In recent times, the regulation of online casinos in the U.S. has slowed somewhat, but its importance for operators aiming to build market share cannot be understated. With FanDuel continuing to cement its position in control of mobile sports betting in the country, which at the time of writing is legal in 28 states and live in 24, online casinos (with six live states and a seventh to come), is likely to become the key battleground where operators can build brand recognition and steam ahead of the competition.
Encouraging numbers
The markets are moving in a positive direction, with the American Gaming Association announcing that iGaming revenue totalled $5.02 billion in 2022, which showed a significant upturn of 35.2 percent from the 2021 total. The positive trend continued in the first half of 2023, with revenue being up 22.6 percent year-on-year to $3.45 billion. About a third of last year’s total was generated by New Jersey, which posted $1.66 billion in annual iGaming win, but it still reflects plenty of opportunity in the other five states that are currently live with online casinos. These numbers also include online poker revenue, but online casinos will always account for a large majority of the total.
This is being achieved despite the fact we are not regularly seeing an influx of new revenue from states opening up online casino markets. Since New Jersey and Delaware launched their regulated online casino markets in 2013, they have only been joined by Pennsylvania, Michigan, West Virginia and Connecticut. We are set to see a seventh state open up in Rhode Island, which will launch iGaming in 2024.
Moving into 2024, with mobile sports betting regulation now also starting to slow down, we expect to see lawmakers across several states considering online casino regulation. This won’t be plain sailing though, and there are several reasons for that.
Lawmakers and state bodies may look at the introduction of iGaming, with fast accessibility to mobile, as having a negative impact on traditional bricks-and-mortar casinos and bringing risks to jobs. This fast access will also lead to conversations about responsible gaming, so education will be vital in any states considering legalization. Gambling is rarely, if ever, viewed as a vote winner either, so even if this is gradually moving in a forward direction, we should not expect this to be a speedy process.
User experience and strength of content is key
While regulation has not reached as many states as would have been expected 10 years ago, the product offerings have improved exponentially. On top of the obvious strides in mobile usage and technologies, we have seen improved payment processing, stronger protections put in place for players, an increased offering of games including crossover with popular culture and better product marketing, which has been vital in terms of player acquisition and retention.
In New Jersey, there are currently more than 30 active online casinos, where the heavyweights like BetMGM, Bet365 and FanDuel are joined by challenger brands like PlayStar. We helped PlayStar launch there, and what we’ve found is it’s possible to find a place in the market by focusing on the user experience, personalization and the production of strong content. Their approach has been localized and they have aimed to provide unique player experiences across their offering.
This has been an effective way to cut into a competitive market where you’re competing against not only some of the biggest names in online gaming, but also land-based operators who have built familiarity with players across several decades. It certainly comes with its challenges, but the fundamentals are not too dissimilar to sports betting. FanDuel has taken the lead in that area with product and marketing innovation. Their marketing has often focused on product releases like single-game parlays.
While the dynamics of online casinos are slightly different, because not every online casino operator will be churning out brand new, innovative products on a regular basis and casino players tend to be players of habit, the ambition to provide the strongest possible content still has to be there.
Budgeting effectively
Another important thing for any operator moving into these markets to consider is the cost for acquisition of new players is high. These are states where players will have been accustomed to playing in bricks- and-mortar casinos, and it is crucial to focus on moving that experience online through the development of the product and the content offering. Creating that omnichannel experience will eventually lead to greater retention. We anticipate the means of improving retention shifting towards reward mechanisms like we have seen in sports betting with products like free-to-play games.
For any operator, whether they already have an established foothold in U.S. land-based casinos, or whether they are new to the U.S. entirely, the chances of success in these markets will be greatly improved with the help of the right supplier. The value that comes from working with teams with expertise in the field, both from a product and technical perspective, is a key differentiator. Experience in the U.S. is particularly important, as both sides need to understand what particularly works well with the player demographics across the different states.
Combining this with the ability to get things done and making sure products are live in a timely and effective manner will give operators the right tools to find their place in markets that are sure to become more competitive over time.
