How to launch a gambling start-up

As the biggest operators from across the UK and Europe battle for market share, the competition between gambling start-ups is arguably even fiercer than those at the top of the pile. Such businesses today contend with a plethora of challenges, including regulatory issues and industry red tape. Having a great product is clearly no longer enough.

One reason many egaming start-ups fail to get off the ground today, particularly in the UK, is how gambling is perceived outside the sector. Adam Kalmanson, co-founder of betting start-up Bookee, suggests potential investors don’t always take too kindly to gambling products as they are considered a vice – one which has recently been very prominent in the UK media with The Guardian leading an industry onslaught.

Affiliates, FOBTs, football sponsorships and the government’s regulations on gambling were all attacked in a total of nine different Guardian articles published on the newspaper’s website between 1 and 14 September. “It’s difficult,” says Kalmanson. “A lot of investors won’t touch anything in the gambling industry because of regulation and the fact it’s a ‘vice’ topic. Maybe people like to stay away from it because it’s not as sexy as social media or ecommerce.”

“One of the main issues with a gambling start-up is that the costs are so high. You can’t just rock up with a minimum viable product and put it out there to users for testing because you have to be compliant, people have to be over 18 and you have to have the correct licences. There are a whole load of restrictions in the UK in terms of what you have to do in order to get something live.”

The Gambling Commission revealed in its annual report that there are more than 320,000 problem gamblers in the UK. This negative association is why many start-ups choose to market themselves as the equivalents of successful businesses in less controversial industries, even though these comparisons can be difficult to shift over time.

Bookee, for example, is often dubbed the Tinder of betting, while Bet Blocks was described in its press pack as WhatsApp turbocharged with betting. How many times do we see new products compared to Netflix, Uber or Amazon, despite operating in wildly different sectors?
On trend
But despite the hurdles there is no shortage of industry entrepreneurs willing to give it a go. In the last year alone, the Great Britain Gambling Commission has processed more than 280 licence applications from prospective operators, including over 2,300 applications for individual licences. Get it right and the rewards can be handsome for those who manage to cause a stir in their very first year of business.

Bookee certainly caught the industry’s attention in late 2016 as a new ‘swipe-to-bet’ mobile sportsbook, inspired by popular dating app Tinder and launched by ex-William Hill and 888 employees Kalmanson and Adam Wilson. The app offers customers a selection of small-stake personalised bet suggestions which customers can swipe left to discard or right to accept. The product also had a maximum stake limit of £30 per bet and a ‘Splitbet’ feature which enabled users to split stakes with friends.

Adam Kalmanson and Adam Wilson of Bookee

Another start-up which has made a splash in the market recently is Bet Blocks. The business is a new social messaging app described as the “WhatsApp of betting”, which encourages punters to place bets online with friends using voice recognition and AI technologies, all integrated into a single chat platform. Using its unique natural parsing language, the app detects specific betting-related words in group chats, for example player and team names, and links them to relevant odds on upcoming events as offered by Oddschecker.

William Hill was the first major sportsbook to partner with Bet Blocks – perhaps an unsurprising turn of events given founders Jonny Robb and Nilesh Mistry both worked for the firm as user experience architects. But other operators are also set to follow suit once the platform eventually launches in the coming weeks.

Kwiff is another innovative product and sportsbook attracting attention. The app ‘supercharges’ the odds on randomly selected bets to encourage punters to act on their hunches in the hope of being rewarded with odds that cannot be found elsewhere on the market. The company was set up by co-founder and CEO Karl Engstrom, the erstwhile marketing manager of Kindred Group’s Unibet sportsbook in Sweden.

Further up the (block)chain, there are also start-ups at the upper echelons of the gambling industry, like cryptocurrency casino platform FunFair, which raised $26m just four hours into an initial token sale when the target was just $10m. However, many of these businesses have yet to prove unequivocally that they have what it takes to make it in the long run. Many others have also simply fallen by the wayside.
Competitive nature
What appears to be the most significant issue and a running theme for emerging gambling start-ups is how they compete in a field dominated by operators with established brands and astronomical marketing budgets. The industry is competitive in innumerable ways. Some newly established companies have found it almost impossible to make a name for themselves when the likes of Sky Bet, bet365 and PPB can afford to spend £300m a year each on advertising campaigns and celebrity endorsements.

Bet Blocks describes it as a vicious circle, with investors reluctant to devote vital funds to advertising when their contributions would barely scratch the surface of gambling’s marketing stratosphere. “We are seeking investment but the problem is that if an investor gives us money, they won’t allow us to use much of it on marketing because the minute we do, we are going toe to toe with the big guys who have very deep pockets and hundreds of millions of pounds in advertising spend,” says Robb.
“A lot of investors won’t touch anything in the gambling industry because of regulation and the fact it’s a ‘vice’ topic” – Adam Kalmanson, Bookee
Kalmanson agrees, adding: “We are just a few guys in an office in London and a tech team in Israel. Our marketing budget is peanuts in comparison and so we have to do things differently because otherwise we’ll get swallowed up.”

As a result, these embryonic start-ups have to think outside the box in terms of marketing initiatives, but what methods can they use to penetrate the market on comparatively small budgets? Bookee turned to social media campaigning, using impressionist Al Foran, YouTuber Jahannah James and fan media movement Arsenal Fan TV to promote their product. William Hill has since worked with Al Foran in the lead up to the Mayweather versus McGregor fight, while Ladbrokes has partnered with Arsenal Fan TV for its #FanFriday talk show on Facebook Live.

“We produced a couple of videos that went semi viral, but these influencers have been taken by the big guys now and they have paid a lot more money for them,” Kalmanson remarks. “So again, we have to do things a bit differently; there’s more than one way to skin a cat.”

And Bet Blocks believes that growth hacking is their likeliest method for feline flaying. They are confident of persuading early adopters who like the product to introduce their friends to the app in the hope of creating a snowball effect. “It’ll be a leaky bucket where a load of people will come in and some will like it but some will leave. A chat app is inherently viral if we can make it interesting enough, so we want to use investment to patch up the holes in the leaky bucket through targeted growth hacking – LinkedIn didn’t spend any money on advertising and neither did Facebook,” says Robb.

Those are some big namedrops but Robb is keen to stress that Bet Blocks won’t be competing with those companies. He does however feel there is a gap in the market for a tailormade social chat platform in the style of Facebook Messenger that uses betting and sport as its primary USP.

“We’re not trying to take those companies on, but we are saying there are elements of sport like betting and data that make it unique, and we want to make Bet Blocks the perfect platform for people to share that kind of information.”
Product evolution
This open-minded approach from Bet Blocks could be the key to success as many different elements, including market response and customer feedback, can mean that a product is constantly evolving to meet the ever-changing demands of consumers. The product is still in the early stages in terms of release despite having worked on the product for almost three years, with the app yet to hit the Google Play Store.

Jonny Robb, Bet Blocks

The firm doesn’t know how audiences will receive the product. It has admitted it could completely change direction from a betting app, to a platform that uses its natural language engine parsing to provide news, form and stats on sports teams and players that would only otherwise be available after trawling through multiple sources.

Co-founder Mistry indicates the chat app could be used by affiliates and media brands to set up their own chat groups, while fans could even purchase match tickets via the app in the future.

“We could even determine conversations and subtly throw in ways of offering match tickets and you buy it there and then in the app, get a confirmation email and go and watch the game. There are endless amounts of features and improvements that can be applied.”

Bookee experienced this process first hand and the app has changed significantly since launch. It started as a simple product due to tech restrictions and because the original plan was to see how punters would react to the idea of a swipe-to-bet interface.

The company presented users with a single bet in a binary action decision for Euro 2016. Punters would have to swipe left if they didn’t like the offering but swipe right if they did and there was no other choice available.
“It’s easy to think you have a great product idea but without fully understanding bettors, you can’t see flaws in those assumptions”  – Jonny Robb, Bet Blocks
After the tournament, Bookee talked to its customers and the feedback was clear. Their audience loved the simplicity of the user interface and the style of the app but they wanted more choice.

“We kept the same scheme but we’ve since added accumulator options and in-play betting. The layout hasn’t changed but the content is now based on exactly what the customer wants,” confirms Kalmanson. “We get on the phone every day to ask customers what they like and what they don’t like, and all of that feedback has been taken on board which has caused the product to change a lot,” he explains.

The swipe-to-bet app also launched its first online casino product in August 2017, using the same tile-focused interface featured in its Tinder-inspired sportsbook. The casino offering initially featured content from Playtech-owned supplier Quickspin and there are plans to add games from the likes of NYX and Evolution later in the year.
Industry background
Launching a gambling start-up is challenging as documented above, but it sounds as though it would be nigh-on impossible without a background in the industry and at least a partial knowledge of how things work.

Kalmanson believes his marketing background in the trade was invaluable, suggesting that he would have been unable to launch the product without the network of people he has met, including those who help with product ideas, marketing opportunities and investment leads. “You have to have a background in the industry to set up a gambling app because of the networks of people that you get to know,” he says.

“It would have been very difficult for me to come into this industry clean. If I didn’t know how to market this product, what a conversion tunnel was and what CPA should be, it would be very difficult to come in and do it blind.”

This was also true for Bet Blocks. Despite working in the industry as freelance user experience architects (UEA) across the industry for almost seven years, Robb and Mistry felt that launching a start-up was a relearning process, especially in the affiliate sector where regulation is constantly evolving.

Mistry says: “The longer you spend in an industry, the more you understand it, but when the compliance issues came along, we were like wow, here’s a whole new side to the industry we have to understand before we can move on.”

His business partner Robb says being a UEA has taught him gamblers are peculiar individuals who often exhibit completely different online behaviours to social media users, for example. As a result, it will take something truly unique to strike a chord with such customers.

“My view is that a lot of outsiders look into the industry and see what they think are obvious opportunities, like connecting betting and social, and it will just explode into an amazing product that everyone is going to use,” he adds. “It’s easy to think you have a great product idea, but without fully understanding bettors, you can’t see flaws in those assumptions.”

Picture credit: Varijanta/iStock