Month: February 2019

October proved a challenging month for equities and gambling stocks were also hit. However, it is important to start with some overall perspective. In October the NASDAQ fell by 6.6%, an aggressive slide mirrored by most other markets. However, our weighted igaming index actually gained 2.2%, with 14 of the 35 constituents up and six of these by double-digit percentages (Aspire Global, Betsson, GiG, Kambi, MRG, NetEnt). Igaming therefore outperformed the overall market by eight percentage points – and since markets only really make sense relative to each other, an impressive outperformance.

However, the relative outperformance of October has come after two months of significant underperformance and so can probably be seen as more of a dead cat bounce than anything more fundamental. This appears to have been confirmed by further volatility early in November.

The most eye catching outperformance during the period was from Mr Green (MRG), which received an offer from William Hill and added 63% in the period. Indeed, MRG’s move accounted for 17% of the Index’s October growth. Alongside the bid, the other strongly positive performances had a very Nordic flavour. As well as Kambi, which we discuss in more detail below as our stock in focus, all the double-digit gains were Nordic-facing and at least two driven by Q3s being not as bad as feared. Neither Betsson nor NetEnt’s performance can qualify as ‘good’ in our view.

More in line with the mood of the wider markets, six stocks were down by double digit percentages over the period: Boyd and Penn in the US, Codere and Intralot in Southern Europe (with significant traditional international/emerging reach), Sportech in the UK (though largely US-facing) and Nektan, also UK based but with a broad online reach. These businesses defy common themes, demonstrating the extent of overall market volatility more than anything sector specific. It should be noted though that five of these stocks have minimal online exposure, while Nektan is a tiny business. It could be argued therefore that the market favoured online pureplays over more traditional businesses in October, but this is likely to be looking for patterns where really none exist.

In the broader market context, online gambling has something of a problem, in our view. There are specific things not to like as well as general issues. Broadly speaking, in a bear market investors look for safety and online gambling does not really score well on this card, despite being highly cash generative and a relatively defensive consumer play. This has probably got a lot to do with historical volatility rather than increasing maturity, but now would be a difficult time to persuade investors that online gambling stocks were ‘safe’ plays.

That is rather the problem. In the last day of the period, the UK government increased online gaming taxes in what is still the largest visible market by far. Advertising is under increasing pressure in a number of territories. Further, Q3 results have continued to highlight a growth slowdown, in the UK especially, despite the boost provided by the second half of the soccer World Cup. Promises of US growth also remain just that, with NJ’s September sports betting figures being routinely misread and overhyped, in our view.

So a sector with a long history of volatility is entering a period of slowing growth in at least one of its core markets and facing increasing regulatory pressure in many more. That contains most of the ingredients necessary to make investors potentially view the sector as something of a dog – one to avoid since the hopes of US/M&A plays are outweighed by fears of disappointing growth and/or regulatory intervention.

So what can gambling stocks do to overcome this? We think that is relatively simple, to answer at least. The premium on sustainability of earnings is likely to increase with scrutiny and companies should not shy away from demonstrating that they are improving in this area, even at short-term cost. Equally, cash generation is not interesting to savvy investors at the EBITDA level: this figure can be too easily manipulated and it is not in any event what investors really get. Instead, highly cash generative companies can enrich shareholders through dividends and share buybacks – proving the underlying defensiveness of the income and giving a reason to hold the stock through bad times as well as good.

However, the most important thing gambling can offer investors is profitable growth. This is the most challenging part, in our view. For as long as this analyst has been covering the sector (nearly 20 years, scarily enough), most gambling companies accept their macro environment as a given and fight for share. This drives up costs via competition (in B2C marketing and B2B price wars) without really much effort made to understand the actual consumer (or operator client for B2B). In a market where land-based is pretty flat and online offers secular growth, refocusing on basic operations management can work. However, in a market where land-based is in decline and online growth is stalling, it can be a recipe for disaster. If gambling companies cannot break this cycle in a challenging macro and market environment, its dog days are unlikely to be over any time soon.

Stock in focus: Kambi

Kambi has added 22% during October, continuing an impressive run that has led to a 138% gain since the new Index’s inception in May of this year (see Chart 1). This makes Kambi easily the strongest stock performer in the Index, double the return of acquisition target MRG since then. Kambi has had many things go its way; the World Cup, winning the ATG contract in soon-to-regulate Sweden and DraftKings in NJ, which has gone on to be the market leader, and becoming materially cash flow positive. All of these things are easy for the market to understand and like. However, all contain potential traps, in our view. The World Cup only a one-in-four-year event, creating tough comps. The sportsbook contract with horse racing monopoly ATG is quite a coup, but the disruption and cost to Kindred (Kambi’s largest customer by some margin and former parent) could easily be bigger than the gain of ATG, especially if Kambi is expected to shoulder some of the duty burden. DraftKings now has only share to lose, and is likely to become increasingly demanding on the differentiation front. All of the above means the news- and cash-flow positivity of Q2 and Q3 can easily be reversed. For Kambi to hold on to its gains, it must prove that its current business momentum is sustainable, or risk adding to the sector’s reputation for painful market volatility.

Disclaimer The narrative provided represents the opinions of the authors. Any assessment of trends or change is necessarily subjective. The information and opinions provided are not intended to provide legal, accounting, investment or policy advice, nor should they be used as a forecast. Regulus Partners may act, or has acted, for any of the companies and other stakeholders mentioned in this report.

Technology moves at breakneck speed in the 21 st century. Devices that are expected to be enduring become obsolete in a matter of years. In online gaming, payment companies that only accept credit cards, do not accept cross-border transactions or have long delays when processing deposits or withdrawals are as outdated as flip phones, CDs and fax machines.

JONATHAN O’CONNOR is CCO at Secure Trading Group. He has a wealth of experience in payments and is passionate about a client-first mentality.

With the current rate of tech development, the gaming landscape will look alien in just five years’ time. We only have to look at how different the situation is today compared with just a few years ago to see that this is a reality. From 2012 to 2017 revenues from the mobile gaming industry grew by 56% to $108.9 bn (source: Newzoo’s 2017 Global Games Report). Meanwhile, players have stopped using their computers and are now gambling on smartphones and tablets, cryptocurrencies have entered the arena and online sports betting is poised to take over the USA.

Blink and you’ll miss a lot. Online gambling merchants must adapt and evolve to stay ahead of the game — fail to do so and there are countless competitors ready to steal your customers’ loyalty.

The rise of new markets

Gaming companies looking to expand into new territories need to offer local payment methods to facilitate the in-game micro-payments that dominate online gaming. With the emergence of Asian markets as major gaming hubs, they need secure cross-border payments capabilities in order to tap into gaming communities where traditional card payments aren’t the norm. Hence why alternative and local payment methods are a must as the gaming industry powers into the future.

Crypto’s coronation

With its high dynamism and power to disrupt the world of payments, cryptocurrency has the potential to become the king of online gambling. Blockchain technology allows users to gamble anonymously, enjoy heightened security thanks to decentralised gambling platforms and receive and deposit funds more quickly than with traditional methods. As blockchain continues to develop and cryptocurrency becomes an increasingly normalised way to pay, global standards of transaction speed and platform security will continue to rise.

Experience counts

Online casinos need to choose payment solutions that have the tools to take their business global, will help them ride the crypto wave poised to sweep over online gaming and have industry-specific security measures to secure customers’ data and money.

Secure Trading has more than four years’ experience powering the payments of online casinos in Las Vegas and New Jersey, and over 19 years’ experience in Europe. We have key partnerships with local payment methods around the world to help gaming operators expand into new markets. Our acquiring bank is based in Malta, the world’s first ‘Blockchain Island’. Our sister company Cyber1 has gaming-specific security systems which create a safe environment for all players.

We understand where the online gaming industry has come from. And we know where it’s headed.

COMPANY PROFILE

•NAME SECURE TRADING GROUP •FOUNDED 1997•SECTOR VARIETY OF VERTICALS •WEBSITESECURETRADING.COM•TWITTER@SECURETRADING

With a greater variety of payment options than ever before across the globe, catering for customer preferences is a challenge for any consumer-facing business, especially one that operates in multiple territories.

According to the latest World Payments Report, non-cash transactions are increasing year-on-year by about 10% worldwide and by about 20% in developing markets.

JONATHAN AMRANI A highly accomplished member of the online payments industry, Jonathan Amrani is director of operations at PSI-Pay Ltd. He has been responsible for leading the development of the ecoPayz e-wallet for the past four years. Prior to working at PSI, Jonathan acquired extensive experience in the fields of both igaming and online payments, working for some of the biggest names in the industry.

In the globalised igaming world, for some multijurisdictional operators credit card payments are simply not an option and this raises significant questions. For instance, what are the main alternatives for those not able to use credit cards as a primary payment method? What’s the best way to avoid declining rates in emerging markets? And how should an operator go about exploring the most efficient strategy for every market?

Alternatives

The main alternatives today involve either tapping into the direct and instant banking infrastructure or engaging with a provider that offers a variety of non-card local service schemes.

If the latter option is adopted and you are able to identify a trusted partner, the opportunities can be immediate. Operators will have the chance to connect instantly with a variety of local deposit and pay-out platforms that tally with consumer trends and behaviours in a specific market.

A holistic approach is vital. Rather than providing different resources to each project manager within your organisation, integration has to be the goal, along with legal compliance. Aim for a one-time implementation, so you can then embark on operating effectively and efficiently. Then, if a partner is able to add a new payment method to its system, the operator will just need to request it is switched live.

When an operator works with such a partner, an immediate connection is established with local currency accounts, providing access to global currencies and ensuring instant conversion. This will allow you to run your business in a global way and not merely locally with high conversion fees.

Global outlook

Once you are able to tap into such solutions, then the rate of decline will drop immediately. With this approach, it is possible to gain access to local currency support at no extra cost. Additionally, for most solutions of this nature, chargebacks do not exist and this therefore reduces the related financial and legal obligations.

However, there are challenges that you will need to recognise at the outset and as your operation expands.

In order to develop an effective strategy for every market, you have to be on the ground to understand the real challenges and the live market, so you are on top of everything. That is the only way to develop a strategy tailored to local markets.

Of course, it might not be possible to situate yourselves in the territory when it comes to establishing operations there. Therefore, it is ideal to have a local partner or your own research team in each country, working in close collaboration with local experts.

COMPANY PROFILE

•NAME ECOPAYZ •FOUNDED 2000 •SECTOR FINTECH •WEBSITEECOPAYZ.COM•TWITTER@ECOPAYZ

Traditional gaming sites are fraught with friction points. Upon entering a new site, for example, players must first register an account, which often involves filling out lengthy forms. About one in four drop out during this step, according to Jumio’s “Mobile gaming registration and deposit abandonment” study.

SAMUEL BARRETT director of gaming at Trustly, started his gaming career more than seven years ago at Clarion Events, where within three years he became head of sales and was managing the biggest gaming show in the industry. Before joining Trustly, Samuel held management roles at various payments businesses.

Even then, a successful registration doesn’t guarantee that players will proceed with a deposit. In fact, CRM specialist Optimove has revealed that only one in three players who register make a deposit within 24 hours.

Finally, the part that should be the most rewarding for players — the withdrawal — is perhaps the step with the most friction. That’s because players often have to submit copies of identification documents, and the experience can vary greatly depending on factors like the amount of the pay-out, the country in which the gaming took place and anti-money laundering compliance requirements. On top of that, the pay-out itself can take several days.

Removing friction

With the aim of removing these friction points, in 2015 Trustly developed Pay N Play, a product that lets players start playing their favourite games right away with one quick deposit from their online bank.

So, how does it work? Simplicity is the watchword here. Upon entering a gaming site, players can make a deposit directly from their online bank via our embedded iframe. During this process, we verify their identity and pass on important KYC data to the operator, which then creates the player account in the background. When the time comes to withdraw funds, players can either retrieve their winnings with one click or the operator can automate instant withdrawals directly to the players’ bank account.

It’s faster for players, and because Pay N Play combines the registration and deposit steps, it reduces abandonment rates, significantly boosting operators’ ROI on acquisition and reactivation, all the while keeping them compliant. In fact, gaming sites that use our solution have seen 16% more transactions per player and 17% higher ATV per player compared to traditional gaming sites.

Barriers across borders

This concept has set a new standard for what players expect from a gaming site, but there are still barriers preventing the concept from thriving in all markets across Europe.

The foundation of Pay N Play is an online bank payment, though not all markets have embraced this payment method yet. While some markets — among them Sweden, Finland, Germany, Denmark and Estonia — show a high preference for paying this way, other markets such as France and the UK show relatively little awareness.

This, however, is changing. According to Worldpay’s Global Payment Report 2017, bank payments are forecast to grow substantially over the next five years, surpassing both credit and debit cards in popularity. The growth is likely to be driven by the development of more convenient digital authentication methods required to log into a bank account.

As new European markets embrace online bank payments, models like Pay N Play will proliferate, stripping away the hassle previously associated with gaming and leaving nothing but pure fun.

COMPANY PROFILE

•NAME TRUSTLY •FOUNDED 2008•SECTOR FINTECH •WEBSITETRUSTLY.COM•TWITTER@TRUSTLY

Over the last decade, technology has transformed the online gambling landscape and we continue to see more initiatives focused on customer retention. As a result, operators now offer more betting combinations and options than ever before to keep customers engaged.

Speed is of the essence. Mobile continues to grow as the channel of choice and is predicted to be worth $100 bn by 2021 (source: Global Games Markets). Meanwhile, players’ thirst for speed and frictionless experiences has also led to the demand for greater payment choice.

CHRIS SMART is SVP gaming and fx markets at eMerchantPay. He is a gaming and FX subject matter expert who partners with operators to increase their online conversions and optimise their payment efficiencies. Chris has spent nearly a decade working closely with some of the world’s leading gaming and forex brands, helping them implement online growth strategies. Prior to joining eMerchantPay, he worked at Worldpay where he was responsible for some of the largest UK focused sports betting and casino operator acquisitions.

What are the main challenges facing operators and their PSPs?

Regulations, Brexit and challenges related to instant payment technologies are key and we examine each of these below. Change is the common thread between legislation, politics and technology. Change may close one door but open another and forwardthinking operators can create new pockets of innovative operating models.

Industry challenges: regulation

The waltz between regulations and the gambling industry can lead operators a merry dance. A common result is the review of existing business operating models, forcing operators to tweak these further. But not all is bleak; regulatory change also opens up new opportunities.

Portugal: 2017 figures published by the Serviço de Regulação e Inspeção de Jogos (SRIJ) indicated that the high taxation rates have not been a market killer. In fact, online sports betting revenues are virtually the same as Spain (source: Legal Sports Report). Despite expert predictions calling for lower tax rates, a figure of €20.5m was recorded in Q4. Further testament to this are Q2 2018 figures, at €37.4m (source: eGR Magazine).

Germany: as far as online gambling is concerned Germany remains a strong market with €35bn generated per year, according to Handelsblatt Global. However, with the country’s Interstate Treaty on Gambling challenged, the licensing debate is still ongoing and more appeals are being made to review the country’s regulatory landscape.

Sweden: the re-regulation of the Swedish market aims to increase safety, with a focus on improving customer protection and overall game security. Six different licenses are on offer and as of 1 August, 2018, many operators have started the application process. As Sweden becomes more attractive, the competition for licenses and market share will no doubt become even fiercer.

US: the repeal of PASPA means that there’s no longer a federal ban and states can now consider legalising sports betting within their jurisdiction. It’s time for operators to analyse the market to see if they want in. Companies must continue to monitor developments in each state while trying to evaluate the potential of the market and customer base.

Industry challenges: Brexit

Depending on the outcome of Brexit, UK payment providers and their acquiring licenses (if applicable) may no longer be passported across the EU. This could result in a change to UK acquired transactions with regards to interchange and scheme fee costs, which may impact all operators servicing the UK market.

Industry challenges: instant payout capability

The new Visa Direct and Mastercard Send services will certainly enhance the desired instant/real-time payment experience. This requires issuers, payment processers and operators to make changes to their systems and operating models, which obviously comes with a cost. The effect of issuers planning to migrate from Visa to Mastercard is also worth consideration as there will be an increase in payout costs due to Payment Transactions (PTs) being more expensive than Original Credit Transactions, not to mention the different scheme rules regarding Mastercard PTs. Other options include instant bank transfers which have been successful in countries such as Australia and Sweden.

What are the areas and regions of growth?

Customer demands and the pace of change occurring within many territories offers operators new opportunities for growth and expansion.

Brazil: there is potential for Brazil to become one of the world’s largest online gambling territories if regulation is confirmed. This is due to its market characteristics—a large population, the incoming of millennials and a seamless setup. However, the political landscape makes regulatory talks tricky.

Colombia: gaming tax collection grew by 20% in 2017 (source: Gambling Compliance) and with a piecemeal expansion in terms of new licenses and regulated products, this is one of the markets to watch as it could be worth about $70m by 2020.

Peru: regulated gambling is a possibility, with lawmakers putting forward a proposal to legalise online gaming. If it regulates, a licenced Peruvian market has the potential to be worth $200m, as reported by eGR.

US: the September figures for New Jersey are in and they saw overall betting revenue nearly double from August’s $95m to $184m. Online and mobile made up more than 50% of that number at $104m. These early indications suggest we will continue to see the numbers rise as online operators optimise and improve their offerings.

Customer payment preferences

More players are looking to bet and play in ways to fit their lifestyle, and this of course includes using mobile devices. On average, across a sub set of operators, we have seen mobile revenue rise above 60% and in some cases even surpass the 80% mark.

Customers’ need for discretion, faster payments and seamless experiences drive payment preferences. In addition to mobile payments, wallets and real-time bank transfers continue to grow in popularity versus cards.

Which innovations have the potential to transform the product and player experience?

Among other key success criteria, payment processing should be as efficient as possible with speed being a key driver. With this in mind, it is not surprising that customers are adopting new payment methods, designed to enable fast deposits and payouts. But it doesn’t stop there; customers now demand both seamless and immersive experiences.

Players can now customise in-game avatars thanks to VR technology recently deployed by the likes of Poker Stars and Stoiximan.

In addition, a number of large operators now offer a facial recognition login.

This may open the door for payments to be made using a similar method in the future.

COMPANY PROFILE

•NAME EMERCHANTPAY LTD •FOUNDED 2002 •SECTOR GAMBLING, GAMING, FX, RETAIL, TRAVEL & FINANCE•WEBSITEEMERCHANTPAY.COM•TWITTER@EMERCHANTPAY

The igaming industry is an appealing target for all kinds of fraudsters, hackers and assorted malicious types. With companies whose revenues are counted in the billions, even a minor data breach could cost millions in revenues and fines. The introduction of GDPR earlier this year has put igaming under even more pressure from regulations, so it’s essential for operators to secure themselves against potential threats to their customers’ wellbeing.

PAUL MARCANTONIO is head of UK & Western Europe at ECOMMPAY, establishing the payment service provider as a trusted partner to e-commerce merchants throughout the region. He has more than 18 years’ experience working for representatives of the payments industry, including popular e-wallets, and tier 1 interactive gaming brands, such as Ubisoft and THQ.

Risks to customer data from hackers are perhaps the biggest threat facing igaming businesses. As a hub for bank details and transaction flows, breaking into an operator’s website can prove wildly lucrative for determined crooks, who can sell the data or use it for identity theft. Even famous physical casinos aren’t safe from pernicious attempts by criminals to bust into their virtual data vaults. Witness what happened at the Hard Rock chain last year.

Fortunately, the toolsets to foil these kinds of breaches are constantly evolving, and businesses across the industry are already deploying methods such as two-factor authentication machine-learningenhanced firewalls and threat detection in their battle against cybercrime. Keeping abreast of the technological arms race between hackers and businesses is vital if you want to avoid the costly effects of data breaches.

Operators aren’t alone in their struggle. Partnerships with reputable and reliable payment service providers can safeguard not only data and revenues but also brand reputation. After all, it’s no good if the bits of your business you’re outsourcing are creakier than a haunted house and are at risk of fines from international payment systems regulators. Ensuring that your payment partner is up to speed on the latest security measures, holds PCI DSS certification, offers tokenisation encryption and complements automatic transaction monitoring with comprehensive manual monitoring of suspicious incidents can help boost profits in a very simple way: by protecting igaming operators from avoidable financial losses.

As a side note, tech-based hacking isn’t the only issue igaming has to grapple with. All the fancy security technology in the world won’t help if a criminal can get a hold of customer data with a phone call. Social engineering – a very nerdy way to describe having a conversation – is a pretty big secondary threat to companies operating in the igaming sector. Having a clear and strictly enforced set of guidelines as to what information staff can and cannot dole out over the phone or email (and the checks they need to run before they give it out) is crucial to preventing slip-ups that can cost customers and companies thousands. Briefing staff on proper email protocols, such as not clicking on weird links from unknown addresses, might sound obvious but can have incredible preventative effects.

So, in summary, combine tech and talk and you’re good to go.

COMPANY PROFILE

•NAME ECOMMPAY •FOUNDED 2012 •SECTOR FINTECH •WEBSITEECOMMPAY.COM

The media has a love-hate relationship with igaming, an industry where conversations are key. Our business is one where everything hinges upon the quality, content and timing of dialogue between casino operators, game suppliers, software and payment providers. This is the incubator where deals are cut, consisting of our present and future partners engaged in continuous discussion about providing solutions to each other. So we know that B2B conversations can make or break your brand, but what about the conversation involving our primary stakeholders – our customers?

TONI HALONEN is co-founder and CEO of Good Game, an online lead generation company with a successful portfolio of igaming brands which is currently building Bojoko. A new concept in the industry, Bojoko connects a community of online casinos, game suppliers and players on one platform.

We seldom hear about players’ stories directly, unless they’re processed and manufactured via the casinos themselves or surface as negative press via those who loudly trumpet their bad experiences. Why is it that we never hear from players who have won modest amounts, played responsibly and used their winnings to add zest to their life?

We’re going beyond the live feed of users flanked by the amount they’ve won with default “congratulations” messages. Bojoko has just launched Conversations, a new feature that crowns our ongoing efforts to build a community that stands for good gaming. Our first conversation is about winning stories, aimed at celebrating the positive influence of gambling when done in the right conditions. Players can now post a screenshot of their winning moment, tag the online casino where they won and share their story on a page with a sharp, attractive interface that lets our community do all the talking.

We’ve kept the bigger picture in mind with this new tool. Conversations aren’t just a vehicle enabling players to promote their good gambling news from a positive angle. We’re also giving them the opportunity to elaborate on the event and interact with other players, in addition to tagging the casinos where they won. This is where you come in.

Creating a listing on Bojoko can get your casino featured in Conversations when players score a win. This isn’t merely free publicity for your brand, it’s an unbiased endorsement straight from the horse’s mouth that has limitless potential to uplift your business targets.

In classic Bojoko style, we’ve engineered another win-win-win mechanism that will help elevate gambling from its reputation as an activity best relegated to dark, smoky backrooms into a legitimate pastime that might twist anyone’s fate in their favour. Or, at the very least, pay for an impromptu night out – which is enough for most people. The point is to light the fire for conversations to start and continue. We’re building an avenue for such exchanges to flourish, and now’s your chance to get in early on our winning story.

So here it is: another of our innovative creations jam-packing value into our partnerships. Empowering people to transform the igaming narrative is at the heart of our inner dialogue. Come join us on this exciting journey.

COMPANY PROFILE

•NAME BOJOKO •FOUNDED 2017 •SECTOR ONLINE CASINO •WEBSITEBOJOKO.COM•TWITTER@BOJOKO_COM

In the last few years, the igaming affiliate industry has been through an enormous amount of change. The pick-up in M&A activity, increasing compliance demands from operators and the shift away from free bets and sign-up offers in the UK have all contributed to create a very different landscape to that of just a few years ago.

It’s no longer enough for affiliates to throw up a few links and sign up with as many operators as possible – the latter have become choosier and are looking to work with affiliates that are not only compliant but also provide something more in terms of products.

Thus far, it’s largely sports betting sites that have innovated in this area – unsurprising news, perhaps, given the vertical lends itself easily to data-driven analysis. But while casino affiliates might not have as much material to work with, some are now focusing on building data-driven products to differentiate themselves from their competitors.

SlotCatalog is one such example. The Malta-based affiliate, founded about 18 months ago, is on a mission to become the App Annie of the casino market, according to co-founder Johannes Klasson.

“You know Angry Birds is the best on iPhone because you can see it on App Annie,” says Klasson. “Well, our site is like a small version of App Annie for the casino market. For each market and country we are aiming to provide a hotlist of the most popular games in real time.”

So far the site features data on more than 8,000 games and Klasson says adding games as soon as they are released is a priority for the site. “As soon as a new game comes out, we will write about it and find a ranking for it, though it will obviously take a few days before we have data from the casinos.”

In its desire to feature information about new games right away, SlotCatalog isn’t alone. When TAG Media unveiled First Look Games, a platform that connects game developers with affiliates to make sure they get game information as soon as new titles are launched, it signed up more than 180 affiliates in the first month alone.

Where SlotCatalog differs from the majority of affiliates, however, is in its drive to move away from the more traditional casino affiliate model. “We wanted to really be data-driven and shift the focus away from voting or personal opinions about the games,” says Klasson. “So many websites simply have somebody sitting in a country rating games according to their personal opinions. I think people have lost trust in ratings on affiliate pages, so if somebody is saying this is five out of five stars it doesn’t really mean anything.”

Partly the move towards data is pre-emptive of a move Klasson thinks operators will also make. “My prediction is that the operators will be a lot more data-driven and less human-influenced when it comes to the game selection in the future.

“The operators will start looking more at the long-term impact of their games once they figure out how to identify the key data to measure game performance and its true impact on player value. Some have already started to do so but the majority of the operators do not have a clue which key data to even begin measuring with.”

Ian Sims, founder of affiliate compliance tool Rightlander, agrees there’s enormous potential for operators and affiliates to harness data more effectively. “Historically, affiliates and operators have tried to sell their site based on the fact that a player is going to like a single game. They think, ‘Well, a player is going to like Cleopatra so let’s bang Cleopatra all over the place,’ but actually a player doesn’t think like that. They want to play Cleopatra, yes, but they also want to play Cleopatra 2 and Thunderstruck and other games that are similar.

8,000+ GAMES THAT SLOTCATALOG FEATURES DATA ON

180 AFFILIATES SIGNED UP IN THE FIRST MONTH

“So you can create a product that says, ‘If you like Cleopatra then you are going to like this, this and this,’ and this won’t just be based on the theme, which has always been the easy way out, but based on the data. So how does the game play? Is it high volatility or low volatility? Does it have a certain feature? What is the frequency of that feature? All these little things that actually make a slot interesting to that kind of player can be fed through factual data.”

Sims built a slot comparison site himself several years ago before selling his affiliate network to Blexr and says he was surprised by how quickly it gained a following and repeat visitors. Similarly, Klasson says he’s been “really blown away by how long the visitors stay on our site and how many people are visiting it”.

Klasson has worked in the affiliate industry since 2005 and set up SlotCatalog with Fedir Havlovskiy, who previously worked for NetEnt. The site’s team of nine is split between Malta and Krakow and while thus far their efforts have focused mostly on building the technology side of the business, Klasson says they are now concentrating on monetising their affiliate business.

He says in future they plan to increase the site’s offerings with more data products and that they hope to soon be able to pinpoint the revenues for slot games in each market.

It’s not yet clear whether or not these developments will lead to SlotCatalog becoming widely viewed as the App Annie of the igaming world. But one thing’s for certain – as affiliates such as SlotCatalog continue to innovate in terms of products, the affiliate landscape looks set to change even further in future.

The subject of emerging markets in the igaming industry is often among the easiest to broach, while simultaneously being the most complex to examine at a more granular level. This is largely due to the fact that a given market’s potential can frequently be identified better than it can be understood. No market in the igaming industry currently fits this description better than that of sub-Saharan Africa.

Two key areas that highlight the region’s array of opportunities are those of affiliate marketing and mobile in-play betting. Closely linked by their reliance on creativity and collaboration, each allows for a more thoughtful exploration of how markets in Africa will drive evolution in technology, marketing strategy and regulation.

The role of affiliates

Prior to building a plan for entry into any of Africa’s growing markets, it is important to acknowledge that each will necessitate its own unique set of requirements, especially as they pertain to affiliates. That Africa’s status as a burgeoning igaming ecosystem is being elevated at the same time as the US market enters its next stage of evolution following the PASPA repeal, offers a convenient parallel.

The respective timelines for igaming in Africa and the US differ but each now finds itself in a position where its immediate future will largely be defined by technological advancements in mobile, the immense popularity of national sports and the implementation of a suitable marketing strategy. In these regards, affiliates are ideally placed to be vital partners and resources as individual brands and markets continue to grow.

Supporting evidence points to an increasing intent on the part of affiliates to partake in the continued growth of African markets moving forward. From the perspective of Income Access, where we conduct an annual survey across our network of affiliates, 2018 saw 19% of affiliate respondents select Africa from the list of regions in which they are considering promoting moving forward.

Another result from our survey suggests that a steadily growing number of affiliates are aligned with key areas of interest within Africa’s igaming landscape. When asked about which verticals they would consider for future promotional activities, survey respondents made esports and sportsbook the top two selections with 34% and 31%, respectively.

The popularity of football and the corresponding potential it delivers to sportsbooks in African markets cannot be overstated. In the case of esports the growth is more gradual, yet still promising enough to serve as an indicator of likely opportunities ahead. The fact that Multichoice Africa, a South African-based video entertainment company, launched a dedicated esports channel – GINX Esports TV – on its DStv network last year suggests as much.

The significance of affiliates’ willingness to participate in the market is important, not just for their ability to expand the scope of a brand’s messaging but also their ability to segment and adapt to an array of market influences. In many ways, it’s as simple as understanding that a strategy that appeals to one audience will not necessarily appeal to the next.

Mobile & in-play betting

Two important product features that any brand striving for success within the African market should be mindful of are mobility and flexibility. The significance of these features, however, extends beyond gaming experiences to reflect broader social traits and routines inherent in the daily lives of those engaging with the product. Given these influences, in-play betting through mobile devices serves as an optimal solution, aligned with numerous market factors.

Sarafina Wolde Gabriel is VP of strategy at Paysafe Group’s Income Access. She focuses on growing Income Access and driving the evolution of the company’s suite of products and services and has over a decade of igaming industry experience.

An April 2018 report entitled ‘Africa – Mobile Network Operators and MVNOs’, which was produced by BuddeComm, a global independent telecommunications research and consultancy company, offers timely insights on the current state of Africa’s mobile market. For example, because of sub-par fixed-line infrastructure across many regional markets, “between 95% and 99% of all internet connections” are through mobile internet.

The report also highlights the degree of sophistication with which consumers manage their mobile subscriptions, with 99% of all subscribers using prepaid accounts that are more economically viable than standard contract plans. As a larger percentage of the continent’s population is now able to afford mobile services, it has “led to a steady increase in the subscriber base”. These points further inform relevant stakeholders of the uniqueness of the region’s mobile market and the importance of flexibility.

Moreover, not only does this make in-play betting well-suited for Africa but it also positions it to benefit from growing global demand. Revisiting the earlier comparison with the United States, a market still in its in-play infancy, it will be important to monitor ongoing developments, particularly in tech as well as regulation and M&A.

From a global M&A perspective, it was only in early October that Scientific Games, as a follow-up to its previously announced partnership with Caesars Entertainment, acquired Don Best, a supplier of real-time betting data and pricing for North American sporting events. On the tech side, the impact of data science and machine learning are already having a notable impact on product development; the continuation of that trend seems all but inevitable.

The influence of similar undertakings and initiatives will ultimately impact the in-play gaming experience of end customers in African markets. The question is at what rate.

As the ecosystem is built for those with an entrepreneurial drive, an infusion of inspired problem-solving and product development at the local level is also expected. It’s at this level that strategists, developers and even regulators possess a more comprehensive understanding of market intricacies and how in-play can engage segmented audiences through unique selling points, tailored user experiences and an appreciation of the diverse behaviours of those varied audiences.

The cross-section where affiliate marketing and mobile in-play meet is relatively easy to identify. In our 2018 survey, 75% of respondents said that they have a mobile-optimised site, with 21% of these having a complementary app. When assessing the online marketing acumen of these affiliates alongside the grassroots innovation inherent to the African market, we see that lucrative collaborations are not only possible – they’re inevitable.

During the first few years that social slots existed, we relied on real-money gaming slots thinking for monetisation. Mainly this: why would people spend their real money?

The answer was simple, we all believed. People would pay because they had run out of coins and they want to keep playing.

It makes sense, right? After all, that’s how it works in the real world. The thing is, over the last few years most leading social slots have been able to consistently spike their monetisation — even double it — based on features, mini-games and other tricks that have nothing to do with losing coins in the games themselves.

In this article, I’m going to take you behind the scenes and show you something surprisingly simple that should increase your revenue from your top-paying players by tens of percent a month.

Understanding why people pay

First, let’s define who this strategy is for. This is for your paying players. In fact, it’s for your top-paying players. These are the players who pay you hundreds, even thousands of dollars a month and in exchange get millions, tens of millions, or even hundreds of millions of coins at a great discount. With these coins, they can play for a week (if they’re heavy players) or months, without paying you again.

So they don’t need to pay, right? Wrong.

Sure, people pay for coins. The thing is that most people would pay for other things as well. And one of these things is status.

Players will pay to get status. And, even better for you, players will pay to keep their status. Once we understand that, we can create a system that allows us to benefit from this.

The Billionaire’s Club trick

Let’s start by giving status to your top-paying players. Let’s say that any player with more than a million coins is officially in the Millionaire’s Club.

Being in the Millionaire’s Club is cool. It gives the player special perks or discounts on things. But, most of all, it gives the player bragging rights. However, if their balance falls below one million, they will lose that status, the bragging rights that come with it, the discounts, etc.

But being a millionaire is kind of common, since people can get there by being lucky, without paying.

So let’s give them something to strive towards. Being in the Millionaire’s Club may be nice, but being in the Billionaire’s Club is really something to aim for. It has true bragging rights and absolutely amazing discounts and perks.

But, if a player drops below one billion coins, they are out of the club. So when that happens, they may get a message from you suggesting they pay more money for more coins to keep their status (even though they have more than 999 million coins and don’t need any extra ones). If you give great perks and a great way to brag about being in the club, most of them will pay to stay in.

Now repeat that process: being in the Billionaire’s Club may be awesome, but being in the Trillionaire’s Club is stupendous! It has the BEST perks and discounts. And it has the bragging rights of being in true rarified air, in a club that numbers only two or three people, or maybe even just you.

Once more, if the player drops below one trillion, they get a message from the game, and he or she will most likely pay — even though the last thing they need is more coins. Status is more important than coins. That is human nature.

You can see how this works: a player can lose their amazing status, a player must pay to keep that status, and the player always has a higher status to strive towards. Most importantly, players can brag and you should give them ways to do that.

One last tip

Since boasting is important, keep in mind that there is more than one way to do it.

Follow your players to learn how they brag. For example, if you look at Facebook fan groups of some of the top games, you’ll see that players like to post screenshots of massive wins. Some wins, you’ll notice, are wins of 100 million or more. The only way to get wins like that is to play with huge bets, the kind that mean that the player has paid to get a large number of coins.

Therefore, if people like to post really big wins, help them. Fix it so that anyone in any of the clubs can take a screenshot of their big win and big win celebration and save it or share it. The saved picture or shared picture will also have a stamp on it, stating Millionaire’s Club, Billionaire’s Club or Trillionaire’s Club, etc.

This is one example of many

These club monikers are just an example — no doubt you’ll have your own ideas about what to call your clubs. As long as you give players a status that they want, and threaten to remove it in the nicest possible way, this should work.

This is just one of the many tricks you can employ to improve monetisation in ways that have nothing to do with your actual slot games. There are many reasons people pay, especially people who have already paid you. Rather than trying to squeeze a few more non-paying players for a few dollars, why not go to your existing toppaying players and give them more of what they want, in exchange for significantly increasing their monetisation? Try this trick. You’ll be surprised.

Guy Hasson worked for Playtech for three years before becoming Playtika’s content manager, responsible for the content of Slotomania and Caesars Casino. He is now a social-slot consultant, specialising in game popularity. His website: hassonslots.com