Analysis: Battle of the brands

European operators have struggled to gain much traction among US players. Martyn Hannah asks why

On the face of it, European operators have what it takes to dominate the US online gaming market.  With years of experience in product and marketing, and with their well established brands, they should have the edge over their Stateside rivals. But the New Jersey market has shown that not to be the case so far, with players preferring to wager on land-based casino sites such as BorgataPoker.com and TropicanaCasino.com. Betfair CEO Breon Corcoran recently admitted just how difficult it had been to launch and build brand equity in BetfairCasino.com, with the site yet to break even in the Garden State. [private]

Speaking to analysts after the London-based operator reported its H1 financial results last month, Corcoran said while revenues had doubled YoY, profitability remained elusive. BetfairCasino.com is one of the top-performing EU brands in New Jersey and has achieved low double digit market share in the state, but is expected to be loss making for at least another 12 months with the firm targeting break even in 2017. “I am very satisfied that breakeven is expected, which is a credit to their [the US team’s] discipline and just slogging away to get a reasonable outcome in a tough market,” he says.

But Corcoran’s optimism masks the uncomfortable truth that despite their greater experience and operating knowledge, European firms hold little to no advantage over their US rivals.

“Before New Jersey went live I really thought the sophistication and experience of the European operators would have carried them a bit further,” says online gaming consultant Melissa Blau. “CRM, data analytics, tight bonus packages, retention, SEO – 10 years of operating in highly competitive markets should have proven stronger results. The incumbent operators, however, became just as savvy very quickly. Tropicana, for example, tapped into the experience of the largest operators working closely with their partner Gamesys to do a lot of the heavy lifting while hiring an experienced egaming operator to oversee the process,” she adds.

Reasons to be fearful

Why European brands have struggled to gain much traction among US players has left some industry observers scratching their heads. The majority of land-based operators have partnered with overseas platform and content suppliers – 888 powers the WSOP.com while the Borgata has joined forces with bwin.party. The result is very little product differentiation between the sites offered by land-based casinos and their online-only rivals. The difference has been in how the sites have been marketed, raising the question of whether European operators have simply failed to connect with US players.

“At the beginning bwin.party was very aggressive with its approach and stormed into the market with ground breaking sponsorship deals with various sports teams in New Jersey and Pennsylvania,” says egaming consultant Itsik Akiva. “Bwin.party really needed the US market to work well for them and it kind of blinded them. They entered New Jersey with unrealistic expectations given the market size and level of competition, particularly from the strong land-based brands.

“We can assume that people knew of partypoker given its success in the US pre-UIGEA, but players have connected better with the Borgata brand. Given their land-based presence, the brand is much more in front of players. The Borgata is one of the largest bricks-and-mortar operators in Atlantic City and it is synonymous with poker and offering a quality gaming experience. So that’s why I think players have gravitated to it,” he adds.

More to gain

It is no secret that the New Jersey market has failed to deliver the signups and revenues most operators and analysts predicted prior to launch. In order to mitigate that, the likes of 888 and bwin.party have scaled back marketing spend and development resources. 888 chief operating officer Itai Frieberger recently told eGR NA his firm prioritized launching in New Jersey over re-entering the market in Denmark – a decision he would have reversed in hindsight. US land-based brands, however, have far more to gain by growing and enhancing their online offerings, using their egaming sites to drive customers through the doors of their casinos.

They have also been able to use their land-based assets to draw players to their casino and poker sites. “The land-based operators have a bit more to offer their online players including the ability to tie in land based promotions for online play including free rooms, buffets, concerts and VIP experiences. That’s a great selling point,” says Blau.

But given the challenging operating environment, some still believe European firms are performing well. Todd Kobrin, former CMO at Ultimate Gaming, says the majority of overseas brands are “doing the best that can be expected” in what are undoubtedly tough market conditions.

“New Jersey has roughly the population of Austria, but the Garden State is an uber competitive market. You have so many brands fighting for a very small player base. European brands must be tied in with a land-based property, which is a very different model than in the rest of the world. The regulations and regulators are also extremely tough on the brands to insure everything is properly and legally upheld. This very exact scrutiny is something European brands or online brands in general are not used to.”

Betfair is regarded among the top performing European brands in the US, but has undoubtedly benefited from its TVG real-money online horserace wagering business giving it a better understanding of the market. Despite lacking a land-based presence in Atlantic City, the operator has taken an innovative approach to marketing, joining forces with entertainment giant Live Nation to allow players to earn points that can be redeemed against concerts and events. The operator has also been active on social media, and been relatively aggressive when it comes to affiliates.

“Betfair is doing a very nice job considering the fact that really nobody in the US market knew them before they launched,” says Akiva. “They were relatively aggressive with their marketing at the beginning and are now starting to create some kind of a brand name. That’s not to say Betfair will become a household name for gaming in New Jersey, but they have been smart in leveraging their different assets and tools to their advantage. Overall they have managed to carve out a nice and consistent share of the market, which is a surprise,” he adds.

The next wave

Regulated online gaming is still very much a fledgling industry in the US. While some European operators have scaled back on marketing and development, that’s not to say they aren’t in it for the long-term. The industry desperately needs a new state to legalize and regulate the activity, with Pennsylvania making strides towards progress in recent months. But while Pennsylvania going live would be a real boon, European brands may find themselves in a similar situation to New Jersey with players gravitating towards the land-based sites.

“I don’t think these issues are New Jersey specific,” says Blau. “Every state will have some variation that benefits the local brands. The strength and trust of those brands, coupled with the tie in with land-based rewards, is a powerful combination that is hard to beat.”

That’s not to say European operators can’t build a successful and profitable business in the US. But as Corcoran points out, it may just take a little more effort and persistence than first thought.