We are in the midst of a gambling revolution that is not showing any sign of slowing down.
Key Takeways
- Operators with the products will win long term – not the companies with the largest marketing budgets
- Businesses must look outside of the US if they wish to gain an innovative and marketable edge
- Vegas is pulling out all the stops and will not go down without a fight
The legalization of sports betting in May 2018 shifted America’s gambling landscape. Sports wagering is no longer done only in Vegas or illegally via unscrupulous offshore bookies, but rather in plain sight through regulated online casinos and sportsbooks. Betting is going mainstream with new states voting in favor of a regulated market every year. By this time in 2025 we will likely have more states with legal online sports betting than those without.
Unless there is a backlash leading to another Bush-era prohibition in the future, the United States gambling market will become the largest in the world and that, in turn, will lead to an increase in the technological progress of a kind we have not seen before.
The question is, what does this all mean for those of us who are playing an active part in the expansion and growth of regulated gambling here in the US? And more importantly, now that the way has been paved, what can we expect to see in the next five or so years in betting, casino, and poker?
Aggressive marketing spends cannot go on forever
After sports betting became legal in the Garden State a few operators reacted quickly and began advertising heavily in an attempt to position themselves favorably in the market. DraftKings was one of them, and the company strategy – being first and hitting the ground running – seems to have paid off. DraftKings is now a household name and often comes to mind first in conversations about sports betting and Daily Fantasy Sports (DFS). It has been money well spent for the 10-year-old business, and so it remains a core customer acquisition strategy.
Although being first might be a good go-to-market strategy – one that has clearly worked for DraftKings – it comes at a pretty high cost. Over $1 billion to be exact. DraftKings famously passed $1 billion in advertising and marketing spend and subsequently, unlimited advertising and customer acquisition spending affected the share price eventually. Unless, of course, there is enough profit to justify 10-digit marketing investments.
As some predicted, this spending frenzy can’t go on forever without affecting investors’ confidence long term. In fact, reaching profitability by 2023 might be somewhat of a stretch for investors and we are yet to see where this leaves Jason Robins and their team. Robins does not seem concerned though, as made clear by this Tweet from November 2021:
What is clear, however, is that not all competing casinos and sportsbook operators are in a position to invest billions in customer acquisition costs. Something will need to change to level the playing field and allow for healthy competition. What we want to see is the best sports betting apps for winning, not the one that has the most purchasing power.
Growing demand for customer acquisition is pushing innovation
Since marketing investments can only take you so far and are not sustainable long-term, especially for smaller players, new businesses are forced to take a different route in order to be competitive. And what can you do if you can’t market more than a competitor? The answer should be pretty obvious: provide a better product of course.
Companies that enter the US market for the first time are trying everything they can to find a competitive angle. This is leading to some pretty original solutions to age-old problems.
What are the main pain points gamblers face today and how are these being solved by the newcomers? Here are some of the latest startups that have arrived on the market in the last few years, most focusing primarily on sports betting:
- DraftFuel – An app that lets you fund your betting habits via leftovers from credit card bills
- BettorEdge – Think Venmo but for sports betting, where there is no vig and bets are traded within the app itself
- Wagr – Bet against your friends instead of the sportsbook
- Ultimate Odds – The app that wants to be “the expedia of sports betting”
- Lion Gaming – Improving security through blockchain technology
- Chalkboard – Track bets, see who your friends have money on and get live score updates into your group chat
There are plenty more sports betting startups that have launched since the beginning of 2018 – all of which claim to be onto “something big” and that create “something truly unique”. The jury is still out on that last one. Regardless of how innovative these businesses really are, to say that the industry is booming would be an understatement. 10 of them have been featured on businessinsider.com as startups “poised to take off“, which is a good indicator of where this market is headed.
Learning from European players
To better understand where the US industry is headed, analysts and industry professionals look for clues in the European markets. There, product innovation has been a must for smaller businesses that want to compete with the more established brands such as Flutter or the Super Group.
The European advertising industry is leaps and bounds ahead of America and due to shifting local regulation, the advertising landscape is likely quite close to what it will be here in the US once the list of states with legal sports betting is finalized and advertising rules and regulations have been agreed upon.
But it is not only around regulation that countries like Germany and Italy have been forced to be creative, the products themselves are more advanced, more secure and in many cases, simply better offerings. Online casino apps have a tried and tested formula that works to attract and retain players, poker platforms are at the forefront of virtual reality, and sports betting technology is mature and reliable. US-based companies have a lot to learn from their European counterparts it would seem.
Paving the way for online casino
It is reported that an estimated 10 million Americans are gambling using online casinos, with that number rising all of the time. But why have they become so popular?
The answer is quite simple: convenience. With hundreds of offerings at your fingertips from a variety of providers, the need to visit a traditional casino, whose offerings are much more limited, no longer exists for many.
Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia are the six states that currently allow gambling via online casinos, with others likely to follow suit soon. The state legislature has been ardently opposing attempts to legalize online betting, in casinos in the states where it is permitted though are obtaining huge traffic numbers as a result.
Sin City’s attempt to keep up
‘What happens here, only happens here’, reads the new slogan of the self-proclaimed entertainment capital of the world.
Like a middle-aged dad trying to keep pace with his teenage children, Las Vegas is showing all the signs of attempting to keep up with the digital trends by doing what they know best. 2017 saw the establishment of the Las Vegas Golden Knights. The following year, the city introduced the Las Vegas Aces, a Women’s National Basketball Association franchise and in 2020 they reached the pinnacle for any sports city on the rise, luring an NFL franchise into town as the Raiders crossed state lines to call Sin City their new home. The entertainment mecca of the US is becoming a go-to sports destination.
With more than 40 million annual visitors prior to the pandemic, there can be little denying that Vegas remains a hugely popular tourist destination, one that boasts more accommodation than any other US city and is responsible for more than half of the world’s 20 largest hotels as well 60 major casinos. So why are these sports teams important to the casinos?
The answer is relatively simple, time. The more reasons someone has to travel to Vegas and the longer that they stay, the more likely they are to gamble in the casinos rather than online.
The most significant difference between online casinos and those in Sin City is the experience. Online gambling is incredibly convenient however it lacks any sort of atmosphere. Vegas offers the sights and sounds of some of the best casino floors. The flashing lights and the sounds announcing a massive win, Vegas casinos transport you to an exhilarating place where winning big is possible no matter who you are.
With online casinos’ popularity only likely to rise in the US, there can be no doubt that Las Vegas is pulling out all of the stops to ensure it remains the premier destination in North America for those with a penchant for the crap shoot.
Bringing gambling into the mainstream
The United States has the largest gambling market in the world. And online gambling is a growing industry within the US. More and more Americans are turning to the internet to place their bets and with the advances in technology in the past few decades, it’s no surprise that online gambling has increased its popularity.
It has been increasingly common for people to use online gambling platforms to make money and build their wealth portfolios.
Government reactions to Covid-19 drove many businesses into uncharted waters with uncertain futures. However, there was one sector that thrived throughout this time and that was the iGaming sector.
This is a tremendously exciting time for gamblers in the United States, according to Scott Manford, CEO of Fortuna Gaming, one of the UK’s biggest slots producers. “The present rate of growth for regulated sports betting in the United States supports the premise that there is a market for the practice as well as a financial incentive for states to adopt it.”
“Sportsbooks have significantly lower profit margins, and lawmakers are soon realizing that taxable revenue from virtual casinos might dwarf that of sports betting marketplaces.”
