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The Proof Is In The Brand

Finding the right recipe for online gaming success

The Proof Is In The Brand

You’re unlikely to find customers in any industry as discerning as online poker players. Following a multi-year absence, U.S. players were clamoring for the return of online poker. New Jersey residents got their wish in November 2013 when several online poker sites went live. But true to form, these sites were critiqued to no end.

Having access to online poker sites wasn’t enough to satiate these players. They wanted access to the best sites, and at the time, that meant PokerStars.

Many of these players believed PokerStars was going to fix every problem overnight, and the general feeling was they would dominate the market in short order. After all, PokerStars has long been considered the best of the best by any measurable metric.

For New Jersey poker players, it would be more than two years before this theory was put to the test.

The eventual arrival of PokerStars, in March 2016, did in fact transform the Garden State’s online poker market overnight. Within days of launch, the total market jumped 20 percent, and PokerStars had already eclipsed the two existing operators—the tandems of 888/WSOP.com and PartyPoker/Borgata. PokerStars seemed destined to dominate the New Jersey market in much the same way the company dominates virtually all of the international markets in which it competes.

Immortality Put to the Test

But a funny thing happened on the way to market domination in New Jersey. After the fast start, PokerStars cash game traffic has stagnated. PokerStars is now in a veritable tie with the 888 and WSOP.com network, something no one publicly predicted.

This is surprising, as PokerStars accounts for about two-thirds of the international online poker market (possessing nearly seven times the average cash game traffic of their nearest competitor, which happens to be 888) and leads in every established, regulated, ring-fenced market not named France.

In Italy, PokerStars controls about 70 percent of the market. In Spain, PokerStars controls about 66 percent of the market. But as intimated above, France is an outlier. In France, PokerStars’ market share is a much smaller, but still significant, 30 percent.

The factors that propelled PokerStars to near-monopoly market shares in other markets, sans France, simply haven’t had the same impact in New Jersey. The best software, the best customer support, the best VIP program, the biggest promotions and tournaments, and the best known sponsored pros haven’t paid the expected, albeit lofty, dividends in New Jersey.

It would be easy to point to the divisive changes the company has rolled out over the past six months—ranging from VIP cuts to rake hikes—as the reason PokerStars hasn’t dominated the New Jersey market. The changes Amaya has implemented have certainly caused its once-pristine reputation among the poker community to take a hit, and have resulted in player-led boycotts and even protests at live events. But, this doesn’t explain the situation in France, where PokerStars has ranked behind France-based Winamax since 2014—well before the recent PR issues.

The question is, why has PokerStars proven mortal in France and New Jersey, while racking up flawless victories in other markets? It’s most likely a combination of things, but high up on the list is the existence of established brands.

Brick-and-Mortar Brands

In both New Jersey and France, PokerStars was confronted by competitors with pre-existing local, established brands.

In New Jersey, the established brands predate online gaming. By law it’s the state’s longstanding brick-and-mortar casinos that are the licensed operators in the Garden State. If their nationally known brands (Caesars, Borgata, Tropicana and Golden Nugget) weren’t enough of an advantage, their online products also had a two-year head start due to PokerStars’ lengthy licensing process.

But even if PokerStars had been part of the synchronized launch in November 2013, it’s not clear to what degree it would have helped. Without exception, when a New Jersey casino has launched an eponymously branded online gaming site alongside an identical site featuring the platform provider’s brand, the brick-and-mortar brand wins hands down.

PokerStars brand is a known commodity within the online poker community, but among the general public in New Jersey, it can’t hold a stick to Borgata or Caesars—especially if we factor in that prior to its March 16 launch in New Jersey, the company hadn’t dealt a hand of online poker in the U.S. since April 15, 2011.

As Chris Capra, 888’s U.S. marketing manager, explains, this physical presence is important, as it allows players to put a face to the name. “You can walk into Caesars in Atlantic City and make withdrawals and deposits to your online account,” Capra says. “Essentially, people can link the online site with a physical company they know and trust.”

France: Similar But Different

France is a bit different. Established, French-based online gaming sites like Winamax and Everest Poker have kept PokerStars at bay.

In Spain and Italy, local online gaming sites sprang into being when the market went from global-gray to ring-fenced-white. In France there were existing online gaming sites that had dedicated the bulk of their marketing efforts over the years to attracting French-facing players.

“I think a big reason for their (PokerStars) relative lack of success in France and New Jersey is related to competent competitors,” gaming consultant Matt Kaufman says. “I think Spain and Italy simply didn’t have a solid competitor, but France and New Jersey have reasonably well-run local sites.”

Kaufman also notes that ring-fenced markets create different challenges that money alone cannot fix. “Globally, PokerStars has an inherent marketing edge due to their liquidity and cash flow,” he says.

“They have more money to spend, and they get to accurately advertise that they host the biggest tournaments in the world.

“In ring-fenced jurisdictions, they lose some of that edge. It goes to show that PokerStars’ software isn’t the only reason they do well globally, and the sites in France and New Jersey deserve credit for what they’ve done to keep up.”

As Kaufman notes, software may be important, but based on the results in New Jersey and France, it’s apparently not the only determinant of success.

Start With a Good Product

According to Mike O’Malley, the COO of Pala Interactive, the key to creating a successful online gaming site begins with your product. When it comes to product, he believes it’s a combination of “investment in the product, and commitment to maintaining it” that will bear results.

“When dealing with technology, a company cannot simply look at ROI on development,” O’Malley says. “Where we are at today, customers do not deal with issues well; they just move on to something else. A seamless transition through registration, deposit and play is vital.”

Capra echoes O’Malley’s sentiment: “You have to provide customers with the features they’ve come to expect.”

Kaufman, who helped build an online poker platform, HDPoker, from the ground up, also lists product as paramount to success, but in a somewhat more abstract way. “I think the most important thing is properly assessing the marketplace,” Kaufman indicates. “Too many companies build me-too products based on the success of others, and fail because of a lack of planning.

“Many business types neglect having an interesting vision (of their product) in favor of filling voids in the market.”

The Ultimate Case Study

A prime example of this is the now-defunct Ultimate Poker.

In a shortsighted attempt to be first to market, the company rushed to launch its product in Nevada. The decision had its benefits, as Ultimate enjoyed a monopoly for several months, but it would ultimately (pun intended) prove to be their downfall when a competent competitor emerged, Caesars’ WSOP.com online poker site powered by 888.

Ultimate was quickly overtaken in the Nevada market by the more robust WSOP.com, but its lengthy first-mover advantage, coupled with a lack of viable alternative options to WSOP.com, allowed Ultimate to maintain a fair amount of market share, while it floundered in New Jersey.

According to O’Malley, Ultimate made three critical mistakes.

First on the list: “Ultimate failed because they invested too much, too quick. Their vision was bigger than New Jersey, and when New Jersey didn’t pan out as they had hoped, they were in too deep.”

Second: “Their product was terrible. They bought a decaying platform that couldn’t be maintained quickly and effectively.”

Third: “They didn’t have a known, local brand, which in hindsight was most important when competing with the local casinos.”

O’Malley notes that Pala, which also lacks a known, local brand, faces similar hurdles.

California-based Pala Interactive launched an independent, self-branded online casino (piggybacking on Borgata’s online gambling license) in November 2014, and launched an online bingo site earlier this year. Because it lacks a brand that resonates with the local population, Pala has learned to do things a bit differently than some of its higher-profile and better-positioned competitors.

“We have no database, and no brand,” O’Malley says. “So competing is tough. We have also learned that players are willing to try brands out besides those they are familiar with. We are putting our toes in the water in all of the different products, so it’s a balancing act for us.”

But as O’Malley notes. unlike Ultimate, “we didn’t over-invest, and are positioned to ride it out.”

Even though he isn’t speaking to Ultimate specifically, Kaufman agrees with O’Malley that funding and creating accurate projections is crucial. “Unforeseen costs, especially related to entering new markets, can be enormous and potentially catastrophic for smaller companies,” Kaufman says.

“Failure to recognize how steep regulatory hurdles can be when getting started is a death wish. Startups with programming chops simply cannot coast through the process of getting past regulators, no matter how great your software architecture might be.”

Intangibles Matter

Software and proper funding aren’t the be all, end all. They are more or less the foundation that puts a company in a position to thrive. But to truly be successful, an online gaming platform has to get two other things right—marketing and customer service.

“Party proved that marketing was the No. 1 factor to getting players,” O’Malley says, in reference to PartyPoker’s pre-UIGEA market domination.

“In the New Jersey market today, local brands are better positioned to market to local players. Marketing takes different approaches depending on who you are marketing to, how big the audience is, what the product is, and who you are.”

Capra notes that in anticipation to PokerStars launching, his company has changed its approach. “Last year our promotions were pretty sporadic, without a lot of rhyme or reason,” Capra says. “Since January, we’ve created a very solid campaign, and have been more consistent.”

Capra goes on to say that had they waited until PokerStars launched to begin their new marketing campaign, it would have appeared more knee-jerk, and may not have had the same effect.

Another crucial intangible is customer service. As O’Malley puts it, “Players will have issues, and they need to be addressed. Dedicated, local support is vital.”

Capra agrees, noting the impact locally based customer service has on customers. “Being very local here (New Jersey) is very important. I don’t think there can be enough said about having the local presence here and letting the players feel that,” Capra says, noting how he gets happy, surprised looks when he explains the customer support for 888 is local. “I always tell customers, the folks that you’re talking to are in New Jersey; they’re in Secaucus—and that’s a very reassuring thing.”

 

Could a New Competitor Emerge?

There is a huge barrier of entry when it comes to the online gaming market. That barrier is money.

As Kaufman succinctly puts it, “Most new competitors simply run out of runway before they can take off.

“It costs an exceptional amount of money to go through design and production of a product that’s sophisticated enough to engage modern players to begin with, and there are countless mistakes that can easily be made during that process.

“By the time a platform starts looking good internally, you still have to get through testing labs and licensing with different jurisdictions, all of which takes more time and money,” Kaufman continues. “And just when you think you’re done, you finally enter a market where in most cases there are existing companies with cash flow to support their marketing efforts, and you’re trying to dig your way out of the hole created by production.”

The money issue goes beyond startups. As O’Malley notes, maintaining or updating an existing product is also an expensive undertaking.

“Technology is constantly changing, and it’s not easy to update massive pieces that make up your platform,” O’Malley says. “If you look at products like PokerStars and PartyPoker, they are built off of old technology, that has been maintained and updated throughout the years.”

So what’s the answer? According to O’Malley, it could be specialization.

“PokerStars was successful for many years because they focused on a single product,” he says. “That gives a development team a single focus, and the ability to understand that product.

“In New Jersey, most companies are doing casino, poker and even bingo. Each of those platforms requires a different type of attention, for a different type of player. That means sacrificing some feature function, or deeper investment to put total focus on each. It’s a never-ending battle to prioritize what is necessary, versus what is wanted.”

Steve Ruddock is a freelance writer covering nearly every angle of the iGaming industry for multiple outlets, including Bluff magazine and Online Poker Report. His primary focus is the developing legal and legislative picture for regulated U.S. online poker and gambling.

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