The development of the gaming business is the basis for the success of entrepreneurship. If a company stands still for a long time, competitors will just lure away its customer base. Creditors will take all the savings as interest. A well-chosen expansion strategy can help you avoid these and other problems.
The Casino Market studio explains the essence of vertical and horizontal growth in the iGaming industry. You will learn which strategy to choose to get the maximum economic effect.
The Up Approach or Business Diversification?
The method implies the improvement of an existing product or iGaming start-up but within the same market. Operators develop their projects in every possible way, add popular content, launch original bonus promotions, cooperate with opinion leaders, etc.
Every business aims for horizontal growth in one way or another. Already at the stage of opening an iGaming platform, the entrepreneur understands that over time, the need to buy additional software from top providers will appear, as well as the necessity to create original games and integrate additional payment channels. It is also possible to open an eSports section in an Internet casino or launch online sweepstakes.
The up growth of the iGaming business is based on a diversification strategy. The term was first used by the American scientist Harry Markowitz in 1952. Its essence is in the competent distribution of a company's resources to maximise profits.
Initially, diversification was discussed in the context of financial institutions: trading companies, hedge funds, and banks. Over time, the term has taken root in other sectors of the economy, including online and offline gaming.
What Does the Diversification of the Gambling Business Bring?
The main advantages of the solution are as follows:
| The improvement of KPI metrics | The development of the casino business' leading areas (for example, slot machines) gives a stable high income. It also affects the increase in profits from related areas thanks to seasonal promotions and tournaments, organising games with live dealers, etc. |
| The growth of an iGaming brand's awareness | The strategy improves the company's image indicators. This has a positive effect on its relationship with players and B2B partners. The firm is also becoming more attractive to investors, gaining access to loans on favourable terms |
| The increase in share in the main operating market | The ideal option is to enter the top three. This is quite feasible thanks to a competent vertical growth strategy. The entrepreneur increases competitiveness by introducing new gambling products and improving existing ones |
| Efficient resource allocation | If the company spends funds rationally (financial, labour, and material resources), the operating costs of the online casino owner are reduced. The released amount is directed to strategic business development |
| Risk reduction | Online casinos are becoming more resilient to crises. A vertical growth strategy helps to keep the firm operating and profitable during a period of economic recession, stagnation, or a sharp change in the principles of the industry's work |
Vertical Growth in Gambling
The main use cases for diversification are as follows:
- The expansion of the entertainment portfolio. In 2023, more entrepreneurs are adding a live dealer games section to their portfolio. It includes roulette, baccarat, blackjack, sic bo, etc. The advantage of this approach is that adding live content does not require an additional licence in almost all popular jurisdictions (for example, Malta or Curacao).
- The launch of branded promotions. This vertical growth option is closely intertwined with online casino marketing. A recognisable advertising campaign will help you attract solvent traffic and strengthen your position in a highly competitive market.
- The creation of original content. The Casino Market studio recommends the development of HTML5 slots based on individual sketches. It is possible to create a line of several gaming machines or release only one product with innovative mechanics that will definitely make a hit on the market.
- Improved customer service. It implies the integration of a chatbot, the creation of an additional platform with premium subscription content, the addition of in-game social tools, etc. The changes may be obvious or not, but all of them are aimed at automating business processes within the company and improving the level of service.
888 Holdings PLC is a vivid example of using a vertical growth strategy in gambling. Despite its 25-year history, the provider has only a few licences in its assets. Its main office, as at the time of the business launch, is located in Gibraltar.
The developer 888 Holdings PLC operates an online casino, a sports betting platform, and a poker room. It also supplies bingo and keno software and branded scratch cards.
The company has several well-known sponsorship contracts (for example, with the Fontwell Park Racecourse), which strengthens its position in the gambling industry.
Horizontal Growth or Business Scaling?
The essence of the strategy is a phased entry into new markets. At the same time, the assortment range of the company remains almost unchanged, with the exception of innovations related to the laws in the selected country. These are advertising requirements, rules for publishing gambling content, deposit limits, and other nuances.
The outgrowth strategy is more complex. However, it brings more economic benefits in the long run.
Why it is Favourable to Scale a Business
The main advantages of the solution are as follows:
- The expansion of the customer base. A new country provides high-quality solvent traffic that directly affects the profitability of online casinos.
- Increasing competitiveness. The expansion of new markets makes the iGaming brand stable and recognisable. The company becomes international and well-known outside its native country.
- The improvement of key performance indicators. Business scaling is always aimed at increasing KPI. These are gross gambling income (GGR), net gaming profit (NGR), return on investment (ROI), and other metrics. The results can be calculated for the company as a whole or within the selected operation market.
- Proper distribution of risks. When working in multiple countries, the entrepreneur insures the business against unforeseen situations. These can be changes in legislation, economic crises and recessions, man-made disasters, etc. In 2023, medium and large projects prefer to operate in several markets at once to distribute risks properly.
- Access to qualified labour resources. Business scaling means staffing. The entrepreneur hires talented developers, creative marketers, experienced lawyers, and other specialists to join the team.
Many top providers prefer a horizontal growth strategy. Tom Horn Gaming, Playtech, Pragmatic Play, Endorphina, Betsoft Gaming, and other companies are aiming to actively expand the European market by obtaining local permits.
The Czech supplier Endorphina, for example, is licensed in Malta, Romania and Greece, but its core business remains unchanged. This is the release of digital slot machines.
How to Choose a Country for Operating
Consider the main search criteria:
Regulation
Legislation is the first thing that attracts or, conversely, scares off potential investors.
In 2023, entrepreneurs want to conduct a lawful and transparent business, pay taxes on time, and receive good remuneration for their work. Fortunately, most jurisdictions have already legalised gambling or are at the stage of legitimising the industry.
The main points to pay attention to when choosing a country:
- the rules for registering a legal entity (opening a bank account, renting a physical office, and completing all procedures online);
- the features of obtaining a licence;
- the restrictions on the minimum age of gamers;
- the rules for registration and verification of clients;
- the limitations on advertising, frequency of bets, and size of deposits;
- the nuances of taxation, etc.
Demography
Entering an adjacent market is much easier than opening an iGaming start-up in an unfamiliar country. The gaming preferences of customers from Denmark and Sweden, for example, are almost the same. Therefore, here the operator only needs to settle licensing issues.
Launching an online casino in Colombia is much more difficult if the entrepreneur has worked only in Europe before. The demographic picture in the new country is radically different. A businessman needs to take into account the average age of visitors, betting and limit preferences, as well as the nuances of attracting traffic, etc.
Market Potential
Its assessment allows the operator to form a competent business development strategy in advance. It is important to understand what to expect from the chosen gambling niche in 5–10 years and whether it is worth investing in the region today.
What to look for when assessing market potential:
- economic and political stability;
- new laws and plans to change industry regulations;
- the launch and development of business projects (for example, the construction of large casino complexes or data centres);
- the quality of the existing IT infrastructure;
- cultural heritage and diversity.
The Level of Competition
For countries with well-developed gambling areas and centuries-old gaming traditions, higher competition is typical. A huge number of companies have been operating for several generations there. Beginners can learn the tactics of implementing an amusement brand on the example of the leading operators in the industry and draw the right conclusions regarding business scaling.
In jurisdictions where gambling has been legalised relatively recently, competition is much lower. However, there are not many successful gambling companies here. Most likely, entrepreneurs will have to learn from their own mistakes.
Promising Regions for Investment in 2023
We offer a brief overview of the markets that give new opportunities for gambling operators:
The Asian-Pacific Area
Analysts consider this market one of the most promising. It is characterised by a confident digitalisation of the economy, the growing penetration of smartphones, and the active introduction of innovations. These are excellent conditions for the development of iGaming projects.
According to experts, the mobile ecosystem (including online gambling) will make a significant contribution to the region's economy in 2023. It will create 5% of the market's GDP, which is equivalent to $770 billion in added value.
Filipinos are the leaders in the amount of time spent on the Internet. They are watching the news, chatting on social messengers, and spinning digital slot reels for over 10 hours a day.
All types of gambling are allowed in the country, which makes it attractive for investment.
North America
The region's potential depends on how fast the federal government plans to legalise gambling. All issues are resolved at the state level.
Currently, online wagering is allowed in:
- Canada (in the provinces of Ontario and Kahnawake — an Indian reservation in Quebec);
- the USA (in seven states: Nevada, Michigan, New Jersey, Delaware, West Virginia, Pennsylvania, and Connecticut).
In Mexico, the work of land-based casinos and bookmakers is legalised. However, Internet betting is in the grey zone. The government has announced massive changes to the industry in the coming years, making Mexico one of the most promising countries for the horizontal growth of iGaming companies.
The future of gambling in the US depends on how quickly the authorities legalise this type of business. By the end of 2023, the first online casinos should open in Iowa, Illinois, and Indiana. Thanks to this, the number of states with legal online gaming will grow to 10.
In the US, there is a clear relationship between the political preferences of the population and the opening of gambling markets. Thus, the democratic states in the east of the country are more prone to excitement and have a positive attitude towards the regulation of the industry. Online casinos are set to open soon in Massachusetts and North Carolina. Other states are also seriously considering legalising the field.
On the contrary, the south of the country, where Republicans are preferred, has a negative attitude towards bets on the Web. The authorities of Texas and New Mexico, for example, have stated that in these regions, the launch of online casinos will be prohibited for at least another 10 years.
Europe
Gambling in Europe has long been part of the cultural heritage of the region. Many companies have developed into large international brands here.
In 2023, the initiatives of the leading European jurisdictions will be aimed at tightening the work of operators. This is due to the growing gambling addiction in the region. For example, in France and Spain, restrictions on advertising are already applied. In the UK, there is a ban on the use of credit funds for betting and a mandatory check of gamblers' solvency.
How to Enter a New Market?
Entrepreneurs who want to scale a business already have enough experience and knowledge, but they cannot do without preparation.
The key points to pay attention to are as follows:
| Game offering expansion | The entertainment catalogue should consider the regional preferences of the audience. In Southeast Asia, for example, there is a demand for live dealer games, as well as slots with oriental symbols. Gamblers from Sweden, Norway, and Denmark will appreciate machines on the theme of Scandinavian mythology, fairy tales, and nature |
| The localisation | The businessman needs to adapt the design of the site or mobile application to the requirements of the local audience. It will require translations of texts, the addition of local currencies and payment methods, and the development of a convenient registration form |
| Marketing | The bonus program must comply with the rules of local legislation. In Sweden, for example, the maximum amount of all bonuses granted to one client per week should not exceed 100 kroons. And operators from the United Kingdom pay taxes on bonuses (welcome rewards and free spins). Entrepreneurs also need to consider the taste preferences of the audience and the available communication channels (e-mail, popular instant messengers, etc.) |
The Main Things about Popular Business Strategies in Gambling
Any entrepreneur sooner or later faces the issue of project expansion.
- A vertical growth strategy is the improvement of an existing gambling product or the launch of new projects within the same operating market. Competent diversification leads to the improvement of KPI metrics, an increase in an iGaming brand's awareness, larger profits, and efficient distribution of costs.
- Examples of vertical growth are expanding the entertainment portfolio, launching branded promotions, and improving the quality of customer service.
- The essence of horizontal growth lies in entering a new regulated market with an already existing or partially modified product. The strategy leads to the improvement of the international reputation of the company. It allows the distribution of risks properly and provides access to qualified personnel.
- The operator needs to assess the market potential, demographic and political environment, regulatory rules, and the level of competition. In addition, it is necessary to expand the catalogue of games, come up with an advertising campaign, and take care of adapting the site to local requirements.
- In 2023, the Asia-Pacific region, Europe, and North America are considered promising for business scaling.
You can order a profitable and successful iGaming start-up at the Casino Market studio. We help our clients with licensing and promotion of online casinos, entering new markets, developing original HTML5 slots, and creating a business plan.
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