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."