Learning from the locals in cracking the US

Share prices of UK betting companies rose despite the FOBT announcement, European executives polished up their CVs and started eying up downtown apartments in Manhattan, DFS companies suddenly had multiple offers to be bought, and any company with connections to betting in the US became M&A targets. All this happened because the US Supreme Court overruled PASPA, the ban on sports betting which had been in place since 1992.

Much has been written from the investment and business side, but it begs the question: how can this opportunity be more lucrative for European operators than the much-fan-fared opening of online gaming in New Jersey a few years back? There was so much hope of a new major market; a market to rival some European countries. But in the end, most European operators are treading water in New Jersey. How come the outstanding skills of the European marketing executives did not grow the New Jersey gaming market in the way predicted? In my view, it’s all about how a European operator approaches the challenge. In New Jersey there were two approaches.

Firstly, joint ventures [JVs) with a land-based operator (this was a must anyway), then hire local ‘experts’ from land-based and provide them with the software, systems and process that works in Europe. The local talent got the market and the Europeans got the operations. With this combination it was sure to work – and to some extend this worked. The localisation mistakes that happen so often in Europe did not happen and companies were quick to launch after the legislation was passed, but you also can’t really call any of the results spectacular.

Strike gold

Then there is the ‘Golden Nugget way’. This was a small, land-based casino with a lower marketing presence than the main operators and without the backing of a top-tier European company behind it. It was certainly not in the Premier League, so they had to do something different. They searched Europe and hired some of the best gaming operators and marketers, got them all work permits and moved them to Houston, Texas. Golden Nugget is a fully European-managed gaming operator, but from the US.

They hired based on talent to grow a low-level, land-based brand into a power online brand. They used all their skills and learnt all the mistakes of Europe. They spent more time on retention marketing than acquisition marketing and they watched the numbers like hawks. And it worked. It beat every one of the big brands from US and Europe. Little Golden Nugget is the largest online casino in New Jersey even though it started six months later than the others and had far less corporate backing behind it.

So what lessons can be learnt now that all the European executives are flying to meet the US executives? How can Europe benefit from the repeal of PASPA? JVs are fine and necessary. Europe can for sure help with trading, technology and operations, yet that’s not going to be enough to compete with the existing Costa Rica operators.

You need smart marketers and operators – ones that know how to fight for every customer, ones that can manage online VIP programmes, ones who can deal with payment issues and bonus management. Golden Nugget knew that they were small; they took a full-time team from Europe who were successful in managing small tactical operations, made them local and with that they became big. This, for me, is the key to future post-PASPA success.

Peter Marcus is a consultant in the online gaming and betting industry, specialising in marketing and operational consulting challenges. He is the former COO of William Hill Online and the ex-UK MD for Betfair.