Social Media and the Proliferation of Online Gambling in the U.S.

The emergence of legalized online casino-style gambling and poker in the U.S. has been fueling hype about its ultimate convergence with social media and the potential role that viral marketing will play in the new online gambling space. But is it just hype?

Acute consideration of cost, risk and return lie at the threshold of every fledging industry, and online gaming is no exception. If they want to enter the online market, U.S. brick-and-mortar casino CEOs must face the daunting task of managing additional risk while protecting their existing revenue streams, though hopefully, the rewards from online gambling will outweigh the risk. Speculation is that online gamblers are different from their brick-and-mortar compatriots and that online gaming, therefore, will produce an entirely new revenue stream.

U.S. brick-and-mortar casino operators appear to be pre-qualified shoe-ins for online gambling licenses in most gaming jurisdictions, although most lack extensive experience in developing, managing and marketing online casino gambling businesses. But no worries, because if they can’t engage, European online gambling operators that do have extensive experience in the online market are most assuredly ready to move in.

But before we start counting online gambling revenue streams, let’s take another look at those risks. Why is the risk to enter the online gambling arena in the U.S. so high?

Part of the problem is shifting sands—the geographical boundaries for online gambling in the U.S. are still being defined and the boundaries in Europe keep changing. Some European countries are now restricting online gambling in an effort to keep the revenue within their own borders. As a result, the industry is softening there. In the U.S., if online gambling is regulated on a state-by-state basis, who knows what the ultimate border and boundary map will look like?

Another problem is that start-up costs in the U.S. could be high because of exorbitant domestic licensing fees in some states, new technology and platform acquisition costs, and the cost to meet multiple state regulatory criteria, which could be compounded even further as political hurdles continue to emerge. Marketing roll-out costs will also be high because of competition and the variety of state boundaries to consider.

Even more barriers and problems are likely to emerge if the industry moves down the online gaming path too quickly. From a state-by-state disparity perspective, it may be incumbent upon the industry to develop some standards—especially during this interstitial period of pay-to-play “social” casino-style games, some type of standardized age affirmation by the user should be established. Different state regulations will likely be a mess, because the smaller gaming states’ agendas will not match those of the larger gaming states. Those agendas, even when established, might not match the Native American gambling agenda, and who knows if tribes want a “say so” in some states too.

So while there is clearly risk in entering the online gaming market, the full scope of that risk at this point remains difficult to assess. The federal position remains cloudy and uncommitted, and if established, would take a very long time to materialize into regulations anyway. So far, the new industry is not manifesting itself as a free enterprise system, and ironically, the World Wide Web will not provide for global gaming. Competition remains a wild card as well—the total number of operators and gaming positions that will move into the space is anyone’s guess. Plus, the fees and tax structures are not yet final.

But regardless of these risks, there is high confidence that online gaming revenues represent an entirely new and robust revenue stream originating from the one of the largest markets in the world. Return expectations are lofty, experientially high and apparently already outweighing the risk for the bigger players.

While the majority of small gaming companies have taken a wait and see approach for now, the powerhouse gaming companies are moving quickly, fortifying their brick-and-mortar futures by fighting for early dominance in the online gaming space today. And social media outlets are materializing as their battleground.

The convergence of online gambling and social media marketing is poised to create a paradigm shift in gaming culture, politics, international relationships, technology, social communication, transportation, information, standardization and regulation. Online social media platforms allow people to have many more meaningful, sustained conversations with friends and family, because they are designed to complement people’s limited amount of discretionary time—you can respond to a comment as your schedule permits, when you have time. You can also share your conversations with all of your friends. When a conversation that revolves around a product or service begins to ignite online, more people join the conversation, get involved and develop a legitimate interest.

But as social media changes the world, we have to remember that these online inhabitants make up our customer base—and they are rapidly becoming more informed, demanding and spoiled, thanks to access to information and endless options for customization, personalization and discounts. Most importantly, they are just a click away from the competition should they become unhappy with our services.

In our new world of online gaming and social media, customers need to be spoken to, not at. They must be treated as people, not market segments. Bombarding customers with messages on Facebook and Twitter is not social media, and those messages are unlikely to go viral. In fact, if you rely too much on “managed placement,” you are more likely to suffer social pushback. The exact balance between “viral placement” and “managed placement” is required if your customers are going to like your message enough to pass it on and start a dialogue about it with their friends, making it truly viral, not to mention so much more targeted than conventional marketing initiatives ever could be.

What we’re really talking about here is an “organic” viral message—customers (not casino marketers) talking to each other about a product online. Word-of-mouth is the most coveted of the marketing mix; no matter what industry you’re in, an endorsement of your product or service from your best customers to their respective friends and family ultimately results in more sales. Most important is that this is an organic conversation—and, decisively, the most coveted result of any marketing campaign to the mass market.

While you might not be delivering the message yourself, you can orchestrate a conversation between your best customers (your brand advocates and influencers), and they can share it with their friends, who then also engage in the dialogue and share it with their friends. You can dictate the dialogue points—what they talk about and with whom, how many others initiate it, and how many others engage in it. How many potential new customers could you reach? Add sophisticated analytics and online CRM, complete with real-time, relevant targeted response dialogues. How could that type of power and control impact your online gaming market share and revenues?

There are 6.9 billion people in the world living in 194 countries. The four largest countries in the world are China with 1.5 billion people, India with 1.1 billion, Facebook with 1 billion, and the United States with 325 million. So if you have aspirations of operating in the online gaming space, you will operate in the world of big data, online social media and a lot of competition. Clearly, Facebook lies squarely in the vortex of it all. You must learn it fast and become an expert in the integration of online social media and online gaming, or you will perish in that space. This is not an argument for Facebook as the be all to end all online, as Facebook is only one of hundreds of networks, channels and platforms that are out there contributing to the ground-swelling social media phenomenon. But arguably, Facebook is the dominant player in the space, and is already involved in online gambling in Europe and pay-to-play social casino games in the U.S. through dominant operators like Caesars Interactive Entertainment.

One more point to consider is the comparative power and scale of the Internet against the carbon world (in other words, online social media channels vs. conventional advertising and marketing channels), as well as the economy of cloud-based processing and storage. Clearly, the Internet is the best place for word-of-mouth about the best place to play casino games online to proliferate—at lightning speed, to millions of people, no less. The Internet is a place where everyone is encouraged to have an opinion and to share it. Everyone is an author who covets their 15 minutes of fame, and they can get it every 15 minutes online, if they want it. As marketers, we want them to have it.

If you choose to play in the online gaming space, you will inevitably compete against the biggest U.S. operators—and they will be experts in every facet of marketing online, the most prominent and effective of which may be managing viral campaigns: developing brand advocates, influencers and peers through online social media networks, channels and platforms, then funneling them to an online gaming site.

Remember, online is about time, and time is money. People will converse more when they have time, and they will gamble more when they have time. They will do both simultaneously and when it’s convenient for them. These folks have hundreds of friends who listen, and thousands they share content with. They share what they value most, what they like or dislike, and they do it with a simple click. We can encourage them to talk about gambling online on your site instead of the competition’s, because by identifying influencers, we can dictate what, by whom, who, and how many people listen. This is about organic viral messages, meaningful content, networks, channels, funnels, and ultimately conversions to financial transactions on your online gambling site. These are exciting times.