Battle of the brands

Operators’ varying definitions of what constitutes marketing spend makes like-for-like comparisons across all territories difficult, but you would have to have been living under a rock not to notice how aggressively they have been ramped up in recent months.

Following a recession-enforced hiatus, mammoth marketing spends are back with a vengeance, and operators have pledged this will continue until they get the required results. First-half figures show sharp rises, Bwin increasing spend by 30%; 888 by 20% (with plans to increase by 40% in H2); and Paddy Power by 50%. While the World Cup undoubtedly skewed these figures, PartyGaming and 888’s rises can hardly be put down to this.

[Click here to see a global breakdown of marketing spend]

As Paddy Power marketing director Barni Evans observes: “Where you see big leaps in marketing spend, it quite often coincides with an absolute switch from being a grey or illegal market to being a legal one, and therefore, it’s just a race, and you see big lump sums being spent there. France would be the biggest and most stark example of that.”

Peter Marcus, consultant and former William Hill Online chief operating officer, argues that the step up in spend is also due to some operators having slashed marketing spend when they started to struggle (in contrast to the likes of Mangas Gaming and Paddy Power, the latter investing heavily in offering guaranteed prices to punters during the downturn to maintain activity). “The easiest thing to cut when you’re having problems with revenue is marketing, but it’s also the worst thing to cut. You lose new users, your old users leave, and then you have less revenue coming in. The problem is there’s also a nine-month delay in the impact. You will end up having to put it back in and it will cost you a lot more to get it back than if you hadn’t stopped it.”

New markets increasing spend

Regulated markets coming online as the sector moves out of its first major recession, such as France, Italy, and soon Denmark, are undoubtedly a significant driver of this step change. However, spend is also up at operators which chose not to go in all guns blazing into the latest of Europe’s newly regulated markets. These include Sportingbet, Unibet, Paddy Power and SBO Bet. Sportingbet is now making significant inroads in Latin America, where it is the top advertiser alongside PokerStars, undertaking swathes of static advertising in soccer stadiums across Brazil.

Head of channels and acquisition James Arnold argues the decision not to go into France has been borne out by the figures he has seen to date. This perspective contrasts with the recent bullish comments of Bwin co-chief executive Norbert Teufelberger that it would generate a profit from the market in 2011. “Everyone went in with their eyes open knowing it was going to be a period of time before you made money, but the payback periods are starting to look longer than people anticipated. The anticipated size of the market is not quite as large as people were thinking it was going to be off the back of the World Cup. That’s not to say it’s not going to change,” says Arnold.

Thus, while Matt Jellicoe, chief executive of Eastern European niche operator Offsidebet, highights that licensing enables you to undertake different forms of marketing, such as “working with media and TV companies, joint ventures, which you weren’t able to do as an offshore company,” Marcus argues there is little promise in the French market for most new entrants.

“You can advertise, but your profit margins are seriously reduced, and no-one has thought through the implications of reduced profit margins. It is all land grab but at some point they will realise only the biggest companies will do well as you need mass economies of scale,” he explains. “I think PMU, BetClic, Winamax and Stars will do okay, but everybody else won’t have economies of scale and will have to spend huge sums on marketing to compete, and profit margins will drop significantly.”

Tailoring your marketing strategy

The apparently unstoppable roll out of the local licensing model across Europe means operators now have to balance the challenge of consolidating brand position in core markets, while also selecting and seizing opportunities to expand into newly regulated territories with all the additional regulatory, technical and marketing expense that comes with it. The days of operators having a one-size-fits-all marketing strategy, as Marcus points out, are over. “We have been very lucky up to now. There has been one strategy and one model and it has worked, and made a lot of money. Now, you have to have multiple strategies and multiple models and some of the original gaming entrepreneurs will not make it.”

According to Evans, the key to flourishing in this new landscape is “to treat each market with the appropriate level of importance.” But he admits, this is easier said than done when “some markets have a population of a couple of million and others 100 million. [You must] ensure your brand, product and marketing are equally well aligned for that market at that moment in time.”

Bill Mummery, executive director, SBO Bet/Celton Manx

eGR: How do you see marketing strategies changing?
BM: The point of origin of your marketing spend can now be quite different to the global reach that it gives you. Significant marketing spend over the next two or three years is less likely to be traditional, above-the-line marketing and more likely to be focused on opportunities that are leverageable and deliverable in other geographies and that do not get caught in the regulatory net. There are a number of jurisdictions in Asia where you could not advertise, but the global distribution of television takes your brands into those markets.
eGR: How measurable is the impact of the West Ham Football Club sponsorship?
BM: You can certainly measure growth at a tactical level by measuring traffic patterns related to broadcast games, for example. It is measurable at a granular level, both in terms of new sign-ups, wagers placed and so on.

eGR: Can you give us some figures to back this up?
BM: On an average weekend we process 500 transactions a second in the run-up to games, up from 200-300 12 to 18 months ago.
eGR: What do you see as the most promising emerging markets?
BM: The next interesting geography is Spanish-speaking South America, but the question would be, how much of it is perceived opportunity, as in the People’s Republic of China, and how much is deliverable.

Luke Brill, head of marketing and gaming, Centrebet

eGR: Your Australia marketing spend is heavily weighted towards offline. Why is this?
LB: We did test spends on 9MSN and also SMH.com (Sydney Morning Herald). We had integrated odds, big campaigns on there, and we found they only really worked on key sporting events such as the Melbourne Cup, final series, and the Australian Open. It was okay on sign-ups and occasionally you would snag a big client, but it didn’t react the same way as in Europe. We found the hardest working media here was traditional media ““ print, broadcast and TV. That, coupled with social media, has been a success for us.
eGR: Why do you think social media has been so effective for Centrebet?
LB: You can have a good idea and it will be out there in a minute, whereas usual campaigns take a long time to formulate. We are seeing really good, cheap conversion.
eGR: How is your marketing spend now split between Australia and Europe?
LB: Australia accounts for 80%, compared to 50% around three years ago.
eGR: Why the shift?
LB: We went into Poland and pulled out because it was costing us too much and we were attracting the wrong sort of customer. We consequently decided to refocus on our core regions including Norway, Denmark, and our JV in Greece. We also had to get a war chest together in Australia, because the relaxation of advertising laws presented opportunities to go on TV and radio, sponsor sports clubs, options unavailable two years ago.

Matt Jellicoe, CEO, Offsidebet

eGR: In contrast to Western Europe, I’ve heard poker is offering decent returns in your markets?
MJ: Poker is a harder market than sports, but our numbers are going the right way. We are spending in the region of US$2m a year on poker marketing, which is 50-60% of overall spend.
eGR: How much of your marketing spend is online?
MJ: We are 90-95% online. We are a young company, only trading a couple of years, and in terms of our B2C marketing, we are a niche operator, focused on specific markets and working with closed affiliate networks and agents.
eGR: With consolidation and Europe fragmenting into separate markets, isn’t it only a matter of time before niche operators are squeezed out by the big brands?
MJ: No internet gaming company, however big, is going to have 18 European licences; they will probably cherry pick 10. So even the very largest are unlikely to have licences all over Eastern Europe. For a company our size, it is still interesting to have a market that makes £200,000 to £300,000 gross profit per month. Those sorts of revenue figures are not interesting to the big operators. This is why I think scale gives you opportunities. Some things are interesting to us and not so interesting to the big guys.
eGR: How many licences are realistic for an operator at your stage of development?
MJ: We can definitely take three or four licences over the next couple of years. I would rather stay out of competitive markets and let the big guys have a scrap in France and Italy and we will pick up licences in Estonia, Lithuania, Romania and Bulgaria.

Simon Prodger, marketing director, PKR

eGR: What’s your take on the French market ahead of PKR’s launch there?
SP: There’s certainly an element of operators being forced to spend to build or defend market share in the land grabs we’re seeing in newly regulated markets. I don’t think it’s sustainable, and there will be operators who find their marketing investment isn’t recoverable either. The rumoured marketing budgets of some operators in these newly regulated markets, particularly those who can bankroll activity through US-driven revenues, is staggering. There’s no doubt many will struggle to keep pace, particularly if they don’t bring scale or a true USP.
eGR: How has PKR’s marketing spend fared over the past year?
SP: Given that market share and share of voice often equate, building a meaningful presence in a newly regulated market can place significant upward pressure on marketing spend. A high rate of inflation within the UK TV market is also impacting on marketing costs, with rates typically being between 15-20% higher than this time last year.
eGR: Which emerging territories are interesting poker operators at present?
SP: Several operators are focusing heavily on Russia and Eastern Europe, and that’s a region we are paying increasing attention to as well. Latin America is also attracting attention, and there are signs of growth in Asia, although investment in these areas remains relatively modest. Activity in Germany has increased significantly, with a great emphasis being placed on TV advertising. France and Italy are also on the receiving end of significant marketing spends.

James Arnold, head of acquisition channels, Sportingbet

eGR: You have stayed out of Italy and France so far, yet your marketing spend has risen substantially in line with the other major operators’ spend. Where is this going?
JA: We are getting heavily involved in sponsorship activity in the UK with the recent betting partnership with Tottenham Hotspur FC and going into the second year with Wolves FC. We have also been doing more horse racing sponsorship. It is a big step in terms of brand marketing that we haven’t invested as heavily in before.
eGR: Which new markets is this spend also being channelled into?
JA: We now have a South African licence. We still see a lot of Central and Eastern Europe as emerging, in terms of size and contribution. There’s interesting opportunities there ““ Russia, Poland, Hungary, Czech Republic, and further afield, newer territories like Brazil and Chile.
eGR: What other changes are you noticing in terms of the industry’s approach to marketing?
JA: We are starting to see some best practice from other industries. Regulated markets are also driving its uptake. For a long time, there was a lot of money being spent without a lot of visibility on what that was doing for you. We now have people employed full time looking at customer satisfaction, surveys, and we are marking ourselves against that. In terms of brand recognition, we are at a lower point than we would have liked, hence the investment in sponsorship.

Barni Evans, marketing director, Paddy Power

eGR: Operators are throwing huge amounts of money marketing in France, where you have chosen to go in on a B2B basis. Do you see this spend as sustainable or recoverable?
BE: I believe there is scope for several major operators to compete indefinitely in France, Australia and the UK. Inevitably, marketing spend doesn’t keep growing at the same rate as you spend more to get a brand off the ground than you do to keep it running. In a couple of years you may not be spending so much on acquisition and the visible stuff, but you may be spending just as much to retain customers, through CRM, trading propositions and product investment and development to compete with the ongoing trail of new arrivals.
eGR: How well is social media working for Paddy Power?
BE: It is a great opportunity for us to communicate how different our brand is to the marketplace. Last weekend we had a Pope Mobile driving round London to coincide with the Pope’s visit. This is where social media came into its own. By using YouTube, Twitter and Facebook you are able to get the message out there in a way that lends itself better to that kind of thing. But I would be lying if I said we, or anyone in our sector, had really nailed social media from a commercial perspective. I think it has a long way to go before it reaches maturity for our sector.