|Wednesday 17th December 2014|
What is happening to online betting?
You may well have noticed - it would be odd if you haven't - online betting providers have been falling over themselves to attract our attention recently. The sheer volume of advertising by betting firms on TV, in print and especially over the internet has gambling in one form or another practically inescapable - which is probably the point.
As punters we are now bombarded by so many free bets and introductory offers that stand-alone sites have started springing up dedicated solely to identifying which Online Bookmakers are offering the best offers at any one point in time. As someone once said, the seagulls follow the trawler.
The obvious question is, why is this happening? After all, it's not normally like bookies to go around giving away free money.
Flattered as we may be that these august organisations are going out of their way to flutter their commercial eyelashes at us, we shouldn't get carried away. The bottom line is still the bottom line. Nobody does maths like a good bookmaker. That said, the maths is pretty impressive.
According to a report by Davy Research published earlier this year, gambling companies in the UK spent approximately £690 million on marketing during the course of 2013. That is a big spend in anyone's book. The same report also found that between 20 and 30 per cent of all online revenues were reinvested in advertising or marketing. What we're seeing on TV, in our papers and online is the product of all that investment. In practical terms, it adds up to around 1.39 million TV ads. That's what you get for £690 million these days.
For all those big numbers, though, the persisting question is 'why?'. Why are these guys throwing their money at the ad men like it’s going out of fashion?
The big answer is the introduction of the 15% 'point of consumption' tax that came into force on 1st December. In case you missed it, the tax applies to operators (not punters) and is levied on any profits raised from bets placed online. Of course, at some point as punters we are bound to feel the impact of that tax. Running an internet gambling company just got 15% less profitable.
Superficially, the hike in marketing spend has been all about capturing and consolidating market share before the inevitable passing on of that tax to the punters in the form of skinnier margins and less generous offerings. That's the top-line argument. There is, though, a suggestion from the accounts department that a clever carry-forward of annual marketing spends might be a way to produce lower trading profits and hence a lighter tax bill for the years going forward from 2015.That would explain that extraordinary level of reinvestment of revenues.
That's just what the accounts department says.
What will happen as the costs of the point of consumption tax begin to hit home remains to be seen. We're expecting to see fewer free giveaways in the months ahead and maybe even a bit less of Ray Winston on our TVs. That said, it is worth taking not of his call to action. They won't be there forever.