Clash of cultures: The end of profit maximisation?
How the industry is preparing itself to survive the culture war that is raging in the regulated markets
The latest ruling from the UK Competition and Markets Authority around dormancy fees and staggered payments would at one point have been a big story, but it struggled to raise more than an eyebrow in the current climate. It seems like a minor detail in a much bigger story, a small battle in a far larger culture war that is forcing the industry to reinvent itself on the run.
If the shift from dot.com to dot.country was a transformation in theory if not particularly in practice, then this is the real deal and is forcing through change that is going to continue to have an impact long after the headlines stop being written. Because at its heart is a move away from pure profit maximisation to a culture of minimising harm.
An old culture that acted primarily, and in parts solely, to grow the share of wallet now looks a little unsightly under the new filter of harm-minimising regulation. Reload bonuses sent to players who have just drained their accounts, talk of “jackpot recycling” or sign-up offers to a carousel brands, can look a little near the knuckle from the responsible gambling perspective of 2018.
That’s not to suggest an industry that was acting with malign intent has suddenly had a transformation, nor that regulators are overreacting, but that it’s simply a perspective shift. There is a real need to move to taking a broader view of how those actions fit into the long-term health of gambling and gamblers respectively.
The culture shift comes hand in hand with a move from unregulated free market enterprise to tightly regulated markets. The end result is quite jarring as a long-term industry observer, where one-time rule-bending challenger brands are now cheering new operators being effectively legislated out of business. It’s quite the pivot.
A little bit of friction?
The reason some techniques and strategies were used so extensively is because they work. But while pushing triggers in habitual gamblers can certainly be profitable, it’s less clear if it’s sustainable under a more watchful regulatory gaze. There are many things that exist because they work and customers actively seek them out, but effectiveness is no longer a justification in and of itself.
Perhaps the most interesting phase of this new experiment will be the opening of the Swedish regulated market in 2019. Arguably more than any other market the Swedish unregulated sector has been the home of innovation and business models that push at the boundaries of both technology and marketing. How that will stack up against a clear desire from the regulator to have a focus on responsible gambling and player protection will be interesting to observe.
The increasing use of frictionless registration and deposit options in the Nordics is a not-entirely related but illuminating issue in this regard. The technology for this comes from the Swedish banking system, and the use of BankID by LeoVegas is the most recent example of this with users able to use existing electronic ID systems to almost eliminate registration hurdles. This is a win-win solution with consumers enjoying a better experience and operators improving their acquisition funnel with no degradation of KYC.
But while the overall experience of online commerce is moving towards frictionless, gambling it appears should not come without a little friction. Regulators are starting to ask for features such as affordability checks, proactive communications over problem gambling behaviours, timeouts, customer warnings, deposit limits and who knows what else in future. Safety first are becoming the watchwords and that means more hurdles for everyone to jump over.
New lines in the sand
The challenge for both suppliers and operators is that these will vary widely from territory to territory and may often require alterations in both marketing and user experience. For the smaller suppliers and operators this is going to be ever more of a challenge to keep on top of. For those accustomed to operating primarily in the “anything goes” environment of the grey market it raises substantial operational and cultural challenges.
The market in the UK is quickly establishing new lines in the sand and operators are being forced to take a more player protective approach to CRM and a far more active approach to problem gambling monitoring and management. As such we’re seeing suppliers like Bede and Playtech begin to build in responsible gambling monitors and tools to their platforms, and this could be where the new supplier battles are fought.
Playtech highlighted this new functionality in its latest results, and this was perhaps not surprising coming from the firm that has been at the forefront of smart bonusing in the online gambling sector. Playtech’s IMS casino management software led the way in using player data to maximise lifetime values, and now it’s looking to lead the way in using this same platform to enhance responsible gambling.
The end game
The end result is still to improve “customer value” and part of this was the introduction of “smart limits” in H1 2018, which alters the game value limits based on a player’s balance, history and a number of other data points. The second aspect was a move towards real-time messaging across multiple channels, which it assured investors was developed in conjunction with new rules on bonus communications in the UK.
But Playtech also announced it has integrated the responsible gambling software tool Betbuddy it acquired last year into its IMS. “From Q3 2018 BetBuddy risk ratings and data analytics will allow B2C brands to respond to user behaviour and communicate in real time with end customers, creating a safer and more efficient customer journey,” the supplier said. How this works in practice remains to be seen and is likely not as straightforward in implementation as it sounds.
The issue of responsible gambling monitoring and communications may be the next big technical problem for both operators and suppliers to solve, not least as it remains a moving target with many of the new regulated markets still finding their feet in terms of expectations around responsible gambling. For operators and suppliers it’s a tough spot to be in with any step back likely to leave a space that will happily be filled by aggressive operators with a less long-term view.
But if operators and suppliers can find a way this works for all, operators, players and regulators, then the end result will be a more sustainable industry with no loss of revenue. The use of better data and better tools that protect the player can mean that more revenue comes from the right customers and less from the wrong ones. And a shift from the rinse and repeat strategy of old can truly be a benefit to all.