|
Is
the i-Gaming sector really recession proof?
To date, the i-Gaming sector seems
to be relatively unaffected by the credit crunch that
is decimating other businesses. There
is a feeling around that because the gaming sector
is growing and, as of to date, appears to be relatively
unaffected by the credit crunch that is decimating
other businesses, all you need to have is a good idea
in terms of new software, new platforms or new applications
to do with e-gaming and then it’s just a question
of sitting back and waiting for the money to roll
in.
That
is not only untrue for now, where the constraints
that the banks are currently operating under, in terms
of investment and loans, is absolutely mirrored by
the Venture Capital companies; it has always been
untrue.
As
Thomas Edison once said,“Genius is one percent
inspiration and 99 percent perspiration”. The
easy bit, curiously, is having the idea in the first
place. However, as someone once said, there are very
few good ideas that don’t, sooner or later,
degenerate into hard work.
As
Malcolm Gladwell’s new book, ‘Outliers’,
illustrates, every success story, given the odd lucky
break and the aptitude and talent of the founders,
depends on hard work and practice. Ideas are nothing
without execution.
So,
if one is thinking of starting a new gaming company,
what are the issues that one needs to focus on most
closely to give oneself an appropriate chance of success?
Virgin Games was itself a start-up just over four
years ago; and, as such, while we are very sympathetic
to the ambition, we are also sanguine and realistic
about the pain being a start-up involves. To us, there
are four key things that are necessary – primarily,
because they’ve always been necessary –
but which have become even more critical than ever
as the economy has battened down the funding hatches.
Firstly,
it is absolutely imperative to make sure you understand
exactly what it is that your customer wants. This
may seem like a statement from the ,industry of the
bleeding obvious, but it is amazing how many start-ups
– or, at least, potential start-ups –
don’t. Too many ideas are based on doing something
“because we can” rather than because it’s
what the customer wants. All the talk and hype about
web 2.0 and social networking often seems to blind
people to its relevance or sustainability as a commercial
business.
Every
new start-up, in my opinion, should be based on a
fundamental insight. That insight can come from data,
research, a dialogue with customers or from testing
alterations to your offering in terms of technology,
service and product to see if it offers customers
a better deal or a better option for them to spend
their money on. Let’s remember, after all, that
in the current market place, gaming companies are
fighting for market share or share of wallet.
At
essence, this principle has always been at the heart
of Virgin’s approach and a key component of
Virgin’s success. The new start-up must know
exactly who they will appeal to in terms of target
audience and exactly what their proposition to that
audience will be. It must also fully comprehend the
customer journey and understand how to remove any
barriers that exist at any of the various customer
touch points. Launching a start-up is no longer about
having a product and selling it to the customer. It
is mostly about helping the customer to buy in a manner
that is better than its’ competitors.
Secondly,
the start-ups must know their place in the value chain.
The businesses that succeeds will be real businesses,
not merely businesses that are targeting the B2C market
because they’ve heard that’s where the
buzz is. Building a B2C brand is incredibly expensive
and, invariably, costs significantly more than people
anticipate – often by a significant multiple.
Awareness needs to be built and then trial has to
be encouraged before customers start to roll in.
Of
course, that requires deep pockets, particularly where
the investment community is strapped for cash and
may only have a relatively low threshold of pain that
they are prepared to endure before pulling the rug
on their investment. B2B, on the other hand, is a
simpler and less risky model. For these businesses,
it is not merely the end customer who plays your game
that you are focused on, but, more importantly, the
customers to whom you will be selling as well. It’s
all about open API’s, quick integration, and
customer support. However, in the final analysis,
this must still add up to a product that’s both
different and, in some way, better. If it’s
not - then stop now.
Thirdly
- and this is more true in today’s economic
climate that it has ever been - you need to build
a business that can make money now, and not at some
point in the distant future. Too many businesses set
out to achieve growth and critical mass before generating
cash on the principle that it is easier to monetise
a business which already has a large reach. In other
words, if Pareto’s Law says 20% of your customers
will provide 80% of your profits, it’s better
to have 20% of a million customers rather than ten
thousand. This is what we see as the driving force,
for example, behind Facebook, Twitter and other recent
“reach mass, monetise later” models.
However,
this model takes time and is fraught with risk and,
as such, is much less attractive to investors. Ideally,
you need to build a business that makes money from
day one and which breaks even in a year and a half
or so; not least because your cash burn will be significantly
slower if, from the start, you have money coming in.
Equally, it is not enough to assume that you can monetise
your traffic through advertising. Currently, outside
our sector, there are predictions of a 40% drop in
online ad sales. With 80% of currently ad sales going
to the top ten properties, that makes it an ambitious
way to try and fund your business.
Fourthly,
you need more than a wing and prayer not just to raise
cash but, just as important, to raise enough cash
to launch your business in the appropriate way. What
you need is both a viable working demo of your product,
commercial contracts in place, and a proper business
plan. However, be aware that a business plan is not
just a sales document to help you raise cash. It’s
a detailed roadmap and a clear statement of where
your business will go and how it will get there. Bland
assumptions, such as “one million users by year
one”, may make the business look theoretically
like a goldmine, but, in practical terms, such claims
are not even worth the paper they’re printed
on. At all stages, you must stress test your business
plan and constantly reappraise your assumptions and
insights because if you can’t do that, you probably
haven’t got a business worth starting up in
the first place.
Make
no mistake; I-Gaming in the UK is a very hard market.
It is more expensive to acquire customers than most
other sectors; the margins are smaller; there’s
a huge amount of competition; less differentiation;
no benefit from location; a tight legal and regulatory
environment; and, above all, a small universe of players.
The Gambling Commission’s survey on remote gambling
participation in September 2008 showed only 5.4% of
the adult population gambling online for cash in games
other than the National Lottery in the last month.
This figure has remained fairly static – the
comparison with 2006 saw the total at 5.1%. Last month,
only 6.00% of the population gambled for cash on-line
(excluding the National Lottery), a figure that has
barely changed over the last 2 years.
So,
with all those factors at play, unless your idea is
good, genuinely original and relevant to its target
audience, my advice to would-be start-ups is stop.
Don’t start, particularly at the moment. If,
on the other hand, your idea fulfils all the above
criteria, then go for it. You are probably on to a
winner – regardless of the economic conditions.
by
Greg Tingle
An excellent article. My 7 plus years in and around
gaming, igaming, news media and internet has demonstrated
to me clearly that i-gaming is recession resistant,
but not recession proof.
I'm
pleased to report that our involvement i.e promotion
of Virgin Games was our first real solid success in
the igaming industry.
Our
Media Man Australia group has very strong traffic
results (Hitwise Australia awards), however we were
not making the best use of the traffic for many years,
but there was strong potential to "monetize"
more of that traffic, eyeballs and the like into a
recurring income stream. We're were still trying to
figure our what the magic formula and "the secret"
was. We were already doing some b2b with other Virgin
brands, in addition to covering Virgin in a news media
capacity, so we enjoyed a bit of a kick start, as
some of the right, receptive audience was already
there, and most Richard Branson business ventures
are successful, and have the strength to ride out
a storm or two.
Much
like Virgin Enterprises Limited, the Media Man Australia
group has spread its risk in a number of industry
verticals, so we are not totally reliant on what's
happening in the igaming sector, and the world's financial
fun and games. We're in in news media, technology,
entertainment, travel and tourism social and community
and gaming industry (but not aviation thank God...
lucky us). Many of these business arms are lifestyle
related, as customers and potential customers all
make lifestyle choices.
The
global strategy has also served us well in the gaming
sector, as the nature of gaming means various cities
and countries have differing laws governing the sector.
As we are largely an internet portal development company
these days (and not an actual casino for example),
we have little trouble in keeping up to what potential
customers and existing customers want in many of the
world's regions, and more often than not, when one
door closes, another opens, when you have such a strong
brand in a number of happening business verticals.
I-gaming is part of the entertainment and technology
sector, albeit it in a sub group known as gambling.
Needless to say, being in business is a gamble, but
you get the idea. I-gaming like many other web based
businesses is in a battle for both the entertainment
dollar and eyeballs (yes, your eyes), as billions
of other websites exist "out there" for
the eyeball to google. The option to "play for
free" or "play for money" has certainly
proved to be a winner, and this somewhat follows the
Microsoft and Google model, in that you give away
something for free, but if you want the best, you
pay (I bet News Corp's Rupert Murdoch and his people
will get to this article eventually).
Our
successes with Virgin Games, and the parent company,
Virgin, helped give us the confidence to further ramp
of our igaming and gaming involvement and we subsequently
launched both Casino News Media and Global Gaming
Directory. I'm proud to say that the Virgin brand
and numerous games are showcased significantly in
our network, and that Virgin Games has been fantastic
for us. Virgin Games dominate much of our classic
slots and classic casino games coverage, as they do
our UK and European sections of our network website,
not to mention the multi currency casino options.
Virgin Games also pay for a job well done, and you
know they have the money in the kitty, and will be
around tomorrow, and likely, forever in some shape
or form. Some of the revenue we derive from Virgin
Games, and our Casino News Media and Global Gaming
Directory arms of Media Man, we put back into society,
and some of this via Virgin's philanthropic and community
arm, Virgin Unite.
I've noticed that a number of traditional media companies
are now starting to take the lead of Virgin by opening
igaming arms, however there's only one Virgin and
Richard Branson, just as there's only one original
Media Man Australia. You can also trust RB to keep
turning up in the news for something, thus keeping
the Virgin name in the world's most recognized and
trusted list, which works for everyone (unless your
a competitor).
Some
quotes that make strike a chord with Virgin and its
audience...
Big
will not beat small anymore. It will be the fast beating
the slow - Rupert Murdoch
Never doubt that a small group of thoughtful, committed,
citizens can change the world. Indeed, it is the only
thing that ever has - Margaret Mead
First they ignore you, then they ridicule you, then
they fight you, then you win - Ghandi
Internet is like electricity - James Packer
In the long history of humankind (and animal kind,
too) those who learned to collaborate and improvise
most effectively have prevailed - Charles Darwin
and last, but not least... In the '80's my gut feeling
was that airlines were crap. I hated spending time
on planes. I thought we could create the kind of airline
I'd like. So we got a secondhand 747 and gave it a
go - Richard Branson
Thank
you Virgin Enterprises Limited for being part of our
ongoing journey, and the journey of so many others
who had a go. You have to be in it to win it, and
Virgin Enterprises, Virgin Games, and so many of their
friends and associates know a thing or two about this.
Happy flying and work hard, play and party harder.
Greg
Tingle
Founder and Director
Media Man Australia
Global Gaming Directory
Profiles
Media
Man
Greg
Tingle
Virgin
Games
Richard
Branson
Global
Gaming Directory
News
Casino
News
Online
Casino News
Global
Gaming News
Australian
Casino News
|
