Info terkini Togel Singapore 2020 – 2021. Prediksi paus yang lain-lain tampak diperhatikan secara terprogram via pemberitahuan yg kita sisipkan pada laman itu, dan juga siap dichat terhadap operator LiveChat support kita yg tersedia 24 jam Online guna melayani segala kebutuhan para tamu. Yuk cepetan join, serta menangkan prize Lotere & Live Casino Online terhebat yg ada di website kami.
To spend or not to spend, that is the question.
Wynn Interactive’s abandonment of its plans to go public have had the gambling world pontificating on that question for the past couple of weeks. In announcing that it was pulling out of the deal, the company cited the desire to scale back WynnBet marketing expenses and work on a more tightly focused strategy.
Wynn is running against the overall trend of the US market. For years now, companies like DraftKings have set the tone for the industry with a maximalist approach to spending. Companies looking to succeed in this explosive market have been shoveling money into mergers and acquisitions, product development, and most of all, marketing.
Revenue for these companies has soared, but in many cases, spending has outpaced in. DraftKings pulled in $644 million in revenue in 2020, up nearly 50% year-over-year. At the same time, it spent nearly $500 million on marketing alone. This year’s revenue should be higher still, but after three quarters, the company is already more than $1 billion in the red as far as the bottom line goes.
DraftKings has assured investors that this is the nature of new markets and that it will soon be profitable. It seems, however, that Wynn feels that this isn’t the correct strategy. Based on the performance of DraftKings stock lately, it looks as if skepticism might also be setting in among investors.
It wasn’t that long ago that we saw a similar story play out in another corner of the online gambling world. In the early 2000s, online poker was growing explosively. The story for the past decade has been quite the opposite. It’s therefore probably worth looking at similarities and differences between the poker boom and what’s happening now with US online casinos and sports betting.
Trying to predict the future
On the surface, marketing math seems easy. Spend X dollars on advertising and promotions, revenue goes up by Y. If Y is more than X, then your strategy is good, if not, then it’s bad.
In practice, however, it’s never that simple. One particular problem in the online gambling world is that the product isn’t a one-time purchase. The ideal casino customer isn’t one who makes a single large deposit, loses a bunch of money and then disappears into the sunset. Operators want to cultivate a relationship with players who will make regular deposits over a long period of time.
That means that the marketing strategy for online gambling companies is highly dependent on projections about the future. Companies that are too conservative in their estimates might miss key opportunities. On the other hand, those that are too optimistic risk burning money to acquire customers who then reduce their spending, switch brands or even quit gambling entirely before creating a positive return on the company’s investment.
Adding to this is the tremendous legal uncertainty in the US market, particularly for the casino vertical. Only about 11% of the US population has access to legal online casinos at the moment. How much US iGaming will be worth in 10 years depends heavily on how many more states get on board.
Until recently, the popular view was a bullish one, and DraftKings was the most bullish of all. At the same time, it hasn’t been uncommon to hear analysts use words like “irrational” and “unsustainable” to describe the market.
Outgoing Wynn CEO Matt Maddox is firmly in the latter camp. In a Q3 earnings call earlier this month, he told investors:
“The market is really not sustainable right now. Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.”
He’s surely not the only corporate leader thinking this. As time goes on, we may see the US market turn into some version of the parable of the tortoise and the hare.
Investors may be starting to see this as well. DraftKings stock is now worth just half what it was at its peak in March. Another big spender, Penn National, has fallen even more over a similar timescale. Of course, there are plenty of other things going on for these two companies specifically and the online gambling industry generally. It’s always hard to know how much share movement can be attributed to any one thing. Still, a lack of balance between spending and revenue is something that can make investors nervous.
Looking back at how things went for online poker, what we see is mostly hares in the early years, who only later found out that the second half of the race would be uphill. That led to a lot of strategic changes in the second decade of that industry.
Gold rush, plateau and decline
When a market has a growth phase followed by stagnation or contraction, the upswing and downswing change the marketing equation in two big ways.
First of all, marketing can either be a positive or a negative sum game. When customers are still discovering a new type of product, marketing can increase overall demand, which helps everyone.
On the other hand, when companies are fighting over existing customers in a market that has already peaked, it becomes a negative sum game. They may spend lots of money in a tug-of-war in which no one actually comes out ahead.
Meanwhile, a growing market attracts many new entries. These smaller companies hold a small share of the market to start with, but if they can attract a decent chunk of the new customers, they can easily multiply in size.
After the market peaks, however, the only avenue for growth is to grab more market share. A small company with only 4% market share can double in size by grabbing another 4%, even in a flat market. The bigger the company’s share, however, the harder it is to grow any further this way. If the market itself isn’t growing, there’s nowhere to go but down.
Ultimately, the smaller companies that fail to build up their share go out of business or pivot to other products. The market becomes dominated by a smaller number of giant brands who are trapped in the aforementioned negative sum tug-of-war.
The PokerStars arc
US sports betting and iGaming might not decline after their peak the way poker has. However, they can’t grow explosively forever. Eventually they will hit a point where, at best, they grow in tandem with the overall population.
Either way, when that happens, the companies that spent heavily to become the market leaders may find themselves victims of their own success. That goes double if a lot of the spending was on promotions. Just compare PokerStars circa 2005 and the same company ten years later.
In 2005, money was pouring into the poker economy. The only thing that mattered was getting as many players as possible, playing as much as possible. PokerStars was battling PartyPoker for market dominance. After the UIGEA and PartyPoker’s departure from the US market, its main rival became Full Tilt Poker, but the principle remained the same.
After Black Friday (or depending on who you ask, a few years before), the popularity of online poker started to wane. When Amaya took over the company, it realized that the amount of promotional spending no longer made sense.
Of course, PokerStars had an additional problem. The promotions encouraged professional players, who predated on the recreational ones who were bringing money into the system. That will be less of a problem for sports betting, and won’t be an issue for online casinos.
Even absent that aspect however, it makes less and less sense to be giving money away as the supply of potential new players dries up.
Ripping off the Band-Aid
Unfortunately, what Amaya found when it cut down on its promotional spending was that it wasn’t just serving a customer acquisition role. It was necessary for customer retention.
Traffic began to tumble almost immediately. Granted, the particular approach the company took to scaling back the promotions didn’t help. It could be described quite fairly as a “PR disaster.”
Nonetheless, any approach would have caused some percentage of customers to turn on the company. Customer entitlement is a real thing, especially in the gambling world. The longer the promotion has been in place, the more the customers think of it as part of the product.
Customers therefore feel cheated when a long-time promotion gets changed or removed. To them, it’s no different than when a favorite restaurant starts skimping on ingredients, or a snack company quietly reduces the size of its packages while keeping the price the same.
Since the takeover by Flutter, PokerStars has backtracked on its changes. The new incentive system rolled out for international players this year is much more like the old PokerStars than like the Amaya-era one.
That’s expensive, but it had no choice if it didn’t want to lose its position at the top of the food chain. During the Amaya era, many veteran players left for PartyPoker. These days, it trades the lead back and forth with GGPoker.
DraftKings can’t get caught napping
That PokerStars felt compelled to bring back its long-term promotions is probably the key lesson here.
There are upsides and downsides to both the DraftKings-style approach, and Wynn’s new tack. However, going back to the tortoise and hare analogy, it’s important to remember how the hare ultimately loses the race in the parable.
He doesn’t get winded due to failing to pace himself. No, what does him in is the faulty assumption that he if he gets a big enough head start, he can afford to take a nap later.
That isn’t the way things work. It’s easy enough to ramp up spending, but dialing it back always has consequences. Sometimes, those consequences can make for worse PR than not spending the money in the first place.
Starting off as the hare is therefore a long-term commitment. If the market keeps growing and customer lifetimes prove to be long, then it may pay off. After all, it’s hard to look at PokerStars’ position in the poker world and say that its strategy in the boom years was a mistake.
However, if the plan is to stop spending at some point and assume the players will stick around, that’s where things can go wrong. Big spending can be fine, but it can’t be unsustainably big. Wynn, on the other hand, will have a slower start, but more flexibility to change its plans in the long run.