The global sports betting myth
Is online sports betting really an international business after all?
Sports betting is a global business we are always told. International expansion is in every company presentation with near endless growth from this $100b a year market. But, looking at the evidence of the last 20 years, sports betting is actually a pretty local affair.
There are few truly international betting brands. Yes there are plenty with lots of licences, but not making money in 20 countries doesn’t really count even if all the sponsorship deals look good on an investor deck.
In truth, most countries top three betting brands will be two local brands and bet365. And while bet365 isn’t the only international betting brand, with sportingbet and pinnacle two others that spring to mind, nearly everyone else will have more of a regional or national focus and a long tail of territories making up the numbers.
But why is this the case?
Sports betting isn’t new
Well it’s partly because online didn’t change much. People have been betting for a long time. And they have been betting online for decades. They already have their preferences, and it’s not a surprise that the big international betting brands were those either raised in the dot.com (grey market) era or those who are still in the dot.com (grey and black market) era now.
In an unregulated market you can build an international brand because you don’t have much regulated big brand competition, and often you’re one of a small handful of options. In hard operational markets you can build an international brand based on being decent at payments and simply being an option in a market where there aren’t many.
But once it opens up to regulation, in many countries there is at least one endemic sports betting brand perhaps even with betting shops or outlets in every town. Or there is a local lottery or casino brand that has huge resonance and no small amount of regulatory influence with fantastic brand recognition throughout the age groups. That’s tough to compete with.
Localisation matters
But competing with big local brands is really only part of the problem. Probably an even bigger issue is localization. Online gambling operators are data machines. They are constantly optimising for what users want and as a result most apps and sites become really quite specifically optimised for what bettors in that country or territory want.
The betting experience is basically the same, but what matters are the differences not the similarities. The types of bets offered, the sports bet on, the language used, the way markets are ordered and sorted, the types of promotions offered, the images used in marketing. There are a bunch of smaller details that probably aren’t even consciously considered, but add up to that specific local betting experience.
A betting operator that is hugely successful in region A will have a product that is laser focused on what bettors in region A want. And by definition it will be effectively speaking a different language than bettors in region B. And there is plenty of precedent for this, not least from UK market leaders falling flat on their face in the continent and vice versa.
We like what we like
Another big factor is familiarity bias. We get used to what we get used to. If bet365 is the market leader where you live then you think all betting apps should look like bet365, if the market leader is bwin then you think bwin is the model for what a sportsbook should be.
We see this in various different markets around the world. A Nordic sportsbook needs to look a certain way, a UK sportsbook has to have certain features one click away and so on. People don’t like change. And they really don’t like having to relearn how to use apps where speed and convenience are the most important issues.
Familiarity is a really powerful drug and you can waste a lot of time and money trying to break user’s addictions to it.
So what does this all mean?
The net result of this is that we’re going to continue to see a lot more acquisitions. Online gambling CEOs are smarter than me and figured this stuff out years ago. It’s why you hear them all talk about buying “local heroes” and “bolt-on incremental value additive buzzword bingo businesses”. It’s just too hard to build a business organically in most markets and even if you do you will probably still mostly suck at it.
The most interesting market in this sense is the USA. The absence of the big offshore brands in the regulated market, and the glacial speed to market of some of the endemic gaming brands meant the likes of FanDuel and DraftKings were able to establish what “good” was in the minds of consumers.
Fanduel and to a lesser extent DraftKings have set the expectation for what a sports betting product should be. And unless someone comes in with a UX that is radically improved they are mostly just offering similar experiences to the market leader and are forced to compete on bonusing and pricing rather than product and brand. The end result, like nearly every other market, is product commoditisation.
But that Fanduel experience doesn’t necessarily translate elsewhere. And as the US product becomes ever more micro-optimised for the specifics of the US betting market is probably becomes ever more unoptimized for international expansion. And that might be challenging for operators that have high hopes to take on the big wide world once they have conquered the USA.