AFTER A FLOURISHING LAST FIVE YEARS AND A REPUTATION AS THE UK’S MOST ROBUST GAMING VERTICAL, CAN BINGO SUSTAIN THE BOOM?


Bingo and boom are cosy, historical bedfellows.


Bingo and boom are cosy, historical bedfellows. Back in 1963, the UK bingo industry boasted more than 14 million members and in 1965 a Gallup poll reported that almost a quarter of the country had enjoyed a game in the previous 12 months. We’ve been here before.

Today, the UK online bingo industry is considered one of the most important and profi table verticals in online gaming with up to four million players according to Mintel. ‘Everyone’s bingo-ing mad’ the tagline said. And it’s not wrong. The words ‘growth’ and ‘increase’ are almost as associated with the game as ‘two fat ladies’ or ‘eyes down’, with figures from H2 Gambling Capital showing that gross win for customers is estimated to more than triple this year to ?326m.

The recent Gambling Commission’s prevalence study showed a 2% rise in online bingo from 2007, while H2 reported bingo gross win revenue had risen by 24.8% last year, reaching ?1.66bn. And, as recently as November of last year, Bingoport.co.uk found the number of players had climbed 2.3% from in October. Overall online ticket purchases also increased, although not at the rate of player numbers, with ?47m worth of tickets purchased, 2.1% higher than the October fi gure. As for operators, two of the biggest claimed signifi cant growth for their online products for the first quarter of 2011, with 888 reporting increased revenue of 9% and Rank seeing a 2% rise.

However, although bingo and boom may be best pals, boom and bust are closer still. The popularity of the game, albeit land based, in the 1960s and through to the mid 80s did not last and it is important to ask whether the trend we have seen in the last fi ve years online is sustainable and whether arguably the industry’s most robust market can continue to grow.

The boom

There are a number of reasons given by experts and analysts for the growth in bingo. Increased marketing spend, cheap stay-athome entertainment during a recession, and a traditional game viewed as a ‘so’ form of gambling. Consistently cropping up is the importance of the female player. It is no secret that gambling is, largely, a man’s world. Men are far more likely than women to take part in most gambling activities.

The exceptions, according to the Gambling Commission last year, were bingo (12% for women and 6% for men) and scratchcards (25% for women and 23% for men). A spokesman for Dragonfi sh, a B2B bingo network which has more than 80 brands and launched 14 alone last year, says the company has recognised the importance of such a market mover. He says it was “perfect to appeal to a new younger femalebiased online audience that casino, poker and sport had not really penetrated”. Scott Logan, co-founder of Bingoport, is less sure. “No one can say for sure. Bingo has a long tradition in the UK in the offline bingo halls. The combination of allowing TV advertising and the introduction of the smoking ban a couple of years ago saw the first steps in what has now become a very acceptable mainstream product.” And there are a number of success stories. “Our view is that Dragonfi sh has a firm stranglehold on the so˜ ware market – owing to the major brands on the so˜ ware such as Foxy, Cheeky and Costa – plus many more,” says Logan. “Tombola, however, is still the leader in terms of the number one online bingo site when it comes to players,” he adds.

According to Bingoport’s November 2010 report, which claimed there were 286,612 players for all sites during that month, Tombola had the greatest share of player numbers per site, followed by Foxy Bingo. Of the ?47m worth of tickets purchased, the same two operators led the way. As for the number of players and value of tickets per software provider, Dragonfish and Tombola (proprietary) were out in front, with Playtech’s Virtue Fusion third. Mandalay, owner of Costa Bingo, has stated its intention to chase down Foxy and to that end chief executive Richard Skelhorn announced in April it would launch free site Fancy Bingo, its fourth standalone on the Dragonfish platform. Mandalay has also led the way as more bingo affiliates become operators themselves, a move which can probably be apportioned to a desire for more control. Affiliates are just one cog in the wheel and once you send a player to an operator site, you lose that control. “When you become an operator, you can have a say in all parts of the player lifecycle,” adds Logan. Skelhorn agrees: “Over the last 10 years, I have witnessed probably six or seven major software migrations and in most of them I have lost a large proportion of my player database, with little apology and no explanation. In just one case, during the start-up years, did a marketing director offer a long-term guarantee on revenues to offset for the migration loss.”

Wink Bingo is another success and has done so well that 888 had to reschedule its payments for the acquired business as its earn-out period drew nearer earlier this year. Meanwhile, Ladbrokes, which had been in four-month-long takeover talks with 888 that eventually broke down, said bingo was a big reason behind strong Q1 financials, up almost 19%.

These strong Q1 bingo performances suggest there is still growth left in online bingo for some operators, despite the overall growth of the sector slowing dramatically in 2010, according to H2 Gambling Capital (see tables on page 44). Logan certainly thinks so: “There is still significant money being spent on driving player acquisition to both new and more established bingo brands, as some operators see more value in building a short-term player database than retaining players for long-term growth.”

888 is convinced there is more to come. “We’re still seeing healthy growth across the Dragonfish bingo business and 888 revenues climbed 30% to US$14.2m in Q1, so while I wouldn’t say we were still in a boom period we are far from stagnation either,” says an 888 spokesman.

“There are still opportunities in the UK market but the recipe for success is based on a good brand, innovative marketing with realtime optimisation and a regular diet of new promotions and product launches to keep players happy," the spokesman continues. "The bottom line is that partners with innovative brands and creative concepts can still make a decent return on their investment.”

The future

Consolidation has been the keyword when discussing what is in store for bingo, but that is only likely if saturation point is reached.

Joe Saumarez Smith, owner of Crown Bingo, believes the industry still has legs. “It’s maturing in the sense that the easy pickings that were there when people started have gone,” he says. “You could acquire customers at a low cost per acquisition (CPA). We started off in 2005 off ?3-?4 CPA. Now most people's target CPAs are around ?70-?100. What some people would describe as the low-hanging fruit has been picked.

“If you look at the demographics of bingo, the numbers who play real-world bingo [land-based] and the crossover to online is immensely small. It’s somewhere between 8%-19% of people who play in the real world who ever play online. So in that capacity it’s got enormous growth in the UK.”

What is likely to change, however, is that the rich will get richer and the poor will get poorer. Saumarez Smith explains: "Anyone doing less than ?15,000 a month gross gaming revenue is probably at a point where it's going to be a struggle to keep going over the next one to two years. And I suspect that the whitelabel people who are offering those services will start to turn off at the loss of the smaller sites, as they realise the cost of maintaining them is not justified for the amount of money they're making.

“It’s like anything. They’ll be lots of small players early on, they’ll be a certain shake out until there are a few dominant players, middletier and smaller ones. At the moment it’s probably an overpopulated market,” he adds.

Secondly, Saumarez Smith also believes that start-up costs could also be prohibitive to new entrants. "The problem is that if you want to launch a new product it's going to cost ?3m, the minimum marketing budget, a ?5m budget for a new site as an operator.”


"Anyone doing less than ?15,000 a month gross gaming revenue is probably at a point where it's going to be a struggle to keep going over the next one to two years"


Joe Saumarez Smith, owner, crown Bingo

The 888 spokesman is unsure, however, that smaller brands will fall by the wayside. “It depends on what you define as smaller brands. We have brands such as Costa Bingo, Bingo Hollywood, Brits Bingo and Moon Bingo that started from scratch, unlike wellestablished gaming brands that have simply diversified into bingo, and managed to create substantial growth in the UK bingo market.

“Another example is Cashcade (owned by bwin.party) that launched a new standalone network last year, called Rollover Bingo, with an innovative concept tied into the National Lottery. Players received a free syndicated entry into the National Lottery draw for every ?5 spent on bingo cards.” Innovation is likely to be the differentiator, with social networking at its core. “Our latest offering has been live chat, streamed directly into the bingo rooms,” says the 888 spokesman. Saumarez Smith talks about the race to become the first to nail a combination of mobile bingo and a chat facility. “It’ll probably be another 18 months before someone gets it right,” he adds.

New markets

New markets such as Spain, Italy and the Scandinavian countries also offer bingo brands and their suppliers great future prospects. In Spain, Congress has approved legislation for internet gambling and the final hurdle to clear is the Senate later this year.

“If you can get those markets online and advertise on television then you can do incredibly well,” says Saumarez Smith. “The real growth is going to come into overseas markets and I suspect it’ll be Italy. The explosive growth we saw in the UK may be replicated there.”

Logan agrees, albeit taking a longerterm view. “Some operators have spent a lot of money going into Spain already, with very mixed results,” he said. “I think the road is long and hard in these markets, but will eventually become lucrative for those that invest for the long term.”

“I think there are amazing prospects for new markets,” adds Skelhorn. “We are really interested in South America and Europe. Look at Costa in the UK, a crowded market. Free bingo, social networking integration, small marketing budget and we grabbed a healthy percentage of the market. If we could do that in the available foreign markets on our new platform we would probably be the largest bingo company in the world.”

RicHard SkelHorn “There are amazing prospects for new markets. We are really interested in South America and Europe”.
 
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