Responsibility, free bets and the new UK PoC regime
Published 5th November 2014
There has been heightened concern within the industry about the proposed 15% point of consumption tax, as well as increased moralizing over the issue of responsible gambling from both the government and the public. In my opinion, the issues are no different from those associated with the other sin taxes, derived from concerns over the social implications of alcohol and tobacco advertising. At the heart of the issue is a government full of ambiguity about what is an acceptable level of intervention into the lives of its citizens, but perfectly comfortable with the money it earns from taxing these vices. This is a very complex debate, so I will restrict my analysis to how the new legislation is likely to affect the bookies and, more specifically, online advertising as a source of new business for them.
The four major players have come together in order to engage government proactively through an industry watchdog called the Senet Group (http://senetgroup.org.uk). All gambling companies will have to adapt to consequential changes in the legislative environment associated with the Gambling (Licensing and Advertising) Act (GLA), which comes into force on the 1st of October. The main consequence of the Act will be the new point of consumption or PoC tax, due to start from December 1st, and all profits from online betting undertaken in Britain will be subject to this
new tax. Understandably, this will have considerable financial implications for the online revenue streams of gambling companies, and, equally as important, the affiliate sector’s financially viability will be similarly challenged by the new tax.
The impact of the new legislation on free bet offers will force operators and affiliates to undertake major strategic shifts in their marketing efforts – whether online or above the line – that will comprise dramatic changes to the message, tone and content of their advertising. I make reference below to pay-per-click (PPC) advertising to illustrate the implications of the GLA from an online perspective. Do a search on your favourite engine and you will see the promotion of free bets, or matched bets, in various different guises (See Figures 1 & 2).
Matched betting, which is otherwise known as lay betting, or double betting, is a method that bookmakers have been using to entice punters to place a bet with their money, and use the free bet offered by the bookie to place the opposite bet in order to secure their chance of winning. Generally, there is limited risk involved. Punters will place bets at multiple bookies, in a practice known as lay betting, in order to provide insurance to their bets, and the smarter ones will spend hours researching online looking for the best specials, and free bet offers. That is why it is so important to present a solid offer, so that punters not only use you for an introductory offer but they recommend you to their peers for delivering a better value proposition. The 15% tax however, seriously impedes the ability to a) create enticing offers without actually giving money away, and b) to better the offer of the competitors.
Let’s use a practical example of how powerful an enhanced free bet offer can be. During the month of June 2014, Coral promoted a one-day special on the opening fixture of the world cup. The offer, 2/1 Brazil To Wear Yellow. This was a truly unique and noteworthy offer that really stood out from the pack. Brazil, playing in the home country, had no other kit change, so the outcome was a guaranteed double of the bet. The offer was promoted consistently across all channels. Coral’s PPC spend reflected the offer on Google and Bing, with a customized landing page which resulted in a flood of new customers signing up.
It was the very nature of this offer, a guaranteed, low maximum bet offer, which was so enticing and pivotal in the acquisition of new customers (See Figures 3 & 4).
The Brazil enhanced offer differs from the generic day-to-day offers that most bookies run as standard free bets. These offers are open to new customers only, and can be used only once. Some examples are Coral’s bet £5 and get £20, Williams Hill’s bet £10 and get £20 and Paddy Power’s Bet £10 get £20. In such instances, the punter’s risk is much higher, as these would pertain to any sport where the odds of winning would vary and thus the punters would never be 100% sure of a winning bet like they were with Coral’s Brazil To Wear Yellow offer.
So, fast forward to the introduction of the new bill. Operators would get taxed 15% on any net gaming revenue (NGR) they receive from these offers. Unless they were getting an extremely high volume at a very low cost-per-acquisition, it would become far too expensive to promote free bets, which could ultimately spell the end of, or extreme limitations on, free bets as a promotion/ acquisition tool. If you think it’s a punch in the gut for the top echelon companies such as Coral, William Hill and Paddy Power, then let’s consider how this will affect the affiliate space. The affiliate space operates on a cost-per-funded player and then on a percentage of NGR. Although it’s not set in stone yet, it is my opinion that the affiliates will also face 15% less on NGR paid out by the operators, and the ripple effect will put huge pressure on affiliate profitability. It will also be a lot harder to convert punters without these so-called free bets. The smart operators will use enhanced offers and tactical offers to gain new customers and likely these would become the new form of “free bets”. I see this creating a lot more effort from the affiliates’ side, as websites and offers will need to be constantly updated with enhanced offers and the smart affiliates will prevail either through the use of technology or just pure blood, sweat and tears, as offers and enhanced offers will constantly need to be updated due to their short life span.
When looking to the future of online gambling, it is a hazy one, with the general feeling that competitors may either adhere to the new PoC tax, find a loophole to get around this, slightly change the message tone of their offers, or find a new angle or hook to keep the punters coming back. It presents a new and somewhat appetizing challenge to the companies and the many agencies associated with their brands, and who work tirelessly to promote them, while also trying to change the way the public perceive them and ensure they don’t appear in the tabloids for the wrong reasons.
Crave & Lamb’s Account Director Sam Behar comments: “The point of consumption tax is an issue which must be addressed head on from a front end communications perspective. Advertisers like Coral will be dealing with the issue of responsibility in this sector with the utmost importance. The hierarchy of change will certainly begin above the line, and should change the way in which operators act on air and out of home, focusing more on trading value and less on free bet messaging. “Ultimately we must all collectively view this as a huge opportunity to deliver a value proposition across all markets that promotes price over free bets and that cements Coral as a leading trusted brand in the UK gambling sector. Across digital disciplines the same principles must ring true with clear and transparent messaging to all our customers alongside a concise explanation of our position of
responsibility. As advertisers we welcome these changes and continually ensure that we are leading the movement of responsibility in this sector”.
It is a culmination of public and governmental pressure that will see gambling companies increase their social and corporate responsibility efforts
to promote gambling in a responsible manner. For operators like Coral, depending on a variety of factors, this could provide a positive knock-on effect, as consumers will view the company as mindful of the harsh effects of uncontrolled gambling, and appreciate the aforementioned efforts of promoting
responsible gambling. There are various ways of getting this message across, and a few are outlined below:
- Introduction of a voluntary TV advertising ban on sign-up offers (free bets and free money) before 9pm
- Commit 20% of shop windows advertising to socially responsible gambling
- Funding of new bespoke advertising campaigns in order to educate people on responsible gambling
- All TV advertising to carry more prominent responsible gambling messages
- Withdraw all advertising of gaming machines from betting shop windows
The Bill has been passed; both the public and the government will wait to see how the gambling community responds, and what the old guard of the Senet Group will be doing in their campaigns to try to convince them that gambling can be further controlled. The affiliate space will of course have to absorb the fallout, whatever form it takes.