Market Analysis on Online Betting Sector - Coursework Example

Market Analysis Introduction According to a report by Gambling Commission , global betting and gaming industry was estimated to be worth $ 417 billion in 2012 with further estimations indicating significant increase in the future. Alarmingly, online betting channels accounted for 8 % of the total net value. Consequently, the report identified U.K’s market as the most developed Western market for remote gaming and betting. Between the year 2012 and 2013 U.K’s gambling industry generated gross gambling revenue of £ 6.7 billion representing an increase of £ 252 million (Gambling Commission, 2014). However, four operators who accounted for over 87 % of the total betting firms majorly dominate the betting industry in UK. The four operators include William Hill, Ladbrokes, Gala coral group and Tote. According to the sports betting intelligence unit (SPIU), sports betting primarily consists of the following activities, football, basketball, boxing, tennis, table tennis, horseracing, rugby and cricket. According to Statistics Portal (2014), casino attendance has also been in the rise with customer’s number increasing from 3.58 million in 2009 to 6.21 million in 2013. According to a survey by National Centre For Social Research (2011), over 73 % of the adult population in the country had participated in some form of betting in the past year. Consequently, over 14 % of the adult participants had used the internet to bet. Analysis of the U.K.’s gambling demography indicated that men were more likely to bet compared to women as 75 % of men and 71% of women participated in betting (National Centre For Social Research, 2011). However, women’s gambling trend indicated a continuous increase each year. Their gambling increased from 65% in 2007 and 68% in 1999 to 71% in 2010. In 2009, sports betting revenue totalled £ 634 million while 2013’s revenue amounted to £ 1138 million marking 79.5 % change in market size (Gambling Commission, 2014). Consequently, in 2013 the country’s total consumer expenditure was projected to exceed £ 2.5 billion. With an estimated growth rate of 12 % annually, the betting industry is bound to expand exceeding net revenue of £4.4 billion in 2018 (Gambling Commission, 2014). Customer The capital venture developed a business model which would optimize on the number participants engaged in the betting process. Based on the market research undertaken by the firm, target customers were categorized into three groups. These included high-time only, high-spend only and high-time/high-spend gamblers. The firm primarily targets high-spend gamblers who spend most cash and less time betting. According to the market research, high spend-gamblers demographically constitute of graduates and individuals in paid employment. Compared to the other class of participants, high spend-gamblers relatively preferred sports betting. Consequently, the focus on high spend-gamblers will be on young and middle aged male participants in the betting process since over 75% of males in UK engage in gambling compared to 70% of women (National Center For Social Research, 2011). According to Statistics Portal (2014), currently sports betting represent over 50% of the total value of the market. Although land based operations are the key drivers of sports betting growth, recent findings indicated unprecedented upsurge in the use of online betting through mobiles phones and laptops. From 2009 to 2012, revenue from football betting had increased from £ 355b million to £ 600 million ( Statistics Portal, 2014). With the continual popularity of the English premier league and tennis, these figures are expected to rise further in the future. A notable consumer trend in sport has been the unprecedented prevalence of online betting on media platforms such as smart phones and tablets. Research indicated that the younger participants were mostly internet user hence their heightened preference for online betting through websites and mobile devices. Additionally, 83% of gamblers indicated that they primarily gambled to win money (National Center For Social Research, 2011). Based on the market research that assessed the leading sectors in the betting industry, in-play betting emerged as the leading form of sports betting. Therefore, the concept of “Bet with friends” is highly focused on maximizing opportunities presented by the growth of in -play betting in the market. Since in-play betting allows modification of bets during the sporting activity, the new model of the betting will allow consumers to place bets against each other as opposed to betting against odds. Based on the new model of betting, participants stand a higher chance to win since the odds are only limited to the number of participants. Principally, participants in “Bet with friends” do not bet against some random odds set by the betting shop but against each other. The suitability of the model was further reiterated by recent survey that indicated that 83% of the betting participants essentially undertook betting in order to win money (Gainsbury, 2012). Consequently, the new mode of betting has formally institutionalised a practice majority of sport fans undertake informally at homes, colleges or at work place. Therefore, this model will further attract new participants who prefer betting against each other as opposed to theoretical odds. Competition Four major operators in UK control over half of the sports betting market share. These companies are the key competitors in the market. These include William Hill, Ladbrokes, Gala Coral Group and Betfred. William controls the largest market share of 15% while each of the other three operators controls averagely 11%. In terms of online research based on Google such engines Williams Hill had the highest percentage of online search, 19.39 %. Figures from the four operators indicated 102 % growth in sports betting from 2008 to 2012 (Gambling Commission, 2014). The growth of sports betting was largely attributed to horseracing. These competitors enjoy larger market shares, more buying power and extensive financial resources that deter emerging ventures from entering the industry. Key strengths of these competitors include extensive portfolio of betting products, well-established networks in online betting and a portfolio of highly recognized and profitable brands. Consequently, Marketline, (2013) noted that the key weakness of these betting shops was their geographic concentration in the UK. In 2012, Ladbroke and Williams hills generated 85.7% and 91.2% of their revenue from UK respectively (Gambling Commission, 2014). Therefore, these operators are highly susceptible to economical and political dynamics of UK. Analysis of the Future Growth of the Market According to Gambling Commission (2014), licensed operators reported for the first time revenue of £ 1.06 billion for the year 2013. This was a 16% increase from the previous year. Generally, U.K.’s gambling market is expected to continue growing. Online betting will be the primary driver of growth in the market as mobile platforms continue to proliferate in the market. In terms of popularity, football betting is expected to surpass horse betting as indicated by its 79% increase between 2009-2012 (Gambling Commission, 2012). The number of women participating in betting is also projected to rise with the growth of online betting platforms that will offer them increased privacy. The advent of social platforms has also led to the development of social gambling which is based on virtual currency. With face book already teaming up with Gamesys to develop mobile applications that allow users to bet using real money in UK, social platform will evidently emerge as the core infrastructure of online betting in the future. Mobile Gambling Knibbs (2013) indicated that revenue from mobile betting was expected to continue growing at a rate of 16% until 2016. Mobile betting is predominant popular with smartphone users of iphone and blackberry brands. According to Dredge (2013), 62 % of the population owned a smartphone in the UK by July 2013. Studies by The Statistics Portal (2014) indicated that U.K.’s mobile betting industry grew by 100% in 2013. Over 2.2 million people in the UK accessed gambling platforms on their mobiles in 2013. Additional figures by Gainsbury (2012) indicated that in 2012 websites betting was 97% while mobile gambling was 3% . However, 2013 was characterised with an upsurge in mobile betting which was at 19.9% compared to websites betting at 80.1% ( Gambling Commission, 2013). The growth of mobile betting indicates the extensive penetration of mobile betting in the UK’s gambling industry. Source: Gambling Commission (2014) In terms of mobile phone operating systems, consumers in UK have higher preference for android phones than iphones. Studies by Gavaghan (2012) estimated that 36.9% of smartphone users operate on android while only 28.5 % of consumers use iphone in UK by 2012. However, iphones are still the most preferred smartphone in US market with iphone having 48.4 % share in comparison to android’s 42.8 % market share (Gambling Commission, 2014). Source: Gambling Commission (2014) Facebook Interaction beyond Sports Over 80% of household have access to the internet hence the popularity of social media platforms such as Facebook and twitter in UK. As an interactive platform, Facebook has pioneered unprecedented form of betting, the social gambling. Facebook has developed social games that facilitate social sports gambling in addition to its interactive services to major sports events (Gambling Commission, 2012). Initially social gambling entailed the use of virtual currency. This is likely to change as Facebook has collaborates with key players in UK’s gambling industry to develop applications that will enable the usage of real money. Facebook offers the gambling industry an extensive network of potential consumer with an added advantage of interactive capabilities. Already 53% of Facebook users participant in social games with the network’s game maker Zynga accounting for 12% of the company’s net revenue (Knibbs, 2013). Incorporation of Facebook platform with “Bet with friends” model will automatically synchronized since friendship structure of the social platform will enhance the betting against each other. Future of the Business The future of the business is heavily rooted on online sports betting market. The business seeks to become the leading provider of sports betting products specifically in football and horseracing activities. With the progressive growth of football popularity, newer innovative bets specifically designed to incorporate “in-play and bet with friends” models of betting will be formulated. By allocating 40% of its infrastructure to mobile betting, the company intends to create a market niche within the younger generation who predominantly use smartphones and engage in social betting. Additionally, by only providing sports betting products, the venture strategizes to entrench itself as the home of sports betting in the UK’s gaming industry hence building stronger product portfolio. Weakness of the Business Model One of the limitations of the business model is that the amount of revenue collected will be highly pegged on the betting characteristics of the participants as opposed to the odds of the bets. Since individuals will be betting against each other, the amount of bets made will be dictated by their social status and general behaviour. Consequently, it is likely that a given group of clientele will be characterised with single unique low spending preference hence lower revenue for the betting shop. This weakness of the model could be overcome by setting a higher limitation value for any form of product being offered in order to only attract high spenders. Brief Overview of Market Trends and Competition Emergent trends in the gambling industry indicate increased consumer preference for sport betting compared to casino games, poker and bingo. However, males are more likely to participate in gaming compared to their female counterparts. However, the number of female participants is expected to rise with the advent of online betting. Online betting accounted for highest revenue in the industry and further indicated a steady growth rate from 2010. Website betting and mobile betting constitute the main channels of online betting. Although majority of online betting is through websites, mobile betting was also observed to be on the rise. The prevalence of smart phones that operate on androids system as opposed to iphone facilitated mobile gambling growth in the market. Majority of participants of mobile betting were the youth and women. The betting industry of UK is highly competitive with four operators controlling three quarters of the market shares. Key competitors to newer entrance in the market include William Hill, Ladbrokes, Gala Coral Group and Betfred. To overcome stiff competition, the emergent venture seeks to concentrate on a single subsector of the industry, sporting activities. In addition, an innovative approach will be implemented to attract and build a robust clientele base. Prospective consumers will be offered a higher chance of winning as they will be betting against each other. This unique model will distinguish the venture from the rest of players in the industry by its form of betting. To tap into the lucrative online market, social gaming and mobile gaming will be incorporated into the standard products of the company. This will be achieved through the development of a websites for both desktops and mobile phones. References Dredge, S. (2013). Data shows 4.3% of UK iPhone owners are using sports betting apps. [online] the Guardian. Available at: http://www.theguardian.com/technology/appsblog/2013/jun/19/uk-iphone-gambling- apps [Accessed 9 Jul. 2014]. Gainsbury, S. (2012). Internet Gambling Current Research Findings And Implications. New York, Springer. http://dx.doi.org/10.1007/978-1-4614-3390-3. Gambling Commission, (2012). Exploring Social Gambling: Scoping, Classification and Evidence Review. Technical Report. The Gambling Lab. Gambling Commission (2012). Industry statistics April 2008 to September 2011 [online] Available at: http://www.gamblingcommission.gov.uk/default.aspx [Accessed 9 Jul. 2014]. Gambling Commission (2014). Industry statistics April 2009 to September 2013.The gambling Lab. Gavaghan, J. (2012). Android leaps over iPhone in UK with 2.5million more users as majority now own a smartphone. [online] Mail Online. Available at: http://www.dailymail.co.uk/sciencetech/article-2105480/Android-leaps-iPhone-UK-2- 5million-users-majority-smartphone.html [Accessed 9 Jul. 2014]. Knibbs, K. (2013). Zynga, Facebook, and the rapidly approaching future of online social gambling. [online] Digital Trends. Available at: http://www.digitaltrends.com/social- media/facebook-gambling-is-coming-and-it-may-save-zynga/#!bbCDib [Accessed 9 Jul. 2014]. Marketline (2013). Company Profile William Hill Plc. marketline. National Center For Social Research, (2011). British Gambling Prevalence Survey 2010. uk. Statistics Portal (2014). Gambling Commission - Industry Statistics 2013. [online] Available at: http://www.statista.com/study/15997/uk-gambling-industry-statistics- 2013/ [Accessed 9 Jul. 2014]. Read More