Following the January closure of online sports betting service betachance.com, the editors at Betting Market (www.bettingmarket.com), a U.K.-based consumer publication, reflected the likely reasons behind it's failures. Following is an editorial piece originally published at www.BettingMarket.com.
The main lesson to be learnt from the "Betachance" saga, is that a fancy website and a fancy domain name is no guarantee of success in cyberspace. Much like the man who built the world's first mouse trap and expected the world to come and line up at his door, many of those who have set up online betting sites have failed to embrace those business principles which still apply, whether one is online or not.
The main risks facing any new online betting operator are as follows;
- Failure to implement a coherent strategy.
- Failure to build trust with customers.
- Failure to eradicate security and privacy concerns.
- Failure to acknowledge legal and taxation issues.
- Poor operational performance
- Failure to manage the marketing/technology interface.
When Betachance began trading, the company offered early prices on English, Irish and South African racing. With regard to early prices on English and Irish races, they were entering into a domain occupied by the established players Sean Graham and Cashmans, neither of whom had/have internet betting sites, but both of whom have long standing reputations. On the internet front, Betachance's main challengers were Luvbet and Simon Bold. Apart from offering early prices on South African racing, Betachance had no distinct competitive advantage vis a vis these competitors. In the early-price market in which Betachance operated, there was little incentive for a shrewd punter who wanted to get a good bet on early to suddenly switch his allegiance to a small online betting site, when, in the first instance, he would not be guaranteed a good bet at attractive odds and, second, he knew his bet would shift the odds dramatically and thus
become transparent. In a world which often revolves around secrecy, such transparency is not welcomed - and that is why Sean Graham and Cashmans continue to survive without an online presence.
As to Betachance's online competitors - Luvbet had received an unprecedented amount of positive press coverage, whilst Simon Bold was already well known to many punters from their advertisements on the Racing Channel and Channel 5.
Throw into the mix, the fact that Betachance were betting on average, to an over-round of 170, and that they were based in Mauritius and you have an unlikely success story. Of course, in the end of the day, it did not matter that they were based in Mauritius, they would have found the going equally as tough if they had been trading from Manchester.
In the wake of the Betachance debacle, it is timely to look at some of the more spurious notions that are flying around regarding the online betting market. Foremost amongst these are
- The idea that brands do not matter.
- The notion that Ladbrokes, William Hill etc. are irrevocably damaging their reputations by trading offshore.
- The notion that it will pay in the longer term to achieve market share at the expense of profit.
- The notion that global domination will be achieved through the mirroring of the parent site into lots of different languages/ or through the setting up of a myriad of various language sites.
In our experience, the reality is somewhat different than that envisaged by those who espouse such notions -
- Unless a new internet betting site has a distinct competitive advantage, which it can protect (unlikely), it will quickly come under pressure from established players and larger newcomers who decide to enter the market place. And whilst greater market transparency and the architecture of the internet does facilitate switching from one website to another, it also makes it more difficult for a newcomer to achieve brand loyalty.
- The time spent offshore has been nothing more than a learning curve for the likes of Ladbrokes and William Hill. When the Government does introduce a gross-profits tax, and these companies return to the UK, they will be more than well placed to roll out their global expansion plans. And in situations
where there is no discernible product differentiation between bookmakers people are more likely to bet with a familiar name, such as Ladbrokes, because in their minds the Ladbrokes brand exhibits attributes that they know and trust.
- The idea that a multi-lingual website will guarantee global domination is somewhat short-sighted. We need only think back to the time when M&S's opened a shop in France and made no money. Notions such as cultural distance will impact upon companies trading on the internet as much as they did their bricks and mortar predecessors, as will the side- effects of trading in a multi-jurisdictional arena.
- Forgoing profit in the shorter term in order to build market share/achieve brand awareness may be ok for the Ladbrokes and William Hill's of this world; however, if you are a second or third line company, you may find that a lack of profits is not welcomed by the investment community when you go with your begging bowl and your plans for multi-channlel expansion. The general implosion that has occurred in the .com arena means that investors are more likely to look favourably upon a clicks and mortar operations which is seeking a web presence, than a new company, with no bricks and mortar experience, which tells them that the streets of cyberspace are paved with gold.
- Whilst the internet has allowed some established betting companies to expand their customer base, and some newcomers, such as Luvbet to carve out niches, it has not eroded industry boundaries and behaviours overnight. For example, the average betting shop punter is unlikely to migrate to the internet in the foreseeable future, and until the more upmarket consumer is offered an "always on" internet connection and the ability to do simple things such as get a bet on right upto the off, most will still prefer to use the telephone to place their bet.
Whilst no one who is throwing millions at the internet will be prepared to admit it, no one really knows what the future holds for the online betting market. As things stand, a presence on the Net is seen as a
necessary pre-requisite for any bookmaker that wishes to embrace and exploit the potential of a multi-channel environment, and looking further down the road, the benefits of convergence. A case of "if you are not in, you can't win".
However, the cost of setting up and running an internet operation may be most successfully borne by those operations that are cash rich, or those which successfully operate in specific niches. Many of the second line players, with no discernible competitive advantage, or understanding of the marketing mix, may find that it will be a long period of time before they start to recoup their costs. It is unquestionably true that Betachance will not be the last failure in what has become a highly competitive market place. Let's hope that some people learn from their mistakes.