Dissertation: Internet Gambling: Consumers, Industry

Pages: 26 (9110 words)  ·  Bibliography Sources: 65  ·  Level: Master's  ·  Topic: Recreation  ·  Buy This Paper

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[. . .] The current revenues of $26 billion are expected to rise to $36 billion by 2012, continuing a trajectory of 13% growth from the past several years (The Economist, 2010). This is significantly faster than the growth in the remainder of the industry, which has stagnated during the economic downturn (The Economist, 2010). However, the online gaming industry is not known for rapid growth or innovation; the majority of innovation that occurs is limited to back-end processing and management activities, with most firms retaining known games and gambling activities in their front-facing operations (The Economist, 2010).

The top ten online gambling sites according to Alexa rankings are shown below, along with their daily traffic rates. Although this is not directly connected to the revenues grossed (which is often unavailable due to many firms being private), it does allow for understanding the size and scope of the industry. (State lotteries and sites of primarily offline lotteries have been excluded from this list, because these sites do not represent online gambling.) All sites except for one (Free Lotto) showed a primarily male audience aged 25-34, which confirms the academic research discussed above in regard to the demographic characteristics of the industry's customers. The majority of these sites also showed increasing visitors during the past three months, which is consistent with arguments that the interest in online gambling is increasing (The Economist, 2010). Ultimately, however, these sites do not generally rank as any of the top sites, and receive extremely small portions of overall Internet traffic, showing that online gambling is still a minority pursuit among Internet users.

Site

Ranking (Global/UK)

Inward Linking Sites

Page Views (3-month average of total Internet page views, percent)

Audience Demographics

Age

Gender

PartyCasino (Casino games)

1,308/75

0.00158%

Younger than average (most under 34)

High male visitors

BetFair (Sporting bets)

1,482/157

1,093

0.00471%

Younger than average (most under 34)

High male visitors

888 (Casino games)

1,318/297

2,085

0.00177%

Younger than average (most under 34)

High male visitors

Free Lotto (Bingo and lottery games)

2,014/2,256

0.00156%

Older than average (most over 34)

Almost even between male and female visitors

Full Tilt Poker (Poker)

2,638/903

3,517

0.00176%

Younger than average (most under 34)

High male visitors

* This site also has extremely high higher-education visitors

Poker Stars (Poker)

4,348/1,956

4,253

0.00088%

Younger than average (most under 34)

High male visitors

Ladbrokes (Sporting bets, casino, scratch games)

6,486/336

2,028

0.00095%

Younger than average (most under 34)

High male visitors

SportingBet (Sporting bets)

8,205/2,609

0.00090%

Younger than average (most under 34)

High male visitors

PaddyPower (Sporting bets)

8,474/479

1,206

0.00116%

Younger than average (most under 34)

High male visitors

* This site also has extremely high higher-education visitors (graduate and above)

PKR (Poker)

8,340/1,009

0.00064%

Younger than average (most under 34)

High male visitors

Table I Top ten online gambling sites according to Alexa.com (2011)

Competition and Strategy

In order to consider competition and strategy issues, two common strategic frameworks have been considered for this industry. The five forces model of competition identifies five underlying conflicts that can determine the competitive environment of a given industry (Porter, 1998). The Ansoff matrix identifies the ways in which a firm can compete given its current marketing environment (Meldrum & McDonalds, 2007). These two frameworks have been used to compare the potential for outcomes within this industry, as well as consider the competitive conditions the industry operates under.

The five forces competitive framework considers five elements of competition, including buyer power, supplier power, threat of substitute products, threat of new entrants, and overall competition within the industry, to determine where a given industry's competitive position is. The five forces model is shown in the figure below.

Figure 1 Porter's five forces model of industrial structure and resulting competition[footnoteRef:1] [1: Figure from http://www.valuebasedmanagement.net/images/porterfiveforces.gif]

These five issues can be summarized as follows for the online gambling industry:

The online gambling industry acts as a service provider for an intangible service and as such is a primary supplier; the supplier power levied by providers of support technologies is negligible.

The buyer power, on the other hand, is extremely high, due to lack of effective marketing strategies (discussed below) as well as broad choice of substitute products.

Threat of substitute products is encompassed in the division of the gambling industry into online and offline components and the fierce competition from land-based competitors (as discussed below).

Given the low entrance barriers and the number of jurisdictions that allow registration of online gambling companies, the threat of new entrants is high.

With a large worldwide market and a large number of mostly small competitors, the overall industry environment of the online gambling industry is very competitive, but it is not dominated by a single company or set of companies.

The second tool used to understand the industry is the Ansoff matrix, which identifies opportunities for market growth in a given industry (Meldrum & McDonalds, 2007). The Ansoff matrix identifies four market growth opportunities based on characteristics including new or existing products and new or existing markets (Meldrum & McDonalds, 2007). The figure below shows the Ansoff matrix and its relationship to product and market development. As will be discussed, the online gambling industry does not tend to innovate on products it offers consumers, instead sticking to known games and betting opportunities (The Economist, 2010). Furthermore, there is little evidence that the industry goes out of its way to seek out new markets, instead relying on existing gamblers for new customers (LaBrie, Kaplan, LaPlante, Nelson, & Shaffer, 2008). This indicates that the product strategy most consistent with the industry is market penetration using a new distribution channel.

Figure 2 Ansoff Product-Market matrix of product development[footnoteRef:2] [2: Figure from http://www.franteractive.net/resources/Ansoff-Matrix.GIF]

In addition to general competition, there are a number of potential dangers within the online gambling industry that can affect how well individual firms operate, as well as the industry as a whole. Many of these challenges, as with the land-based gambling industry, are related to organized crime (McMullan & Rege, 2010). McMullan and Rege (2010) have found evidence of different levels of organized crime syndicates at work in the online gambling arena.

Some of the criminal activities found in the gambling industry included hackers and malware that steals players' financial information, inside theft of data by the companies and their employees, phishing and identity fraud, and money laundering (McMillen, 2000; McMullan & Rege, 2010; McMullan & Rege, 2007; Schopper, 2002). This is a significant concern and one that has led to much stricter regulation than might have otherwise been seen had the industry not been such a significant target for abuse.

Marketing in the Online Gambling Industry

Marketing in the online gambling industry is inherently problematic. It is governed by the marketing rules of other gambling practices, which are routinely highly restricted and must comply with government requirements (Zangeneh, Griffiths, & Parke, 2008). Of particular concern is the impact of gambling marketing on children and adolescents, who do not possess the critical thinking faculties of adults and thus may be excessively influenced by marketing (Monaghan, Derevensky, & Sklar, 2008). The problem with management of gambling advertisements is that it is difficult to directly target consumers that may be appropriate targets (such as adults that are not problem gamblers) while still avoiding targeting marketing to underage individuals and other unsuitable targets (Monaghan, Derevensky, & Sklar, 2008). However, marketing also provides governments with revenues (through taxes and in some cases, such as lotteries, direct revenues from the game sales) (Zangeneh, Griffiths, & Parke, 2008). Thus, there is a conflict in achieving effective marketing for online gambling practices, which has impeded its general development. There are further problems in online marketing of gambling, particularly the issue of cross-border laws regarding gambling marketing and the technological challenges of restricting marketing activities from specific jurisdictions based on those laws (Hornle & Zammit, 2010). Given these conditions, it is perhaps not surprising that many online gambling sites do not engage in significant non-Internet marketing, choosing instead to stay with traditional Internet-based marketing techniques such as site optimization, keyword search and banner advertisements, and word of mouth or viral marketing techniques (Wesley & Barczak, 2010).

One approach that has been taken in marketing online gambling is relying on established brands in order to bring in existing customers, although this has not proved to be a very popular approach (McGowan, 2008). The short-lived Web site playmmirage.com, a site that was established by MGM Mirage on the Isle of Man, used the existing MGM Mirage brand in order to attract customers that had previous experience with the industry (McGowan, 2008). This marketing campaign used existing trust between the company and its customers in order to establish a marketing relationship and draw in consumers (McGowan, 2008). However, this attempt was abandoned shortly after its establishment, due in large part to MGM Mirage's status as an American company and the uncertainty of online gambling legality in the United States (McGowan, 2008). The majority of online gambling sites do not rely on the use of… [END OF PREVIEW]

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Internet Gambling: Consumers, Industry.  (2011, May 8).  Retrieved April 22, 2019, from https://www.essaytown.com/subjects/paper/internet-gambling-consumers-industry/9818453

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"Internet Gambling: Consumers, Industry."  8 May 2011.  Web.  22 April 2019. <https://www.essaytown.com/subjects/paper/internet-gambling-consumers-industry/9818453>.

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"Internet Gambling: Consumers, Industry."  Essaytown.com.  May 8, 2011.  Accessed April 22, 2019.
https://www.essaytown.com/subjects/paper/internet-gambling-consumers-industry/9818453.