The gaming industry continues to evolve, and with technological advancements it has moved from centralised game parlours, betting shops, and casinos to decentralised betting in your home or from your smartphone.
In a decentralised world, it is increasingly harder for iGaming operators to compete effectively and to turn a profit. Adding new players while retaining existing ones is a balancing act that not many operators seem to be getting right. It is a delicate balance, and can significantly impact revenues.
Types of iGaming operators
The growth-share matrix gave us a solid foundation on market performance and product portfolio management for any sort of company. In short, a company needs ‘stars’ that can assure the future, ‘cash cows’ that provide the funds to build towards that future, and ‘question marks’ that could eventually become stars, as current stars turn into cash cows and then ‘dogs’.
The same can be said within iGaming, however with iGaming there is the added factor of differentiating between new and existing players, and tailoring marketing efforts to have a healthy mix. Research has repeatedly identified the following 4 strategies that are used by companies, including iGaming operators, to handle the delicate balance between signing up new players with maintaining existing ones.
1. Running in place
These are operators that rely heavily on new acquisitions making upwards of 90% of their player base. In contrast, only about 10% are existing players.
Marketing spend in acquisitions is understandably high in these situations. Any effort to encourage existing players to spend real money aren’t necessarily effective, so as such operators seem to be ‘running in place’. While there is a frantic pace for the iGaming operation to keep up, this doesn’t result in significant uptick in their revenue.
Reasons for this could be:
- It’s a new operator and is in its ‘question mark’ phase, requiring capital investment with an eye on the future.
- Marketing efforts for acquisition aren’t focused on the ‘right’ type of new players such as those who will stick with the operator and continue to spend (‘active players’).
- Too many acquisitions, indicating too much spend not balanced with organic revenue growth from existing players.
2. Rising stars
These are the iGaming equivalent of ‘rocket companies’. Healthy revenues, coupled with growth at breakneck speed. The key for these operators is that most of them earn 30% to 60% of their revenues from existing ‘active’ players, indicating the operator has succeeded in engaging existing players effectively and thus establishing a foothold in the market.
The other underlying reason is that getting loyal players to try new games and promotions is easier and cheaper. Unfortunately, not every ‘running in place’ operator is guaranteed the opportunity to become a rising star someday. It requires a combination of a unique iGaming product, an effective acquisition strategy, cost management, and staying ahead of the competition.
3. Top performers
Top performers have reached their full potential. An overwhelming number of these operators derive more than 70% of their revenue from existing players, which is the direct result of effective player engagement and low player churn.
They have also learnt to acquire the ‘right’ type of new player, meaning they have a tried-and-tested acquisition strategy that optimises marketing spend. This will keep acquisition costs minimal while continually adding new players to their brand.
Top performers have essentially reached full potential for the iGaming product in question. Implying eventual decline is inevitable, however for the medium term, they’re generating significant revenue at low cost, resulting in a great bottom line. As such, these operators are at the liberty to innovate and use their ‘cash cow’ products to experiment with other ‘question mark’ and ‘star’ products.
4. Legacy operators
These operators usually have a long history in the industry, notably online counterparts of established land-based casinos or online brands that have been around forever. They are still making a lot of money, and derive close to 90% (or more) of their revenue from existing players. They cost less to run, and continue to add to the operator’s reserves.
However, legacy operators often find it difficult to grow any further, with new acquisitions only contributing to about 10% of revenue. The product appears to be nearing the end of its life cycle, meaning existing players could be about to jump ship. If they do, this will drag the revenue numbers down.
The operator in this instance, needs to prepare for the eventuality of either revamping the iGaming product or rebrand it, and launch an aggressive acquisition campaign to revitalise their player base. Sometimes, legacy operators simply choose to retire certain categories of products and switch their focus to a particular type of game, such as slots, card games, or sports betting only.
Next best action
Any operator in the iGaming industry will in due time pass through these four stages (sometimes reiterating them) until it becomes a legacy operator. However, with a suite of products in their portfolio, an operator can work on retaining existing players and switching them to other products or upgraded versions.
The strategies used to keep a healthy balance between sustaining the influx of new players and increasing the lifetime value of existing ones need to be recalibrated for every phase of a company’s growth. This should be an ongoing process that occurs in every department of the organisation, and which leads to the implementation of different approaches that help maintain a mix of new and existing players, while providing a way for retaining and switching players as the market evolves.