No More Free Lunch For Casino and Bingo Operators
When the UK Government first revised its gambling laws in 2014 – which included the 15% point-of-consumption tax (POCT) on all UK sportsbook bets – casino and bingo free bets were spared from the general betting duty (GBD). However, Chancellor Osborne’s latest budget proposal aims to level the playing field and proposes to impose the 15% general betting duty (GBD) on all free or discounted online bets effective August 1, 2017, including bonuses being offered on casino and bingo games.
Sizing the search impact
Free bonuses – whether in the form of additional bonus money top-ups on first deposits or no-deposit offers – form a crucial part of the online gaming proposition and are a key incentive driving players to register. But how big a portion of the online traffic is being driven by searches for these specific offers? In the absence of a magic crystal ball, we turn towards historic search volumes for keyword segments around casino and bonuses in order to gauge how the proposed change could impact the search behaviour of UK punters and what shifts could be expected from an advertisers’ perspective. Across roughly 1,500 keywords, the rough breakdown of search volumes around free-bet/bonus-related terms can be seen in Figure 1.
Sports betting represents by far the largest single slice of the pie, contributing to almost half the monthly search volume around free bet/bonus-related terms. However, looked at as a whole, it looks like a fairly even split between casino-related free bet queries (also including roulette and slots) and the sportsbook segment, and as such, the aggregate impact across all nonsports free bet bonuses will be significant. If we looking at the top 5 sportsbook queries (see Figure 2), it’s clearly evident that free bet searches are driving a lot of volume, with about 40% of traffic coming from such queries.This somewhat overstates their importance, because a lot of sportsbook search volume is event-driven and long-tail.
However, it provides an idea of how significant these promotions are. What’s also worth noting is that free betrelated terms offer a significant discount on the suggested bid, which is partly due to lower expected player value, but also reflects the additional bonus costs that have to be paid by the operators. Sportsbook operators have also had quite some time to adjust their PPC strategies following the tax rollout in late 2014. In casino, where the tax won’t be levied until August next year, bonus-related terms account for around 44% of all search volume, similar to sportsbook, and again a significant portion (see Figure 3). However, unlike sportsbook, the traffic is split between free bonus queries, and queries specifically relating to no-deposit bonuses, which at 32% constitute by far the largest category in terms of volume.
How will the tax impact PPC?
Across cost per clicks, we see bingo and casino coming in at an average of around £25-£30/click. Clearly, the larger expected player values are driving up the CPC’s when compared to Sportsbetting, where recommended CPC’s on free bet terms hover at around £18/click (See Figure 4). Since these bids are driven largely by auction dynamics, it would make sense to see the cost per clicks decrease by roughly 15%, as advertisers adjust their targets to compensate for the GBD, which should see a deflation of CPCs for bonus-related terms.
Interestingly, unless the CPA payouts are adjusted for affiliates, this would be a boon for UK aggregator sites that receive a significant portion of their traffic through just such keywords, and it’s certainly an area that we’re watching closely. However, in reality, there’s been relatively little adjustment on free bet keywords following the original rollout of PoCT in late 2014, in fact the CPCs have actually started to rise after an initial cooling off period (see Figure 5)
Will this force a change in search behaviour?
One interesting development that occurred in the sports betting vertical after the PoCT took effect was the switch in acquisition messaging: whereas previously punters were lured in by attractive match bonuses (i.e. Bet £25 Get £50), this suddenly switched to focus on enhanced odds offers. There was very little search volume around enhanced offers prior to the taxation change, however it wasn’t long before customers started researching around the new acquisition mechanic (see Figure 6). Total volumes are still a far cry from the standard “free bet” queries; however the trend is up and rising. It will be interesting to see if the latest update to the GBD will have a similar impact on the casino and bingo space and prompt operators to adopt a new acquisition mechanic, or whether there will simply be an adjustment of CPCs in the medium term as advertisers adjust for the 15% tax expense.