A Brief Re-cap from the NCRG and G2E: Part 1

It has been a while since we last blogged and we are sorry! This is due to the hectic conference season and demand for Bet Buddy products and services, but we are now back on the blogging trail. We wanted to take this opportunity to re-cap on what were excellent NCRG (National Center for Responsible Gaming) and G2E conferences, specifically two of the panel discussions that Bet Buddy participated in. Here's our re-cap on the first of these panels, the NCRG Roundtable on Online Gaming: Regulating Responsible Gaming on the Internet.

The session was chaired by Alan Feldman, Senior Vice President of Public Affairs at MGM Resorts and Chairman of the NCRG, and included Mitch Garber, CEO of Caesars Interactive Entertainment, Mark Lipparelli, Former Chairman of the Nevada Gaming Control Board, Clive Hawkswood, CEO of the Remote Gambling Association, and Simo Dragicevic, CEO of Bet Buddy.

As anticipated there was significant debate about the possible cross-over between social and real money wagering. Some believed that the player wagering characteristics and player types are very different between the two forms of gaming, with very few players making the cross-over from social to real money wagering, whilst others felt that the game mechanics between the two forms of gaming can be very similar. For example, Dr. Jeffrey Derevensky (McGill University) made an excellent point to Mitch Garber, in that given many youngsters play Caesars social games on Facebook such as Slotomania, Caesars has an excellent opportunity to use such games as means to educate younger social gamers about responsible gaming in real money wagering.

Debate also shifted towards the regulatory regime implemented in Nevada ahead of the launch of internet poker. Mitch Garber stressed that the requirements put in place by Mark Lipparelli and his team were more strenuous than his experience in the UK regulated internet gambling market when he was CEO of PartyGaming, specifically around money laundering checks and requirements to verify players' locations. However, when Mark was asked about whether Nevada would be implementing a central self-exclusion database which all licensed operators could use, he said whilst Nevada seriously considered this option, they didn't take this route from day 1 due to the regulator not having sufficient technical ability to develop and host such a service. Whilst we agreed with Mark's assertion that the regulator would require to partner with other specialist providers to deliver such a service, we believe there is sufficient weight of evidence for all regulated markets to adopt such an approach (for more on this topic read Bet Buddy's research into multi-operator self-exclusion with GamCare and Salford University).

There was also debate around what future directions research in problem gambling and Internet gambling should take. Simo Dragicevic stressed that the scientific community and industry should now look to start testing new tools and systems with actual players to assess their effectiveness in influencing behaviours, and whilst Clive Hawkswood supported this approach, he stressed that there are still many differencing view points in the scientific community about what is the best approach to do this, which may be hindering adoption. Alan Feldman asked whether internet gambling companies had developed universal algorithms that could identify people who are at risk for developing problematic gambling behavior. Whilst Mitch Garber stressed that Caesars do place analytics at the heart of their operations and use such approaches, we feel that we are still some way off from being at the point where the industry can adopt universal approaches (although this is not inconceivable).  

In our next blog post, we will highlight the key discussion points from the G2E Panel on Proactive Responsible Gaming, which was chaired by Connie Jones, Director of Responsible Gaming at IGT and included Joachim Haeusler, Head of Responsible Gaming at bwin.party, Hillevi Stuhrenberg, Head of Responsible Gaming at Betsson, and Simo Dragicevic, CEO of Bet Buddy.

What does the analysis of internet casino gambling player data tell us about behaviour and risk?

Our research analysing internet casino data has now been published in the latest edition of International Gambling Studies (Vol. 11, No.3), a special edition on Internet Gambling. The paper outlines the phase 1 findings from research undertaken by Bet Buddy in partnership with GTECH and City University London which utilised anonymised player data from a research cohort of 128,788 players from three internet gambling sites licensed in Malta offering internet casino and poker to regulated markets. Whilst the research builds on the methodology adopted by the Harvard Medical School and bwin Interactive Entertainment AG (specifically Braverman and Shaffer (2010)), which analysed live action sports betting internet data relative to gambling risk factors using k-means clustering analysis, our research explores the casino results in new contexts not covered in previous research. To the best of our knowledge this research, along with the Harvard/bwin collaboration (an overview of the collaboration can be found here), is the only peer-reviewed research to be published that analyses actual internet gambling data, and is the only research to analyse casino internet gambling data in the context of risk.

Whilst we discussed some early insights from the research in a previous blog this paper contains the full results and analysis. Our results are analysed in the context of risk factors, game structure, player education and clinical models for problem gambling. For example, we suggest that the analysis of some risk factors, such as loss chasing, could prove problematic when using current gambling screens (such as DSM-IV) in the context of internet gambling. Our results showed that real active money gamblers with the highest intensity and frequency levels gambled predominantly on slots type casino games, in comparison to the most moderate gamblers who preferred table games. We also examined how behavioural analysis and feedback mechanisms can help players to regulate gambling behaviour (for example how medical data is being used to help people make more informed choices - see this TED video). We explore how the opportunities that data analysis offers can help move beyond the traditional applications of data analytics in the gambling industry such as in marketing and risk management, in that applying advanced data analysis in new contexts (e.g. healthcare) can identify individuals who would benefit from proactive intervention or lifestyle changes (McKinsey's Big Data report discusses the application of data analytics in industry in general in greater detail). When the results were analysed in the context of clinical models for pathological and problem gambling (such as the Pathways Model) we found certain limitations. For example, we would have benefited from augmenting our existing internet gambling data sets with new data sets, such as call centre data, which can also be used to help predict gambling behaviours (see Haefeli, J., Lischer, S., & Schwarz, J.(2011)). 

We believe that this research is an important step in furthering our understanding of internet gambling behaviours in the context of risk and player protection and welcome feedback from industry and academic practitioners. If you interested in finding out more about our research and product offerings then please contact us.

Some Snippits from Westminster – The Future of Gambling

Yesterday's gambling seminar at Westminster (London, UK) brought together senior industry, parliamentary, and regulatory figures to debate how regulation, technology and international markets are shaping the future of the gambling industry.  Whilst there was much debate across a range of issues, such as EU regulatory harmonisation, taxation, US regulation and Black Friday, data privacy, sports betting and sports rights, we will share some highlights from the discussions that focused on the new opportunities that technology is providing for the industry.

Opening the ‘New technologies and platforms for gambling’ session was Mark Maydon, Commercial Director of Sporting Index.  Maydon said that the industry is witnessing an ‘arms race’ in terms of technology, in that there is a need for significant and continued investment in IT if operators are to remain competitive.  Operators need to develop more effective and scalable data processing capabilities, with Maydon suggesting that the gambling industry needs to learn from how the financial services industry has developed these capabilities.  Investment in mobile gaming was also an area of significant importance and growth for the industry.

Charles Cohen, CEO of Probability, was next and he stressed that whilst mobile gaming was a growing channel it was a very different channel to traditional online gaming.  He challenged the ‘myths of mobile gaming’  stressing mobile gaming’s objective is not about squeezing as much cash from online gamblers by encouraging them to gamble more (such as when in the pub or whilst waiting for the bus).  Rather, mobile gaming is about offering a different betting experience that appeals to a different customer i.e. not traditional PC-based online gamblers.  He stressed PC-based online games do not transfer well to the mobile channel and the best mobile games were very simple games.  He also shared some interesting insights from Probability’s own research: the average session of a mobile game is c.10 minutes and 82% of mobile gamers gamble whilst sitting at home sitting in front of the TV.  David Loveday, CEO of OpenBet, stated he felt that the TV channel, once integrated with broadband, along with online content provision, were two areas that will become increasingly prevalent in shaping the future of gambling.

Finally Martin Cruddace, Chief Legal and Regulatory Officer at Betfair, framed his views on technology in the context of social responsibility and integrity in betting.  Cruddace said the industry must lead from the ‘front foot’ on these issues and that Betfair was investing in technology to better protect the customer, including predictive analytics to identify problem gambling behaviour.  In addition, Betfair are further enhancing the current range of player protection features by offering self-exclusion via gaming vertical and are also assessing the possibility of giving players the ability to exclude themselves from gambling from certain parts of the day e.g. after 11pm.  Earlier Peter Reynolds, Head of Communications at bwin.party, emphasised the that online gaming offered a perfect audit trail of data that allowed the industry to proactively track online behaviour and act upon insights obtained.

The key messages coming from the other sessions re-iterated common themes; US regulation will inevitably happen however this will be via multi-year state projects, a lack of harmonised regulation in Europe is making it increasingly expensive for operators to compete internationally, however EU harmonisation is realistically many years away, and regulating markets is the best way to protect the consumer.  And the consumer is what the industry must focus on during these consultations and debates over the coming months as the best way to influence policy makers is by framing the debate in the context of what is best for the consumer rather than what is best for the operator.

Further Analysis of Behavioural Markers for High-Risk Internet Gambling

At the Responsible Gambling Council’s Discovery 2011 conference we presented our research and solutions that help lotteries and operators to develop sustainable relationships with gamblers by helping them to make more informed decisions.  Part of our session was focused on sharing our latest research findings on the analysis of high-risk gambling behaviours.

Braverman and Shaffer (2010), from Harvard’s Division on Addictions, published How do gamblers start gambling: identifying behavioural markers for high-risk internet gambling last year.  The paper is an important research asset as it was the first to analyse actual online gambling behaviour during a gambler’s first month of play to predict gambling-related problems.  Their study of live action sports bettors identified a small sub-group of gamblers (2.8%) from the total research cohort (n = 530) who demonstrated high levels of gambling variability and involvement.  These gamblers were found to be at higher risk than other gamblers of reporting gambling related problems.

The study was of particular interest to us because it was the first to use actual online gambling data to analyse  the first month of play, which allows for the possibility of intervention before gamblers start causing harm to themselves.  We wanted to see whether their results for sports betting would be consistent with other gamblers so we recreated the study using two new datasets, casino (n = 546) and poker (n = 575), using the same methodology as Harvard i.e. analysing the first month of play following registration, using the k-means clustering method and the same behavioural markers.  Our results showed some similarities to Harvard’s, in that we identified in both casino and poker a small-sub group of gamblers who showed markedly different gambling behaviours compared with the others gamblers during their first month of gambling activity, which in our case was highly variable gambling patterns e.g. see cluster 3 in our casino results.

We also observed other similarities with Harvard’s results e.g. the majority of gamblers in the research cohorts demonstrated moderate betting patterns.  There were also some differences e.g. our casino research identified a sub-group of gamblers who demonstrated high levels of gambling Intensity during their first month compared to the other gamblers.  This could be attributed to the nature of the casino games, such as slots and roulette, in that they are more continuous compared with live action sports betting and poker, which could allow for more intensive betting behaviour.  

Further opportunities exist to build on Harvard’s and our research, including extending the number of risk factors and also leveraging alternative statistical methodologies.  Whilst clustering is a useful machine learning technique for dividing data into meaningful groups, it has some limitations.  For example it has trouble clustering data with large outliers, such as skewed non-normally distributed populations such as these datasets.  It is also produces more meaningful and natural clusters with the application of greater numbers of variables and sub-clusters e.g. Experian, the credit rating agency, has used the k-means clustering technique to cluster populations into 45 types and 13 groups using 350 measures (Cameron et al, 2005.  A new methodology for segmenting consumers for financial services.  Journal of Financial Services Marketing, Vol 10, 3, 260-271).  

These findings provide further evidence of different gambling patterns and behaviours relative to high risk behavioural markers amongst gamblers.  We plan to publish the full findings later in the year.  However, when new technologies emerge, such as using behavioural analytics to help gamblers to better self-regulate their gambling behaviours, their usefulness is not always obvious and their uptake is rarely dependent on how well the technology works.  Rather, success and uptake depends on whether the ideas behind the technology spread and diffuse, which is why it is important that the industry has the opportunity to debate these ideas in detail.  At Discovery 2011 there was significant interest and debate across many sessions in how new technologies can help to better protect vulnerable gamblers.  Thanks must go to the Responsible Gambling Council for organising a great platform to enable lotteries, operators, software providers, problem gambling prevention and treatment providers and academics to debate these issues in a very open and collaborative manner.

The Forces Shaping the Online Gambling Industry

Whilst the online gambling industry has witnessed tremendous growth in the past 10 years it remains a very young industry, currently capturing c.6% of the gambling industry’s total gross gambling yield of c.$336bn (Barclays Capital). As the industry continues to grow and mature, an increasingly complex operating environment is presenting both challenges and opportunities to operators. This blog entry seeks to examine the key forces that are shaping the online gambling industry today.

Regulation

The regulation of online gaming markets is opening up opportunities for legalised online gambling in European markets, which is primarily being driven by the need for governments to effectively manage the taxation of the online industry. The regulatory map in Europe remains complex and in flux following a series of European Court of Justice rulings during the past 2 years. The spectrum of regulation across Europe is wide, ranging from online gambling being banned, such as in Germany, to liberal regulatory regimes like in the UK. In between are countries that have regulated online gambling with varying licensing and taxation regimes.  Whilst growth of the online market in Europe will continue with the further opening of markets, online gambling in all forms remain illegal in the USA.  Despite opposition to legalising online gambling in the US, it is expected that the trend towards regulation will continue over the next 2 years.  Whilst a more uniform regulatory playing field in Europe remains at least 5 years off, Michel Barnier’s Green Paper on European online gambling is due to be published at the end of this year and is being eagerly awaited by the industry.

Technology

At the 2010 EIG product development was highlighted by Mark Blandford (Sportingbet founder and Valhalla Investments) as more important than marketing as players demand richer, more varied and more mobile gaming experience. Advances in technology is allowing game developers to take 3D gaming to new levels, and this trend of enriching the user experience will spread to the online gambling sector. The number of mobile broadband subscribers is rapidly increasing i.e. there were 257m subscribers in 2009, which is predicted to expand to 2.5bn by 2014. Operators are also investing heavily in developing advanced analytics solutions to better understand customer behaviours to make marketing campaigns more targeted and meaningful. Whilst there has been a large focus on customer acquisition in the past 5 years, operators are now focused on reducing player churn during key phases of the customer lifecycle. No one operator will be able to develop market-leading technology capabilities across all these areas in isolation therefore best-practice collaborations with specialists will be required to remain competitive. Potential new competitors are emerging as social media technology platforms mature and attract more users and gamers, with the distinction between legalised gambling and gaming with virtual currencies becoming increasingly blurred.

Consolidation and Convergence

The industry is now entering a phase of consolidation as brand, capital and scale become key levers to entering new markets and attracting customers through competitive prizes, odds and gaming variety and experience. The biggest moves in the market in 2010 included PartyGaming and bwin’s merger to create the world’s largest listed online gaming firm and Betfair’s recent flotation on the London Stock Exchange, signs that access to capital and scale will become increasingly important to succeed. Sportingbet and Unibet are also in discussions regarding a £600m tie-up. As well as revenue generating synergies, consolidation will provide vital cost reduction opportunities through economies of scale which will become increasingly important. Sales and marketing costs typically make up between 30-40% of an online operator’s costs and it is likely that retaining these budgets will remain an important weapon in the battle for market share. Further competitive pressures will result from the continuing trend of convergence, with land-based operators looking to leverage their brands and gain market share in the online sector. Convergence within the industry between B2B and B2C will also continue as online operators look to expand their business models and find new revenue sources to augment existing revenues from players.

Corporate Transparency and Trust

Given numerous corporate crises across many industries over the past few years there is an increasing expectation that all corporations should be ‘whiter than white’ and operate in a socially responsible manner. The online gaming industry has in recent years increased its focus on delivering a socially responsible industry for players. The regulators who license operators have responsible gaming codes of conduct in place that operators must adhere to which are both prescriptive (e.g. age verification, self-exclusion) and open to interpretation (e.g. prevention of problem gambling). Whilst it is difficult to predict whether recent economic and corporate failures will result in a permanent change in the corporate attitude towards CSR or tougher regulations, focus from the media and policy makers will continue to grow on industries with perceived reputational issues, such as gambling. The internet also offers an unparalleled level of transparency to customers, whether it’s comparing operators’ odds, prizes or which organisations they are accredited by. Given increasing competition and very low switching costs associated with online gaming, customer loyalty cannot be guaranteed solely by brand awareness marketing and customer inertia. Brand equity will remain incredibly important and nurturing customer loyalty and trust will play a key role in growing an online operator’s brand value.

EASG Conference – Some Links to Interesting Presentations

I was fortunate enough to attend the European Association of Gambling Studies conference in Vienna a couple of weeks back and the EASG have kindly posted the presentations on their website. There is a lot of really interesting information posted, and whilst it will take a long time to review them all, I’m going to give you some links to some of the sessions I attended.

Alex Blaszczynski from the University of Sydney gave a thought-provoking presentation on approaches to better understand the relationship between internet addiction and gambling whilst John McMullan from Saint Mary’s University (Canada) demonstrated an immense knowledge and understanding of online poker marketing and promotion and what this means from a responsible gambling perspective.

For a more detailed look at new thinking into problem gambling detection, I heard Tony Schellinck from Dalhousie University (Canada) give an overview of the work they are undertaking on developing FLAGS, a screen which acts as an early warning system to measure problem gambling risk. Joerg Haefeli from Lucerne University (Switzerland) gave an interesting overview of early detection research based on call centre data and his colleague Suzanne Lischer built on this when talking about early detection processes for problem gambling.

An increasing area of interest in academia is the link between youth gambling and social media, with presentations from Jani Kinnunen from the University of Tampere (Finland) and Jennifer Reynolds from the University of Toronto.

Finally, Sally Gainsbury from Southern Cross University (Australia) in Parallel Session 1 talked about the effectiveness of online interventions in the treatment of problem gambling and Henrietta Bowden-Jones told us about the great work she and her team are undertaking at the UK’s first NHS National Problem Gambling Clinic.

I could go on and on as there were many many other interesting talks and presentations but I would be here for some time!