Q&A: 888 on the benefits of a fresh approach to customer acquisition

In the egaming industry, a unique offering goes a long way to ensuring the success of an operator in the short term, but long-term success comes from instituting unique policies and practices to keep players enthused and logging on to sites.

As a digitally focused operator, 888 has long had to depend on creating value in both its existing userbase and those new customers who choose to join its sites. In its most recent set of financial results, the business revealed record customer acquisition rates across all its key verticals.

Over the past three years, the business has pivoted away from its traditional model to an approach that targets recreational gamblers. It is an approach that has lifted revenue, as well as providing uniqueness, which goes against the grain of the industry. 888 CEO Itai Pazner and CFO Aviad Kobrine discuss with EGR Intel the roots of the approach and how it will affect the group’s operations going forward.

EGR Intel: Group revenue from regulated markets have continued to increase over the past two years to record highs in 2019, so is there any one factor to which you attribute this continued growth?

Itai Pazner (IP): I wouldn’t say there’s one specific factor. If you look at the charts, it’s quite clear that in 2017 and 2018 there was a slowdown in our revenue, much of which had to do with the enhanced responsible gambling measures, which we have placed in our systems across the board.

In parallel with this focus on responsible gambling, we were busy implementing our new strategy focusing on recreational players and the mass market becoming less focused as a business on VIP players. We’ve been much more focused on acquiring and building a proposition which is more relevant and engaging for the mass market.

A lot of that has to do with product development, but it also included types of bonuses offered and the types of marketing activities we pursued, so we almost had to change the business model we were in, which affected a lot of different parts of the business over those two years. 2019 was the first year we started back towards growth under this new strategy, and since then we’ve been launching new sets of products across all our key verticals. Every time we do these sorts of product upgrades, which more specifically fit in with the new types of customers we are targeting, it tends to have a good impact on business revenue.

EGR Intel: The business has seen double-digit growth in all key B2C verticals except poker, so why do you think poker has bucked the trend and what are you planning to do to bring this back into positive growth?

IP: As a vertical, poker has failed to grow globally. Putting aside the one operator which managed to outgrow other operators in this space through aggressive marketing tactics, overall poker as a market has suffered for the past few years. It’s a long-term trend which hit us quite hard in 2019, but it’s largely due to several factors. Firstly, the splitting of global liquidity pools is something which started with the US poker market shutdown in 2006, something which was a big massive liquidity split in terms of the rest of the world. Since then, what’s happened is gradually different shared liquidity markets have either closed or split out. For example, there’s the European shared poker liquidity network, which started with four countries trying to retain their own liquidity on the one hand and other places like Australia, where they have banned online poker completely. In addition, there were other macro trends which affected poker in general over the past few years.

Poker is a game based on liquidity; the more liquidity pools you have joined together, the better it is for players and operators. Inversely, the more liquidity you split out has the opposite effect. Alongside that, I think the poker industry didn’t do enough to change the poker proposition from what it was in the kind of good old days of poker. What eventually happened as a result was poker became more relevant to the older players and it wasn’t attracting a lot of new and fresh poker players. This is primarily because the level of skill required to participate in online poker just kept increasing and increasing, and it became almost irrelevant to new players that didn’t have that kind of level of skill.

All these things led to a slow, gradual decline in poker and it hit us quite hard last year. As an operator, we’ve taken a lot of actions which may have postponed our poker market hit until last year, including our 2009 move to focus on recreational poker players. This move to limit what I would call the sharks – not incentivising them, not bonusing them, not doing rake-back deals – was a very different approach, and that’s why I think our poker network lasted as long as it did. However, we’re starting to see a stabilisation in the poker market beginning in H2 2019 and to capitalise on this, we’re completely modernising the mobile poker product with a plan to launch later this year. You never know how a product works until it hits the market, but we do have high expectations for the relaunch. It’s our biggest product revamp since the launch of our Orbit casino [platform] a couple of years ago, so I hope that will have a positive effect.

EGR Intel: You’ve had double-digit rises in customer acquisition in all major verticals. How is the business planning to maintain these growing figures?

IP: One of the changes in our approach and strategy was a much stronger focus in investment in product and product experience, which resulted in a positive effect on marketing, better conversion rates and lower CPAs. We chose to pursue this as opposed to pushing more dollars into marketing only, and we’re also investing more in product enhancements. A good example is the Orbit casino product, which has reported very strong FTD growth in 2019, only a year after we first launched it. Since then, we’ve continued to invest in the Orbit platform, enriching it with more content, more relevant content and making that content more user-friendly and intuitive towards customers.

I like to compare it to the Netflix model of providing a smooth and intuitive experience through one platform or website. We’re taking that same approach in casino by adding more and more content, most of it developed internally. We have our own proprietary games, but we take the best of third-party games, package it and deliver it to players intuitively using AI algorithms and recommendation software. When we see good results in casino, we increase marketing, something which keeps the momentum of positive FTDs going, which in turn increases revenue growth.

EGR Intel: Italy proved to be a very successful market for 888 in 2019 despite the advertising ban, with new customer acquisition up 18% and record poker revenue. Does this prove that the prohibition of advertising is ineffective?

IP: Not necessarily. Stopping online gaming wasn’t the motivation behind the Italian ban. For me, what it does prove is that companies with a very strong digital orientation, and strong products which consumers will relate to, will continue to benefit over time, despite a ban being in place. Inversely, companies with not-so-great product and marketing tactics that were based on above-the-line branding – such as massive sponsorship deals – are going to suffer more.

888 is, and always has been, a digitally led company. It has historically been beneficial for us compared to our competitors when we go into countries where marketing is limited and restricted. Not all of our competitors in the Italian market are growing in the same way we are, and in actuality, our market share in online casino has increased following the ban. We’re now maybe the fourth- or fifth-biggest online casino in Italy with 7% market share. I don’t necessarily think that the group’s results have proved that the ad ban doesn’t work, I just think that it represents the strength of our brand and the high search ranking that we have on Google.

EGR Intel: 888 has reported double-digit growth in bingo thanks to its acquired Mandalay bingo brands. Has this vindicated the decision to acquire these brands?

IP: Yes, first the growth in the bingo business during 2019 occurred after acquiring these bingo brands. If you look at the growth without these brands, bingo revenue declined by 3% last year. We bought the brands that were running over our network because we saw that the provider [Mandalay] had basically stopped investing in these brands because of different priorities. They stopped investing in the Costa brand over a couple of years and, as a result, the business was declining, and they wanted to offload that asset.

We saw that as an opportunity to take it over; it was our software and technology anyway and we felt that we could do a better job in bringing it back to life and recovering that brand. On the whole, I think the results have been decent. We’ve seen the business stabilising and slightly growing, but outside of this our other historic bingo brands, where we’ve revamped either the front-end or marketing practices, are starting to show some good initial indications of growth as well.

EGR Intel: Where do you next plan to launch the 888 Spectate sportsbook platform and how far along the track are you with this?

IP: We’ve launched in Sweden, but obviously we can’t do a like-for-like comparison post-launch because there’s very limited numbers of sporting events. However, in what current activity we are seeing, the product is a good and stable platform, which has resulted in good feedback from customers. We’re currently speaking to focus groups and conducting research on customers using the new product and making sure that they are happy with the experience and the UI and UX of the new product. Touch wood, there have been no technical issues. The feedback is good and the cross-sell indicators between online casino and sports have shown a good level of activity on a relative basis. The plan is to launch in further markets later this year, and we have a clear and well organised plan to do so.

Our plan is to launch in the biggest market for sports betting: the UK. The UK is by far the most competitive and advanced market in the world, which is why it’s important to absolutely get the process right. We don’t want to migrate a new product to the UK market and create fractures within our existing sportsbook offering. We’re taking learnings from our Swedish launch and adding more UK-relevant features to the product that we don’t currently have. We want to launch in the UK and several other markets towards the end of this year. There’s a very clear plan of rolling this product into all our other markets, including Spain, Italy, Denmark and Romania. Obviously, we’re also looking to bring the platform to the US as well.

EGR Intel: How has the ‘too much is too much’ RG campaign been received by players in both the UK and Spain?

Aviad Kobrine (AK): I think it was generally very well received both by players and by other stakeholders. We have not received any complaints, which is in itself a good thing. Sometimes, when you try to do something with good intentions, cynical people will say, ‘Well, that’s actually a branding exercise’. We have not received any complaints, which is a good start, and I think customers appreciate the fact that we are deploying more tools. We’re interacting with them more. We’re trying to educate them not to cross the line, whether it’s from recreational to a potential problem. So overall, I think it was successful. We certainly intend to continue with similar initiatives.

The campaign was originally launched at the turn of the year, and we planned to run it again in H2 2020, however, because of the current coronavirus outbreak, we’ve brought that forward and have recently relaunched the campaign. More people are at home because of the lockdown and can be in a vulnerable position, so we thought it would be a good idea to relaunch it now across a few of our markets, including the UK.

EGR Intel: Given the potential likelihood of restrictions on VIP programmes, how important is it to the business to have a low VIP exposure?

AK: Our focus on recreational players rather than VIPs has significantly reduced our VIP player base, something which would negate the potential impact of restrictions should they be imposed. As a business, 888 has already applied the standards being recommended by the BGC-led UK Gambling Commission (UKGC) working group in its recent code of conduct for VIP gambling to our player base. We’ve got specific checks on these individuals already and we’re great supporters of the work that the BGC and GVC have done in this area. We all think it’s the right thing to do and it was very well received by the UKGC itself. For my part, I think it’s another important step in removing or reducing the potential for individuals to experience gambling-related issues and we’re very proud of the work done in this area.