New gambling and tax laws in the United Kingdom will have a massive impact upon mobile and online gambling operators’ advertising strategies and spend. We look at how some companies are preparing for the changes.
New online and mobile gambling laws being introduced in the United Kingdom are set to hit gaming operators hard, compromising their marketing strategies and reducing their ad spend significantly.
How Will the Law Change?
Starting on October 1, under the new Gambling Licensing and Advertising Act, overseas companies advertising remote gambling services to customers in the United Kingdom must hold a licence issued by the UK Gambling Commission. Companies can fill in applications for the licence starting in September.
Currently, those advertising remote gambling services to UK consumers can do so provided they hold a valid licence from within the EU or the White List Territory in which they are established.
The existing tax law was considered to be incentivising companies such as William Hill, Betfair and Ladbrokes to operate their online operations offshore from locations including Gibraltar.
At the same time, a new finance bill being introduced in December will see gambling operators taxed on a place of consumption basis. This means that they will have to pay tax at a proposed rate of 15% on gross gambling profits generated by customers in the UK, regardless of where they are based. Gambling operators in Gibraltar at present pay 1% in tax.
The Effect of the New Rules
Analyst Amisha Chohan says the new laws could lead to a marked decrease in marketing and promotions for gambling operators, particularly for smaller operations.
Because of this, many operators have already ramped up their marketing expenditures in advance of the changes in an attempt to gain market share, reveals a report by Deloitte.
Use of Social Media
Gambling operator 888 is one of the only companies to have successfully capitalised on the growth of social media, according to Stickyeyes, by regularly posting on platforms like Facebook.
The operator posts predictions, betting odds and tips, well as updates on live games and post-match reviews.
Ahead of the changes to law, gambling operators are also considering social gaming as an alternative to their online gambling operations, says a report by Deloitte on the ‘Future of the British remote betting and gaming industry‘.
The issue of social gaming, where a prize is not won as a result of gambling, was discussed by HM Revenue and Customs.
It ruled, “Social gaming where a prize cannot be won was out of the scope of the consultation and of the reform, since it is not currently defined as gambling either by social or tax legislation. The Government will continue to monitor the market for social gaming and other associated products to consider any impact on gambling taxation.”
Social games that do offer real money prizes, though, are still subject to the tax. Gambling operator 888 was one of the first to sign an agreement with Facebook offering real money gambling (RMG), according to Calvin Ayre.
The company’s first app, Magic888 Casino, was withdrawn from the social network just a couple of months after it was introduced because 888 realised it couldn’t make any money from social gambling, especially after the gambling tax was introduced.
When the app was withdrawn in July, 888 COO Itai Frieberger told eGaming Review: “It’s no secret that social real-money casino is not doing very well, but on the other hand Bingo Appy is performing strongly and we intend to increase our footprint there.”
“It makes no sense [to keep Magic888 Casino] before Point of Consumption because it’s going to be very tough to run something which was always marginal,” he added.
However, the company will keep its Bingo Appy product on the social network because, although it will be affected by the tax increase, it is gaining enough traction on the social network to make a profit.
The lesson here? If you want to get involved with RMG on social networks, it’s a good idea to ensure the market has the appetite and will spend money to prevent it being a flop like Magic888 Casino.
Pay Per Click Spend
Bet365 and Mecca Bingo have increased their Pay Per Click (PPC) spend and, as a result, have the greatest reach through paid for and organic high traffic, says David Moth at Econsultancy.
Mecca Bingo has implemented a whole new approach to its PPC programme by utilising real time usage and playing patterns, as well as linking to offline media buys to improve click-through rates and conversions.
Increasingly, gambling operators are targeting new customers with the offer of big deposits or bonuses when they sign up or use the site via their PPC ad campaigns. Foxy Bingo is one company to do this, as are market leaders William Hill, Bet365 and Paddy Power. However, companies must use caution when offering free bets.
Targeting Campaigns to Major Sporting Events to Increase Brand Recognition
After finding out through research that its customer base was overwhelmingly more interested in sports than in gambling, Paddy Power created new ad campaigns linked to three major sporting events. These Cheltenham, the Euros and the Ryder Cup, as Marketing Society reports.
Another approach is for operators to increase spending on popular sporting event keywords such as The World Cup, Wimbledon and The Grand National.
Going forward, online gambling companies will need to adopt fresh and innovative marketing tactics, advises Cision, in order to make up for the money it will lose by paying a higher tax bill.
To boost their marketing and boost their profits, gambling companies will need to better utilise social media platforms as a marketing tool and as an extra revenue platform, adapt their PPC campaigns and maybe even partner with a sporting brand or event to gain more traction.
Are you a gambling company? How will you be spending your marketing budget to ensure you don’t miss out when taxes rise?