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Market Review #19 | Gambling Tech
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Hi, this is Clément from HUB612👋
Welcome to all the new followers and hello to everyone!
Last week, I’ve been watching the champions league semi-finals and I was a bit surprised by the mid-game TV advertisement. They were mostly about betting money on sports results. I got intrigued. Therefore, this week I’m digging the gambling tech industry. Welcome to the vice tech.
Gambling is massive
Also called betting, gambling is the wagering of money or something of value ( = the stakes) on an event with an uncertain outcome, with the primary intent of winning money or material goods. The outcome of the wager is either immediate (ex. a roll of dice) or happens in a longer time frame (ex. betting on an entire sports season).
The gambling market is massive. In Europe in 2019, the total market was worth €98.6bn (with online gambling accounting for €24.5bn and land-based gambling accounting for €74.1bn in gross gambling revenue). The market dynamic is mainly driven by online gambling whose expected CAGR is 7,25% over the next 5 years, land-based gambling is stagnating.
Here are a few facts explaining this growth:
The regulated online gambling market is growing
In 2019, only 73,5% of online gambling activity took place in the regulated markets. This is not enough to evolve in a fair global gambling market. Arbitrage may happen easily. If it’s not regulated, that’s because countries have never gotten around to addressing online betting to any significant degree (ex. Canada, Netherlands, New Zealand, .. )
Online gambling is going mobile
In 2019, 55.9% of Europe’s online bets were placed from a desktop computer, while 44.1% of online bets were placed from mobile devices. No surprise here.
The number of bets placed online increased drastically
Customers placed 44 bn online bets in 2019, an increase of 39% from 2018. I pretty sure it kept growing
Gambling is safer
Indeed, 1.2 m direct interventions with customers were made to promote safer gambling. Furthermore, up to 63% of gamblers used a safer gambling tool (ex. reality check, deposit limit, or time limit).
There are new markets
Both eSport and crypto are driving higher adoption in gambling these past years.
The secondary market opened, bringing more liquidity
Mobile and technologies have brought more flexibility and liquidity to the market by creating a secondary market to sell/buy issued bets.
The action of gambling has diversified over its history. In Mesopotamia the earliest six-sided dice date to about 3000 BC. So, I guess humans have been playing and betting for quite a long time now.
Here are the different types of gambling:
Table games and electronic gaming (slot machine, video poker, .. )
Card games (Bridge, Basset, Put, .. ), Coin-tossing, Dice-based (Backgammon, Mexico, .. )
Parimutuel betting (horse racing, .. ), sports betting, and e-sport betting.
Knowing this, I wondered how the fixed-odds betting (regulated) market was structured:
Online gambling forecasters
Before betting, you’ll probably need to gather some intelligence and pieces of information (previous results, the ongoing strikes, the goods, .. ). There are multiples ways of doing this, therefore there are different levels of gambling forecasters:
Newspaper & Radio
Commonly studied by new gamblers, it provides generic information and very little details.
Community of gamblers
The best version of a product is one powered by its community. Therefore, gamblers have joined their efforts in forecasting the outcomes of sport games results, e-sport competitions, .. They mostly exchange through discord and telegram.
Some gamblers are probably lazy and are willing to trust and follow a successful gambler. That’s a copy trading vibe. It exists! It’s never totally free but you’ll easily find these influencers if you look carefully on your social networks (Snapchat, Tiktok, .. ). The number of stories they share, explaining their bets is skyrocketing.
Algorithms powered forecasts
Betting services that use artificial intelligence algorithms to predict sports results. Unlike 'human' predictors, they can analyze and compare thousands of statistics to continuously improve their predictions.
Bet Management Services
If you start betting regularly (i) you’ll lack visibility on your financial performances (ii) you’ll qualify the task as time-consuming and boring (iii) you’ll have blinkers when it comes to analyze and optimize your return on investment.
Therefore, a new kind of service is developing to become your personal digital coach/assistant when betting. See it as a bookmaker aggregator with embedded intelligence to source opportunities, bet and analyze performances in a single place.
As I said before, the market is slowly but surely being digitalized. Thus bookmakers, a highly regulated and scrutinized profession, are going digital! You probably know the big names. They have aggressive marketing and a high cost of acquisition given the “100 € offered for a created account” policy. But the lifetime value of a customer in this market is high, there’s is, unfortunately, no doubt.
Last thoughts about gambling
With the current bull market of cryptocurrencies, gambling has reached a new market. There is an increasing number of games where you can bet all kinds of coins: minesweeper, poker, wheel of fortune, slot machine, ..
Higher risk = higher return or higher loss
Insurance for gamblers
Ultimately, I’ve been wondering where insurance innovation can take place. New challengers took off in France in house insurance, health insurance, .. But where are the upcoming new challengers?
Looking at the gambling market, it became obvious it would not come from this market.
Gamblers have wondered whether there is any type of insurance that covers gambling losses in case they don’t generate a payout from their bets. Two reasons explain why it’s very unlikely to happen:
Gamblers always face a high likelihood of loss when gambling and insurance companies will find it hard to continually cover this over a long period of time.
Having losses paid back may actually increase a gambler’s habit (a negative feedback loop)
In this case, the closest to insurance is probably cashback. Some sites do offer a cashback promotion which allows players to claim back a small percentage of their losses as a bonus.
Open Banking, but gambling addiction-proof
I recently spotted that Monzo (neobank) extended its gambling block feature to payments made via Open Banking. Monzo's mission is notably to help customers struggling with gambling addiction, therefore they now block card payments to specific merchant category codes.
This is possible thanks to their partnership with TrueLayer. Concretely, TrueLayer automatically lets Monzo know, via an enhanced API call, any time their customer attempts an Open Banking payment transfer to a gambling firm specifically.
Great to see that off-the-shelf bricks, which I described in a previous issue, are now fighting against this addiction!
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