Jackpot! Online Casinos to Drop Billions on Ads

Hey, ad agencies: Feeling lucky? You should be. With online gambling newly legal in Nevada and a host of states looking to follow suit, casinos are expected to flex some major marketing muscle, which could lead to the next boom category for spending. According to Simon Holliday, director at H2 Gambling Capital, "somewhere between $3.5 billion and $4 billion could be spent by the internet-gaming sector" on marketing over the next five years. That's more than General Motors spent in U.S. advertising in 2011. And if Mr. Holliday is right, by 2017 the online-gambling industry will be spending nearly as much as the entire insurance category did last year. The business of online gambling became reality last year when the U.S. Justice Department granted states the power to legalize online platforms connected to bricks-and-mortar casinos. Nevada, the first state to pass a statute legalizing online gambling, is working through kinks in the regulations and its casinos will likely begin advertising in January. Meanwhile, industry executives said 10 additional states, including cash-starved California, as well as New Jersey and Delaware, will likely pass their own laws in the near future. Mr. Holliday estimates the gross value of the online-gambling market to be $1 billion in 2014 and exceed $13 billion over a decade -- but not without the help of a major marketing spree. "Driving players to their sites is the biggest single cost of these companies," he said. "It is probable that 25% to 30% of company net revenues [20% less than the gross including bonuses] will be spent on advertising and marketing budgets in the initial years, as there is a land grab." To gain share in this lucrative market, especially if a federal law is eventually passed, casino brands are preparing to boost their marketing budgets. The biggest beneficiaries will likely be digital media and agencies. "Five years ago, the combined spend of all onsite-based gaming companies in online advertising was very small, limited to SEO for attracting visitors to book hotel rooms online and to come to the website," said Mitch Garber, CEO of Caesars Interactive Entertainment and World Series of Poker. "It's changing dramatically. ... There's no question that as an industry we'll be spending more time and money on interactive advertising." Coveted Accounts Caesars Entertainment, which owns Harrah's, Horseshoe, Bally's and others, recently opened a search for a creative agency to oversee digital-media planning, buying and search, Ad Age reported. There's no language directly linking the request for proposal to future online gambling, but existing digital efforts, such as free social games, will likely help casinos like Caesars introduce internet gambling to consumers. Casinos will continue to target offline media customers -- especially those who pay attention to events such as championship poker, which is broadcast live on ESPN, said Mr. Garber. He said that when he was CEO of an online-gaming company in London (where the practice is legal and gaming is among the most-coveted industries for agencies), "TV was the biggest creator of new customers." What's more, online and offline gambling are "very complementary," he said. "We're not going to do away with magazine, TV and billboard advertising, but we'll be a lot more creative." Much of the creativity will be aimed at a younger consumer. An agency executive familiar with the industry said most online gamers are in their early 20s, while the average casino gambler is north of 50. However, states and casinos are still working through some of the technical challenges in being able to detect age (gamers must be at least 21) and ensure that online betting and devices used to participate in it are contained within the state. The agency executive expects that if online gambling is legalized in at least five states, the big casinos will double their marketing budgets and, in a number of years, casinos could be a top client category for agencies. You have to be in it to win it, though. Online gambling is costly and time-consuming because agencies must purchase licenses in states in which they're supporting casino advertising. Licenses for one casino client have already cost his agency around $500,000, said the agency executive. Google's policy in the U.S. is another hurdle. The search giant "doesn't allow advertising for internet-based games where money or other items of value are paid or wagered in order to win a greater sum of money or other item of value." It's unclear at this time whether Google will amend its policy on a state-by -state basis, if at all. And while search is a key piece of the puzzle, the greatest obstacle for agencies will be revising their local marketing approach [from one focused on designated market areas to one focused on a state-by -state basis] said a media-agency executive. Any adjustments are worth the extra costs, this executive noted, as the payout should be significant. Though he's reluctant to estimate how much online gambling could add to marketing's pot, John Schadler, founder and managing partner at Las Vegas-based SK&G said, "there will be a rush at the inception of the online sites to gain market share and notoriety. ... That requires initial branding efforts and initial media spend at a pretty strong level. "It becomes an exercise in brand awareness," he added. "We're inventing a category."

Jackpot! Online Casinos to Drop Billions on Ads

Featured Stories