Henrik Ekdahl is the co-founder and partner of Optimizer Invest, a leading European investment company specializing in the online gambling industry.
If we compare the gambling industry to others, online gambling hasn’t been that innovative and we’ve been slow too on the uptake of new technology available.
That’s because we haven’t been forced to innovate: the market has been a safe environment for many years, allowing a lot of operators in a lot of countries to rest on their laurels.
There is no fuel for innovation without competitive elements.
That’s now starting to change, however.
Every industry has recognized the importance of a mobile platform for their brand, for example, and gambling is no different, but that’s now old news. Everybody left in this sector has some form of mobile enterprise.
It’s now time to think beyond 2015, and think differently.
We’re starting to see more and more companies attempting to blend real money gambling with their online presence. It’s a process of gamification, reverting back to the model of a computer game that some consumers will love and take up instantly.
Of course, that won’t satisfy every customer and so the number of products you create grows to suit your range of players – it’s important therefore to be engaged with their needs and requirements – but this shouldn’t prove too large an obstacle. We believe that the market is large enough to hold niche products like this.
As investors, we’ve realised this and incorporated that into our selection of startups: whether it be adventure games or online slots, our portfolio needs to reflect the dynamism of the industry.
On the flip-side, as competition increases, and with it innovation, so does the difficulty of customer retention and acquisition.
This is closely linked to the types and range of games you showcase, and how you market them, which can be expensive.
So you have be knowledgeable about how every decision you make impacts your customer base and experience. Once you have your consumer through the door, you have to get to know them and make sure you meet, or exceed, their expectations.
That of course, requires data.
Up until the present, data, again, wasn’t something many gambling companies thought enough about.
Now it’s all they talk about – big data, smart data, theorems, data tools and analytics, all peppered into everyday conversations about the future of gambling.
To the casual eye, it’s impressive how fast an entire sector can react to a new trend, but for us it’s a process not happening fast enough; most operators are still well behind where they should actually be right now.
As examples, they haven’t got a streamlined back-end process integrated into their systems, or the data they’re collecting isn’t as relevant as it should be. Problems that are simple to diagnose, but slightly harder to treat.
Internal issues, like the examples above, reflect the problem of using legacy systems (and thinking) when applying new methods of technology.
Software legacy, in particular, is a challenge to innovate.
Many large operators around the world have been live for decades and their platforms are built on specific languages that don’t necessarily implement the latest technology available. That’s usually because that transition requires so much work, but it’s completely necessary as new players emerge already activating these new architectures.
It’s becoming a different ballgame, and players need to keep up.
Iterative changes can be useful here: it means making smaller tweaks almost constantly. This has the double benefit of maintaining a strong, innovative position, and forcing you to keep with the newest ideas surrounding your sector, as you look for your next adaptation.
Otherwise, you’ll be facing a series of missed opportunities, be that in the form of lost customers or market share as new players emerge – and acquiring those players through consolidation isn’t as simple a solution as you might think…
Consolidation was always on the horizon as an industry starts to incorporate newer operational methods from newer companies, but the aforementioned roadblock of legacy infrastructure still poses a problem.
A recently bought, fast growing company with decent technology will only remain that way if its buyer allows it to; what usually happens however is the startup is moved over to the parent company’s platform, relinquishing its main selling point almost instantaneously.
It’s very rare that a large operator moves its entire operation over to the smaller one, but that would probably be a better idea – despite the hand-wringing it would create in the executive suites.
And I don’t blame them.
It would be a huge leap of faith for all of your data, your customers and your products to be put onto a new platform, not as rigorously tested as your own, and one alien to you methods. It’s much safer to continue on the tried and tested.
However that’s not the mind-set required anymore; taking that moon-shot would be the better decision in the long run. The new platform would respond well to the iterative process of innovation discussed earlier, as well as being able to number crunch your old data sets in a way only a startup can achieve.
This won’t happen overnight though, of course.
Where we will see the big changes in this sector will not be in the technology or the innovation, but in the geographic and demographic trajectories of consumers.
It’s long been discussed, but Asia and Africa are both in strong positions to become a strong resource pool for many gambling organisations. European operators in particular are gaining traction and making money in these new areas: think Nigeria, Uganda and Kenya.
It’s an exciting time, because up until now making any money in those locations has been extremely difficult – but you only have to look at the rise of mobile to understand why the change has finally occurred.
However, as mobile continues its market domination, so the market looks forward to see what it will affect in the months and years ahead. What isn’t so simple is customer behaviour; we can apply more and and more data analytics to help us keep on top of their changing attitudes and play time, but no-one can say for sure how their relationship with us will manifest as technology continues to innovate this space.
