting against an individual rather than a bookmaking business is nothing new, and that online betting was in its relative infancy.
Innovation is often lauded as a wonderful thing, but more often than not, great launchpad businesses either fall by the wayside for being too outlandish, stepping too far away from an accepted normality to capture the attention of the unknowing majority, or simply seeing their concepts adopted in a far more consumer-friendly fashion (read: simplified so as not to ruffle the principle revenue stream’s feathers).
iGaming provides an excellent example of an industry, both from a B2B and B2C perspective, unprepared to fully accept innovation that could lead to the diversification of online gambling as an activity, broadening the appeal and reach of the industry to new markets, whether they be demographic or geographical – in essence its long term survival. Quite simply, the big players are happy to maintain market share by competing on price – whether that be tightening up betting and gaming margins or lauding the biggest welcome bonuses around. When they get a little unhappy, rather than diversifying to grow market share, they buy out the competition.
To quote a personal mentor, Steve Donoughue. “Without differentiation, customers become price driven and in our industry this means they become ‘ladies of little virtue’, taking one sign up bonus after another, spending it then moving on. Customer life cycles are counted in months and customer lifetime value is usually not much more than two or three times what it costs acquire them. As profit margins decline and customer acquisition costs increase, so the industry moves to consolidate, as only the biggest survive when it’s all about volume – such is the meaning of grind and an ever increasing race to the bottom.”
The mergers and acquisitions we’ve seen of late are not the big fish buying out the innovative start-up with a view to building on what they have through broadening their product offering with the latest ideas. We’ve seen the mighty Bwin partner with Party Poker, and Amaya (to a point) purchase Pokerstars and Full Tilt. This is no Californian Gold Rush, it’s more a policy of Lebensraum, of occupying existing market share to sit on the throne for another day. To keep the unknowing majority away from the alluring clutches of innovation that the industry is reluctant to uncover as a viable revenue stream, if you will.
So what of the smart, tech-savvy start up with a fantastic concept that, with the right traction, could change the way customers engage with online gambling verticals and the industry as a whole in the future? Is there room for them to acquire market share without adopting a semblance of the status quo operating model?
Colossus Bets has not only reinvigorated the concept on pools betting on soccer, the company behind it has been savvy enough to look at the B2B route to offer regular sports bettors within the unknowing majority exposure to a product they may not have previously known existed. Clever, not least because they’ve found traction with the likes of Coral. The operation has also invested heavily in signing on Michael Owen as a brand ambassador, proving that they mean business. However, we’ve seen start-ups make similar inroads before – a comparable innovation in sports betting could be the now defunct Buzz Sports.
The execution of both B2B and B2C marketing is undoubtedly tenfold trickier and twentyfold more important to a business doing things completely differently from a product perspective. Consequently, it’s a hell of task convincing essential partners, such as affiliates, to give up real estate to the same-old-same-old operations that continue to make them rich, in favour of something you are proclaiming as the future. Without the support of such critical brand and product advocates, there stands to be no future so inevitably it can become a question of overspending to build traction in the short term to B2B and then B2C buy-in in the long term.
In a product such as TradeFight, which sits, I would argue, very neatly between traditional online gambling verticals and the emerging Forex and binary market, we see another conundrum – one of positioning. The product sees P2P trading take place in a heads up, poker style format, with the house keeping a percentage of the rake. It’s an ideal way-in for both iGaming affiliates and their customers looking to explore the Forex market, but TradeFight will inevitably come up with an antipathy to change something that is “working”.
As things stand, the iGaming industry and its key players only appear interested in keeping its customer base lustfully entwined with an ageing harem of cloned or interbred platforms. As enticing a prospect that these casino concubines have been over the years, it’s high time the proprietors opened the doors to the Champagne room and let the clientele enjoy the new models.
