If you have been following the business pages lately you cannot help being struck by the huge changes underfoot in the online gaming industry with mega-mergers between Betfair and PaddyPower and GVC beating 888 Holdings to acquire Betwin.
These gaming behemoths have sought scale as a response to spiralling customer acquisition costs, as well as increased tax and regulatory burdens. A profitable customer can often cost hundreds of dollars to acquire. It is refreshing to see a leading online gaming business like Welton Holdings’ Fun88 take an innovative approach to reducing customer acquisition costs.
Quite simply, Welton Holdings' Fun88 has gone back to a basic fundamental of marketing: ‘Word of Mouth’. But the innovation is in that by adding the latest generation of innovative Invite-a-Friend marketing software it has ensured that, finally, referral marketing channel can now drive a significant percentage of new customer acquisition.
But first let’s take a quick look at the challenges facing online gaming:
PRESSURE FROM ONLINE MARKETING COSTS, REGULATION AND TAXES
Online gaming is a fiercely competitive industry where, as Tim Stocks reported in April 2015, marketing costs are typically one-third of the operator’s total cost base:
Image: Page 6 of 'Red Roses and Slain Dragons' by Tim Stocks, 23 April 2015
In the conclusions in this report, Tim Stocks stated:
“With increased costs of customer acquisition, competition and changes in the taxation environment (an increased tax burden)—scale is increasingly important and those without scale will struggle to fund marketing expenses over time, eventually losing market share”
Recent changes to tax legislation have only made this worse. For example, the UK Government’s decision to tax online gambling based on the location of the gambler not the company, as well as eroding the advantages of being based in a fiscal paradise, has increased operating costs by requiring operators to accurately identify the residence of their gamblers.
In fact, the UK Government in a 2014 Report had already identified that higher gambling taxes would likely reduce marketing expenditure:
“Most of the companies we spoke to argued that in the event of an increase in costs (whether through tax changes or other changes in overheads), the promotions and marketing budget would be vulnerable to being cut.”
So it is little surprise to see all these mergers. But perhaps Welton Holdings shows there is a better way to combat high marketing costs when marketing budgets are under pressure.
People who gamble are likely to know other people who gamble
Gambling is by nature social in that gamblers like to compare bets, share stories of winning streaks, bad luck and ‘nearly wins’. The result being that most people who gamble tend to know other people who gamble, whether they compare the racing form or football results over coffee breaks or pool together to buy lottery tickets.
PWC in its report ‘The Outlook for the Casino and Gaming Market to 2015’ stated:
“Going forward, social networking will be an important driver of activity and growth in online gaming worldwide. ….[Its] role in driving online gaming services could be especially significant because of its high levels of mobile usage.”
Welton Holdings’ Fun88 is making use of the social proclivity of gamblers to share, by integrating the Buyapowa technology into its website to incentivise all its customers to refer its friends and family with smart rewards that include free betting stakes and roulette wheel spins. Referrals will be tracked by the Buyapowa platform in leaderboards and star referrers will be eligible for special rewards such as smart phones.
The first Fun88 Invite-a-Friend programme will launch in Thailand in the Thai language and will enable customers to refer their friends and family via email, social media, SMS and IM. After launching in Thailand, the next Fun88 launch will be in Indonesia.
Daniel Lee, Brand Manager at Fun88 said: "Because we operate in the highly competitive gaming market where marketing costs are high, we are always looking for innovative new customer acquisition channels. Buyapowa offers us the ability to drive referral marketing at scale by engaging and incentivising all our existing customers to introduce their friends. We are also pleased at the quick turnaround time that has enabled us to launch in Thailand and the Indonesia within a matter of weeks.”
As a result of being able to harness sharing by its existing customers Welton Play is looking to add a substantial new and relatively cost-effective customer acquisition channel to its business, which is surely a better way to react to cost pressures than just merging to combine search and affiliate budgets and reduce overheads.
If you are in online gaming and would like to see how you can finally get Invite-a-Friend to deliver meaningful customer acquisition for your business then drop us a line.
Image attribution: Creative Commons Thomas Hawk
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