“Why is it so hard to start a new gambling business?” This was the question posed last month in an article by Graham Carrick, CEO of RunLastMan.com. In the original article he recorded the fortunes of around 100 e-gaming start-ups.
He lists a few core reasons as to why he thinks it so hard to get a gambling company off the ground:
• No access to government funding
• Angel investors are scared of betting
• You get shunned – early stage companies can often get valued press coverage, cash and investment from competitions, awards and pitching events. However, if you’re a gambling company don’t bother even applying.
• Margins are incredibly tight in betting
• Acquiring players is ridiculously expensive for B2C
GBGC’s thoughts on the question posed:
• It is difficult to start a new business in any sector. The failure rates are generally high for the period 3-5 years after launch.
• Of the enquiries that GBGC receives, many entrepreneurs want to run a pari-mutuel model. This is often as much because they see it as a less risky business model for themselves rather than because it is what gamblers want to play. Unless high prize pools are guaranteed, higher spending customers generally prefer fixed-odds betting, when there is a choice.
• Social gamers do not convert into real-money gamblers. Business plans that anticipate signing up social customers cheaply and then morphing them into high-staking gamblers in the future are misguided.
• Some of the new ideas are viable as an addition to boost an existing suite of games and services but are not strong enough to stand on their own as a long-term business.
• GBGC finds that some new entrepreneurs to gambling still believe that having a gambling website means that their market is “the whole world”. This approach is not feasible from either a licensing or marketing point of view. You must have specific target markets.
• In markets like the UK the fight for consumers’ attention is getting harder for new entrants. The situation could get even worse if further gambling advertising restrictions are imposed.
“Why is it so hard to start a new gambling business?”
GBGC’s CEO Warwick Bartlett and Graham Carrick, CEO of RunLastMan, will both be speaking at the i-Gaming Forum in Stockholm (5-6 April 2017)