Researching for expansion vol. 2: The Business Perspective
In the previous post we looked at the regulatory requirements you'd keep an eye out for when considering to expand to a new market. Although important, it's not even close to the whole story when building a business case for expanding. As important is to consider the market from the actual business perspective, and how it aligns with your own strengths and strategy. Every market has its own peculiarities, that are a usually result of surprisingly long history of legal and cultural development, in some cases it goes as far back as 3000 BC. How the this history has shaped the country, will be visible on which games might be the most popular, gender differences or how the market is divided between online and offline offerings.
The business part in market expansion is a huge subject in its self, something that could be a material for book even. So, this will only scratch the surface, as so much is down to the individual companies' own strategies. It's a big undertaking for anyone and should be treated as such.
The are many factors to look at on a market, like size, maturity, competition, customer behaviour and marketing restrictions, but with a thorough analysis of the key parameters, you can deduce if there's a gap for you to start enlarging. When you look at the size of the market, let's say comparing Estonia versus Spain on just population level: 1,3 million vs. 47 million. Take away people under 18 years of age and you have a potential gross audience. The share of the adult population that participates in gaming (online or offline) varies significantly from one country to another, but for markets that have an established, regulated online market, you could say that roughly 15% to 35% percent of them take part in some form of online gaming activity monthly. Money spent on gambling per capita (or ARPU for your customers) is a good KPI to find out also, there's a huge variance between countries on available money for this kind of entertainment and people's willingness to to spend it.
Marketing restrictions are especially critical to understand, when you're coming in with greenfield approach on an established market, how will your customers find you? The available or allowed channels; like TV, paper, online, offline and social media advertising differ from one country to the next, or the actual content of those advertisements might be subject to regulation. If you have a target audience, do they typically follow a specific sport, if so maybe a sponsorship with events build around it? Local presence vs. advertising on national level. Partnering up with a local ad-agency or marketing company is usually a good idea, they'd know what would work and where your audience is to be found. There's many strategies you can employ in your entry and it's crucial to find out what will work best with your brand and target audience.
There is also significant behavioural differences from one market to another, which game categories are preferred by which demographic. Sports betting has traditionally being something that is hugely popular in southern Europe and Great Britain where as casino games mostly dominate in the nordics. For example, depending which sports betting product you have, make sure that there are also sports and leagues represented there that are expected and played in the country you plan to enter. Poker has been heading down for a decade, dropping from its once dominant position into a marginal product for most companies. That being said, if you have a good product and knowledgeable staff you might want to try it out as the competition is waning also.
All of the points above are affected by market maturity, what customers are expecting, in terms of product offering and experience.
Weighing in the costs of entering and the operations that follow it, and comparing it on market projections gives you an idea of rough ROI. Significant cost element for entering a licensed market is the cost of getting/being compliant, our service is designed to alleviate this pain and make it much more risk-free and cost effective in terms of initial investment needed. It will continue to save you money on the operational side going forward, and will bring further value when entering yet more markets. When a market is newly regulated, the regulators are also often learning the ropes as they go on, so places where you cut corners in the beginning might come to haunt you later, when they are up to speed. Even a faulty report or erroneous data might slip through, but as it is stored for a longer time period, there's good chance that it will cause trouble later on.
In the next post we'll examine the respective merits between two ways of entering, greenfield and through M&A. Those naturally tie in closely with the business aspects of market entries.