Spain's ad break is here

Spain is the latest flash point in what now appears to be a war against gambling advertising across Europe. The new restrictions – which are now in force – are second only to the outright ban in Italy when it comes to prohibitive intent.

TV advertising is an obvious target and the new rules will limit all sports to the hours of 1am-5am. The same goes for online ads on Facebook and YouTube. Meanwhile, a ban will be instituted on sports sponsorships. Bonuses will be restricted to certain forms of retention offers with welcome bonuses banned.

Ad words can be used for gambling-specific search terms but will be banned between 1am-5am for more generic terms. Affiliate marketing will be restricted to sites where there is sports betting content and on social media activity must be restricted to profiles where the main activity is betting and gaming.

Taken together, the measures read like a litany. But what concerns the sector is that they also appear to be disproportionate. Both Spanish trade bodies, Consejo Empresarial del Juego (Cejuego) and its online equivalent Jdigital point to stable rates of problem gambling, at around 0.3% of 18-75-year-olds, and question the politics behind the move.

Alejandro Landaluce, general manager at Cejuego, suggests the move is more about public perceptions of escalating gambling and assumptions about an increased social impact.

“We think that the lack of regulation of publicity regarding public management gambling (both online and state-reserved games) is one of the factors that has influenced this perception and that is why on many occasions we have requested a regulation, not a ban,” he says. “The problem is that when emotions, feelings, ideologies or tendencies intervene, the reason for the data ceases to be important and other criteria are imposed.”

That the rules are not being applied equally across the regulated spaces also increases suspicions over motive.

“We would like to stress that this debate is only focused on private online gambling,” says Andrea Vota, director general at Jdigital, who notes that the state-owned lotteries will be free to continue marketing as before.

Offshore pull

As has been argued in other countries, market watchers warn that restrictions in advertising will only fuel black-market activity. One of the central arguments over the regulation of online gaming is that marketing activity can help encourage previously grey or black-market activity to come onshore. Reverse that equation and make the regulated operators less visible by restricting their marketing and the likelihood increases that players will be enticed back offshore.

“This is in effect the law of unintended consequences in action, as any attempt by the Spanish government to restrict player’s entertainment is simply going to drive them to look elsewhere for recreation,” says Ruben Loeches, chief marketing officer at R Franco Group.

We have had a taster for what might occur when marketing activity was severely curtailed during the spring pandemic lockdown period when gambling ads were temporarily banned in response to what turned out to be unfounded fears over a boom in online gambling activity.

Joaquin Gago, founder of Spanish-facing affiliate marketing site BetanDeal, points at the ease with which offshore operators were able to take advantage during this period. “It is very easy to create a dotcom site and offer a welcome bonus and make some promotions,” he says. “Nowadays there are many (such) sites where you can place bets in Spain and the government and DGOJ has not the resources to ban all of them.”

“All restrictions that have an impact on the player experience will encourage offshore play,” says Fintan Costello, founder at affiliate BonusFinder. “Offshore sites are just one click away for a user and as we see in Sweden, players will happily go to unlicensed sites for a better experience.”

Others, however, suggest there are still obstacles that will hamper offshore growth. “The Spanish regulator is doing a good job of blocking and preventing unlicensed brands from operating,” says Unai Concha Olabarrieta, business development manager at provider OneTouch. “Without a licence it is almost impossible to have effective payment methods therefore dotcom brands are far less prevalent in Spain than in other countries.”

Follow the money

What is certain is that the lockdown ad ban led to a fall in marketing expenditure. Total spend across all marketing channels dropped by over 50% year-on-year in the second quarter with TV advertising spend nearly 60% down. This decline was matched by bonus levels which also took a tumble after sign-up bonuses were also affected by the emergency measures.

The only area where spending rose was sponsorships which, perhaps surprisingly, rose in the second quarter. This apparent rush to extend deals right up to the likely introduction of a ban on sponsorships drew the ire of the somewhat anti-gambling minister for consumer affairs Alberto Garzón who suggested such moves were “reckless”.

Yet the impact of the new rules on the sponsorship market arguably needs more analysis. “The ban on sports sponsorship, which is particularly prevalent within football, will likely see operators look elsewhere to invest their marketing budgets,” says Florian Geheeb, global director for advertising sales at Sportradar.

“Removing such significant sums of money from the country’s top football league, for example, could have a knock-on effect on its appeal to global broadcasters if teams are unable to attract and pay global superstars.”

As for the operators, while the route to market is now more constricted, it has not been shut off completely. It resembles the situation in Italy where some limited forms of digital and affiliate marketing remain permissible.

“I think we will see a rise in programmatic advertising,” says Geheeb. “Marketers will be under more pressure than ever to maximise their budgets in challenging conditions and programmatic advertising provides operators with the means to efficiently target customers during that small window of opportunity in the early hours of the morning.”

Gago similarly notes that with operators unable to spend marketing money elsewhere, it leaves affiliates as one of the last routes open. “It could be an opportunity for the affiliates that can adapt better and faster to the new environment,” he says.

Here it is worth noting that Catena Media, the market leader in affiliate marketing in Italy, said in its second quarter earnings statement that the business there had “showed stable performance due to their strong market position”.

Pushing back

The other important lesson from Italy, of course, is that operators needn’t panic, at least not in the short term. In 2019, with the ban on marketing taking affect in full in July of that year, online gaming revenue for all products rose over 13% to €1.73bn. In the second quarter this year, meanwhile, despite the sporting shutdown online gaming revenue rose 25% year-on-year, following a similar rise in the first quarter.

Positive numbers to date, perhaps, yet the market has clearly been disrupted by the ad ban with fines having been issued for breaches against operators and Google. There is also talk that the gains in the market have all accrued to the market leaders, backing up claims made about harsher regulatory environments and the extent to which they act as a deterrent to smaller brands either already present or looking at market entry.

“An over-regulated environment with excessive obstacles is not conducive to a positive investment environment for companies coming in from abroad,” says Loeches. “This will inevitably stifle competition and, for many, innovation.”

Ultimately, it means the consumers will pay the price for the previous marketing over-exuberance. Whether that is a lesson that is heeded elsewhere, by the legislators and regulators on one side and the operators on the other, remains an open question. If the sector isn’t to suffer more marketing reverses, though, then it arguably needs to come up with more answers on why marketing matters – and why it can be trusted with it.

“We need to assume that times have changed and countries are now re-regulating and defining stricter advertising controls,” says Mauro De Fabritiis, partner at MDF Partners. “This is a trend that the gaming industry will need to adapt to and we are optimistic that operators will find ways to promote their products and acquire customers in these new regulatory frameworks.”