January 24, 2020
The iGaming, or online gambling, industry was one of the first to capitalize on the immense opportunities of the ‘90s internet revolution. And after decades of early adoption of technologies like live streaming, cryptocurrency and artificial intelligence, iGaming is now expected to reach a value of almost $100bn by 2024.
A softening of legislation in US states like Nevada and Pennsylvania has certainly helped to accelerate the performance of the industry. But it’s the use of technology that makes it so exciting for investors right now. iGaming technology has not only helped casino operators to tackle fraud, and sportsbooks to optimize their odds. It has also facilitated a new wave of innovation that will be crucial for companies to stay afloat in the industry.
Let’s start with one of the industry’s biggest innovators: artificial intelligence.
Artificial intelligence and machine learning in iGaming
AI is expected to increase economic growth by an average of 1.7% across 16 industries by 2035. And given the iGaming industry’s openness to innovation, it’s unsurprising that AI has been applied in the industry for years. But casino and sports betting operators are continuing to find new ways to use AI which will only increase the potential of their products.
One of AI’s greatest roles has been to tackle the impact of fraudulent players, who have been a costly nuisance to iGaming companies for years. Rooting out high-risk or cheating players used to take a great investment of time and energy for casino and sports betting operators. But even the most experienced fraudsters are finding it harder to cheat thanks to AI and ML-powered technology. Gaming operators can now detect risky activity in real time and use the data to protect themselves from the robbery of fraudulent activity.
AI’s ability to process data faster, along with its capacity for image recognition, also allows sports betting companies to more accurately process events as they happen. They can now draw from a huge volume of data sets based on live feeds, social profiles, camera angles and more. This has given rise to the concept of AI sports traders, which can set markets and real-time odds much more effectively.
From a marketing perspective, AI also allows iGaming companies to better understand their users’ playing habits so that they can more successfully recommend other games. This presents extra revenue opportunities through cross-selling, and helps to retain customers who may otherwise have lost interest. It’s obvious why industry leaders are investing so much into AI, for the purpose of analyzing players’ behaviours. It allows them to better understand what motivates players so that they can encourage them to come back for more.
From building recommendation engines to spotting abnormal player behaviour, data and AI comes together to give players a better experience and more control. As the technology grows in capacity, sports betting and casino operators will not only be able to see what the problem is, they’ll be shown exactly how to fix it.
Blockchain and cryptocurrency in iGaming
There’s no question that gambling and cryptocurrency have a close relationship. As far back as 2013, it was estimated that around 50% of Bitcoin transactions were gambling-related. Today, cryptocurrency allows people to gamble online in places where regular gambling transactions are outlawed – or simply gamble anonymously.
But blockchain technology could hold the key to something even more important – proving the fairness of casino games. Online gambling has always faced skepticism from some players, because there’s no way to know for sure what’s going on “beneath the counter”. The implementation of blockchain offers a new level of transparency which makes online casinos more trusted, and could in the long-term result in more players.
Some crypto-only iGaming operators already exist, and there are many advocates that believe the iGaming industry could be a key driver in the mainstream adoption of cryptocurrencies. At SiGMA’s World iGaming Festival in Malta last year, a panel discussing cryptocurrency in the iGaming industry said that it showed greater adoption with the younger generation, and made it easier for players to make international transactions.
However, panelists also said that there was a stigma around cryptocurrency that limited its adoption. And certainly, Bitcoin’s high volatility, relatively low transaction speed and security risks have led other casino operators to reject it as a payment method. Cryptocurrency will inevitably have an important role to play in the future of iGaming, but it faces challenges of its own.
Game design, and the pressure to innovate
Mobile apps have been a huge catalyst to the continued success of iGaming companies. Smartphones and live streaming have made online gambling a social and accessible experience throughout the last decade.
But rapid increases in processor power and graphics capabilities have brought about much higher consumer expectations. There’s currently more pressure than ever for iGaming companies to innovate, and that’s why we’ve seen casinos expand their game rosters to include titles that combine casino classics with skill-based and RPG-style games.
There’s already more than 3,000 iGaming titles on the market, with around 50 new ones launching every month. Virtual reality games will inevitably become an important part of the roster in the years ahead. But promotion is key, too. It’s not enough to launch a game with a captivating theme, excellent mechanics and unique mathematics – it has to be presented in a simple, enticing package.
In a panel discussion at the CasinoBeats Summit in Las Vegas last September, Gamingtec CEO Sapar Karyagdyyev said that most operators were offering 95% similar products and services – and that they needed to be more creative. “Looking for cooperation with game developers, we appreciate companies producing valuable and original content,” he told the panel.
This industry is booming, but staying competitive relies on being able to offer players a completely immersive, multi-channel experience. That means offering a seamless experience as users switch from one device to the next. To meet consumers’ demands, iGaming providers will have a greater requirement for creative and technological expertise in the coming years.
Mergers and acquisitions will shape the iGaming industry
Given the speed at which the iGaming industry is moving, and the rapidly-growing requirements for technology and innovation, it’s easy to see why M&A has become such a part of life in the industry. Operators and suppliers are looking to consolidate, scale, gain ground in new markets, and attain new assets that can help them to stand out.
Last year’s news of a high-profile merger between the Toronto-based Stars Group and Irish bookmakers Flutter dominated headlines in the industry. Earlier in the year, it was announced that Stars had teamed up with Fox Sports to launch FOX Bet, a national media and sports wagering partnership that is unprecedented in the United States.
These deals have come about largely as a result of the relaxing legislation in the US – but with the industry becoming one of the fastest growing sectors worldwide, M&A is an exciting prospect for middle-market companies too.
A bright future for iGaming
Online gambling currently accounts for around 11% of industry revenue, and that share is expected to grow substantially within the next few years. It’s a thrilling space in which to reach new heights.
But in order to win and maintain market share, iGaming companies need to make sure they have the technology and creativity to give them the competitive edge. Offering players new, more personalized and more immersive gaming experiences is the only way to come out on top in this booming sector.
8 Smith Square, London, SW1P 3HT
© Grindstone Capital, 2021. All rights reserved.