A Candid Discussion on Mobile Gambling

Charles Cohen is regarded as a true pioneer of the interactive gambling space. He identified that mobile, rather than PC and Mac, was a neglected segment of the interactive gambling market and decided to create a specialist company to dominate that opportunity. He founded his company, Probability Games, in 2004 in London, taking it public on the London Stock Exchange in 2006.

Probability PLC is now the market leader for gambling on mobile devices. They have more than 1 million customers for their mobile casino games, taking more than 13 million bets each month. They operate under their own brands (“Lady Luck” being one of them), as well as a platform vendor to third-party brands such as Ladbrokes and William Hill.

Cohen has recently stepped up his international expansion strategy by signing deals in Mexico with Grupo Caliente, as well as starting the process to come into Nevada.

With the legalizing of mobile interactive devices in Nevada and now in New Jersey, the stage seems set for mobile to compete for a chunk of the gaming pie in the U.S., too. So I took the opportunity to ask Cohen for some background and tips on mobile gaming. Below is our conversation.

DB: Why is mobile important for online gambling?
CC: June 27, 2012, was the fifth birthday of the iPhone. This little baby has grown into a monster. Steve Jobs, a man truly at one with his inner fountain of hyperbole, promised us a product “that would change everything”. He turned out not just to be right, but (for once in his life) understated.

The smartphone generation he helped create works, shops, banks, socializes and plays very, very, differently. How, where, why and what players gamble on is also going to change profoundly. So is who they are. It will be a different, new, customer and possibly new brands and operators too.

DB: Is mobile gambling something for the future rather than something to consider today?
CC: It’s now. More than half of Americans and Europeans have smartphones, and they spend up to 90 minutes every day using them for games, e-mail, Facebook and occasional telephone calls.

DB: Do you think land-based gaming companies need to concern themselves with mobile?
CC: Yes! And the easiest reason to can be seen if you remember what happened to Kodak.
Kodak, as you know, filed for Chapter 11 bankruptcy protection not so long ago. There were many reasons for their spectacular demise, but one of them was a complete failure to recognize the threat from digital photography until the horse had bolted, fathered several new generations of horse and retired to the country.

Kodak’s error appears to have been to have done everything right. They listened to their customers, who kept telling them to make better film products. The early digital cameras were pretty hopeless, so why should they waste their time on such fripperies?
Of course, we know what happened: Digital photo technology created a whole new generation of photographers who could now walk around with a whole photo editing suite and production facility in their purse. These people were not Kodak’s customers, so they totally missed the party.
Mobile is doing the exact same thing in e-gaming. It’s creating a whole new generation of players who want something very different from the punters, whose needs are so expertly met by the online providers. The latter, naturally, have no idea that this is going on and probably won’t until it’s too late (in Europe by the way, we’re already at that point).

True story: It turns out that online gaming (even in countries like Britain where it is legal) has been resisted by the vast majority of the people it is actually aimed at. U.K. government data shows that while 60 to 70 percent of adults play lottery regularly, less than 6 percent gamble online on something other than the lottery. This is despite thousands of sites and millions spent on marketing.

Recently though, we took the step of actually surveying our customers about their gambling habits.

Bear in mind that every one of our customers is recruited to the services we offer directly on their mobile; they play on their mobile, they deposit and withdraw on their mobile, they even receive promos on their mobile. There is no PC in the equation, anywhere.
I nearly fell off my chair when given the results. Eighty percent of our customers do not have an online gambling account with anyone. That missing 60-plus percent of active actual gamblers who don’t gamble online? It’s not that they don’t want to play gambling games remotely, it’s just that before they had a smartphone most of them simply couldn’t or wouldn’t.

DB: What are the differences between game design for land-based, online and mobile environments?
CC: One of the biggest differences is that land-based and online gaming sites are designed to offer an immersive, all-around entertainment that will keep the player’s full attention for a few hours and for them to feel satisfied at the end that the whole experience was worthwhile.
Mobile e-gaming does not, I have discovered, work in quite this way.

A few years ago, we noticed that all the online casinos were maxing up their slots offerings with branded games and sophisticated bonus features, 3-D graphics and all kinds of cool stuff. So we also made some fabulous feature slots, with a big launch, a tsunami of text messages, free play, competitions, the works. Customers leapt on the games. We were delighted and we thought we were really clever.

We weren’t. The customers came, they played, and then they went back to the games they liked playing before and left the fancy new games alone.

I was very disappointed. It didn’t make any sense for quite a while until another one of those customer surveys asked, innocently, what people were doing whilst they were playing the games.

Nearly nine in 10 told us that they were doing something else while playing our games. Mostly watching TV. Or drinking a cup of tea (this is England, after all).

The point is that they are not paying attention, and critically, they don’t want to have to pay attention. These games are a distraction, a sideways glance, a momentary lapse of concentration. Our data supports this: the average play session is 10 to 15 minutes long, repeated irregularly throughout the day.

This is why our lovely, complicated, expensive games flopped. They required far too much from the customer in terms of time and attention. They showed us that the more demanding the product is, the less likely people are to play it at all.
Of course, this is the complete opposite of online gaming. Here, you’re looking at products that are designed to keep you glued to your screen for two, three hours or more. They are immersive, richly tailored and lavishly decorated, like a well-stuffed armchair. You’re not supposed to want to get up from it and that’s often why you like the idea of sitting in it.

Mobile gambling, by comparison, is a slightly uncomfortable bar stool.

DB: Many land-based game titles have done very well when transferred to the online environment. Do you believe that games that work well in the online market will automatically work well across mobile too?
CC: This is what we call the crossover myth, which is that a game that works well on the web just has to be a hit on the mobile as customers want a multi-channel experience.

At the urging of a b2b client a few years ago, we licensed a very popular online slot for mobile. It was the first time anyone had ever done this, and we worked closely with the owner to faithfully reproduce this title. We copied the math precisely (thus reducing our theoretical margin significantly for these games from our other games), because the game designer insisted that it was the math that made these games popular. He was right, but not in the way we all expected.

The game was very popular with customers, but not in a good way for us. We were making no money at all and we couldn’t figure out why.

What we hadn’t appreciated was that games for mobile are consumed in bite-sized chunks about the length of a TV segment. A customer who scored a big win on this volatile game online would stay in to play some more. A customer who scored that same win on her mobile was going to pocket the cash and enjoy the rest of her TV program knowing the dinner had just been paid for. We just were not getting the churn to deliver the theoretical margin.

The profile of any online game, which assumes either a low propensity to stop when there is an above average win, or which allows too much space between even average wins, is going to fail on mobile. If the customer has only 10 minutes to give you right now, you better be confident your hit rate is such that she’s going to get a few wins in that time, otherwise it’s goodbye customer.

DB: Probability is widely respected for its proactive approach on compliance and social responsibility. What are the regulatory issues for a mobile gaming product?
CC: Our first regulator was the Alderney Gambling Control Commission (AGCC). They have a very detailed approach to regulation and extremely precise requirements.

The problem we came up against in trying to comply with the regulations was that much of them did not make sense or were not possible on mobile.

Real estate was a huge dilemma. The amount of information we were required to present to the player meant there was no room left on the screen for anything else.

Then there were problems with security infrastructure (SSL didn’t exist) and social responsibility controls such as session timers (not possible in this environment).

And even if you got all this right, how do you give the regulator version control on your code when you have to release new builds of your game software every day to ensure you were adapting to the vast number of new phones your customers wanted to use?
Hats off to the AGCC, who didn’t let the details get in the way of the principle. So long as we could prove that we had a solution to their problem, we would be granted a dispensation.

There’s no question that this challenge is still the main one for the spread of mobile e-gaming. Top of the list right now is location. Jurisdictions need to know exactly where the player is when they place their bet.
Technically this is not easy. Regulators are people too and they know that they can use their cell phones to calculate their location to within a few yards of their location, so why can’t an online operator be able to do the same for a player?

The point is that what’s an acceptable standard of proof for locating yourself to the nearest gas station is not an acceptable standard of proof for enforcing e-gaming regulations.

The good news is that technology has a way of finding solutions to the problems it has created. In this case, companies like GeoComply are now appearing in the market with regulator and operator-friendly solutions that actually work and are practically spoof-proof. This process is a lot like what happened in the first era of PC-based e-gaming when SSL made credit card processing secure enough to meet the rigorous standards required of e-gaming.

The fact is, though, that regulations designed for the last decade will need to flex and develop for the next decade and the post-PC era. No one expects it to work out of the box. In the world of mobile, nothing ever does.

Tune in to our Audio Edge show with Briggs to hear him expand on this topic, dispelling myths about mobile gaming and talking about its true potential.