No wagering required: The future of online casino?

Since the very beginning one truth has stood tall over everything else in online casino: bonuses are king. Every acquisition campaign, nearly every retention campaign and any player survey that’s ever been conducted puts bonuses as the top driver of activity. But recently this long established model appears in threat and the recent regulatory push back has serious consequences for an industry in love with 200% bonuses and ever escalating turnover requirements.

The investigation by the UK’s Competition and Markets Authority and the Gambling Commission into online gambling was focused in part on terms and conditions around bonusing. We still also await the outcome of both this investigation and the triennial review in terms of longer-term changes to the gambling regulatory environment in the UK. But it has already had some major impacts.

888 hit the headlines over its record £7.8m financial penalty over responsible gambling failings, and five operators are still facing enforcement action announced back in June, with Ladbrokes Coral and William Hill still the only two to be named. But there is little doubt in the industry that more is to come and while there is no real expectation of the UK following Australia in a move to ban all sign-up and retention bonuses, some greater control over how they are offered could be a real possibility.

Beyond this is the recent move to bring gaming bonuses under the Point of Consumption tax regime for the first time, adding a 2-3% hit to bottom line for most operators. While early thoughts were this could be easily mitigated and would have minimal impact, there is a growing realisation that the legislation does exactly as promised. In short there is still a long way to go for the industry, and bonuses, you sense, are fast becoming a problem as much as a solution.

Problems or solutions?

What we’re already seeing is significant change occurring as the market begins to react and reposition for this greater degree of regulatory scrutiny and increased costs. Affiliates are feeling the brunt of it with operators no longer affording the reputational and bottom-line risk attached to outsourcing their marketing. Operators have tightened their controls on how affiliates promote their brands in the case of Sky Betting & Gaming which has canned the affiliate programme altogether. But when it comes to the core casino proposition, relatively little has changed. Yet.

Where the CMA is known to be focused is on the visibility and clarity of T&Cs at the sign-up stage and any unreasonable restrictions on withdrawals. Some T&Cs have been cleaned up and offers are more carefully presented, but 20-99x wagering requirements, limited or no play on table games and restricted games are the rule rather than the exception. There seems a huge inertia around bonuses and their use as an acquisition tool. Even in Australia, where they are technically banned in some states, they remain the major promotional tool, not least among affiliates.

Nonetheless there is the sense that, slowly, there is some momentum towards moving away from the tried-and-tested model. Recently, one of the firms that has built its business on these types of high-profile big bonus offers, bgo, announced it would be removing all wagering requirements from its bonuses. The site is now leading with an offer of 50 free spins with “no max win and no wagering requirements”. The small print shows new customers get one free spin for every £1 deposited and play is restricted to four named slots titles, but it’s still a radical departure.

They are not alone, however, and one company has been treading this path throughout 2017. PlayOJO launched in early 2017 with industry-first no-bonus offers, no wagering requirements and a loyalty scheme that offered cash back on every bet. “Our vision was the online casino market needed a shake-up and this would only happen if someone changed the foundations of the value chain and the way casinos treat their  players,” Ohad Narkis, co-founder at PlayOJO, says.

Narkis and his partners spent the best part of 12 months researching the market and kept finding an inherent level of distrust from players in the current online casino model. “Our research showed one in three didn’t trust online casino bonuses, and have had bad experiences in the past,” Narkis says.

Shaking the tree

At the core of this mistrust was the lack of clarity around terms and conditions and the inability of a player to do what he or she wanted with their own funds. “The traditional bonus model with exclusion of games and wagering requirements didn’t work so we decided to throw it out of the window,” Narkis says. “We wanted to come up with a casino that had transparency and fairness at its core. It was centred around having a simple, clear set of terms and conditions and treating players fairly and allowing them full control of their funds.”

What came in its place is a simple money-back scheme, with player director rewarded for loyalty and getting a percentage of their stakes instantly returned as cash depending on the games they play. It may not sound like a lot but it’s a significant shift in perspective for the player and the operator and at first glance seems decidedly less generous. For a typical £100 deposit that is rolled over 20 times to unlock a £100 bonus it will return £12 paid in real cash and completely wager free under the PlayOJO system. But direct comparisons are to miss the point.

What PlayOJO is setting out to achieve, Narkis says, is a simple and transparent game offering. The player’s money is theirs to do with whatever they like at all times, the T&Cs are kept to a page at the maximum and the guiding principle is to confound player expectations of what they should expect from an online casino. But Narkis admits it’s not been an easy task communicating this to players despite a seven figure media spend to date in the UK. “It’s been harder work than I imagined,” he says.

“We felt it would work and players would appreciate being treated fairly. And because we would be unique in the market, we would get enough market share. Players still have this sense that somehow the casino is trying to screw them and it takes a lot of time and effort to mitigate this level of mistrust. You gain trust by making sure your brand is visible and you have a lot of positive word of mouth, but this takes time and investment and we’ve only been live for eight months and advertising for six months. We are getting there but it’s taking time.”

Education, education, education

One of the interesting learnings from the PlayOJO launch is it’s not just the players that needed educating, with the support and operational services from its platform provider SkillOnNet also needing time to adjust to this new way of thinking. “It requires a shift in the way the whole business is run. A lot of the support we get is from SkillOnNet and they operate a lot of brands that operate in the traditional way so our team had to undergo a mindset shift in how they interact with players and the level of transparency we have. This approach is still unique in the business and that was an interesting experience to go through,” Narkis says.

One of the major advantages from this new set up is it enables them to save costs in some typically staff intensive areas for online casinos. The customer service teams need to spend less time talking through terms and conditions with players and there are fewer checks that need to be made at withdrawal so players can get paid out faster. “There is no doubt in my mind this saves us money, and while I can’t put a number against it we are seeing a lower volume of customer support queries coming in from the active base we have,” Narkis notes.

Although, interestingly, he adds there is no proven saving on taxation, despite the lack of bonusing. “We are paying the same amount as we would have done if we used the traditional model, but it allows us to be unique, transparent and pay out more quickly. It saves time and allows us to deal with other queries that come in and when we do have conversations with players we can spend the time on guiding them through the casino and get the best experience we can offer them.”

The big question, however, is did it work? Are players buying into this new operating model or is it proving an expensive experiment? Narkis is equivocal in his response, noting that while financial targets are being hit he has found it harder to get the message across than he expected. “It takes a lot of effort to change perceptions. If you look from the very top level we are hitting our forecasts, which is always good. The uncertainty around how players would respond to the offer and how they would convert were quickly dispelled and we converted much better than other brands I am aware of.”

In an extremely competitive market such as the UK online casino sector, this is perhaps the biggest advantage of the strategy. Being able to cut through the crowd is a valuable commodity, and in a PPC and affiliate world where all sites offers look much the same, it’s perhaps an advantage that you are not everyone’s cup of tea. “It’s maybe not a product that’s relevant for everyone but those who do come to our site seem to convert very well. And we also see this from player feedback on review sites, on Facebook and on chat that they appreciate the no-bullshit approach we have.”

And any marketing savings in the current market can count for a lot. Narkis notes the level of competition in the UK market has spiked significantly since they set out their business plan in 2016. The top spending brands such as Casumo have been laying out £500,000 on TV “month in and month out”, according to Narkis. “That has surprised us and we’ve increased our spend to get to the share of voice we wanted. The UK online casino market continues to expand in a very mature market and it shows players are looking for alternatives.”

Moving further afield

The high cost hasn’t deterred PlayOJO from attacking the UK market and neither has it put them off moving into that other super-competitive casino market: Sweden. “We have been extremely aggressive in the UK in terms of our marketing investment, and have been in the top three or top five TV advertisers every month since we’ve launched, which is a big investment for a private start-up,” he adds. We are looking to do the same in Sweden next year and other mature markets where we believe a challenger brand can come in and offer an alternative to what players are used to. If we weren’t happy with what we’ve seen so far we wouldn’t have done that.”

So just how big does he think the site can get? “We can get very big and we are still a very young brand. We can be a true market leader. There is nothing I’ve seen in the numbers so far that makes me think that we can’t become a significant brand and a significant business,” Narkis adds. But there is a tone of realism and circumspection that follows. “It’s still to be proven that it’s the right business model in the long-run,” he adds. “We’ve been running for just over half a year so it’s impossible to say what our 12-month plus retention rates are like. It’s yet to be proven that players can be retained in the long run without the offer of traditional bonuses. We convert well, but that still remains to be seen.”

But the question was never really if other operators would flock to follow a challenger brand in its early stages, nor even would they all look to copy its strategy if it proved successful. As Narkis notes, there is a huge risk in copying what PlayOJO does. “For a casino that has been operating for a decade with a specific business model then if they change they will get a percentage of the players who will stop playing. But it’s possible new casinos will launch brands and come up with similar to what we are doing.”

Perhaps the bigger question is will operators be forced, by regulation, legislation or the wider market, to make a shift in this direction? While a ban on bonuses seems unlikely there is no guarantee that current market conditions will always prevail. And Narkis notes that the founder team at PlayOJO honestly believes this is the right vision not just for them but for the wider industry too. But he doesn’t agree this means the death of bonus offers is in the wings.

“So long as they increase the transparency around the terms and conditions they can continue offering bonuses with wagering requirements. There is nothing wrong with this and I don’t think this will change. Business models will have to change as far as taxation goes, because operators are paying 2-3% more than they did in August and in a competitive market that is a big impact on the bottom line. I expect there will be a greater level of innovation and creativity around how operators reward their players, but I hope it will be in a fair transparent way for the benefit of the industry and the players.”