Mobile and Betting, A natural pairing... or so one would believe

Lets do some mobile betting, gambling and lottery lessons from Slovakia. This week we had the annual Mobile Marketing Forum in Slovakia where I delivered the keynote. I also met up with several friends from the central European region and got to learn of many good stories around mobile, marketing and m-commerce from Slovakia and neighboring countries. I learned a lot, but the one story that stood out was by Milos Prelec who works for Tipos the national betting and lottery company of Slovakia.

WHEN IT ALL FAILS

And Milos started his presentation telling of how Tipos entered mobile betting five years ago. His team developed a technically elegant solution to do sports betting which cost about 10 million Slovak Crowns to develop at that time (about 33,000 Euros or about 50,000 US dollars). The mobile betting service functioned technically in an excellent way, there were no technical faults to it.

So how did they perform in the market? Over the first three months after the service was launched, they achieved a total of 40 bets. Not 40 million bets or 40 thousand bets. 40 bets. The total value of the betting was 26 Euros. Again, not 26 thousand or 26 million. Over three months, the service that cost 33,000 Euros to develop, had total betting activity worth 26 Euros, out of which Tipos would earn its betting commission as a tiny fraction of that. Now Slovakia is not a 'big' European country by population, at about 5.5 million people the country is roughly the same size as say Denmark, Finland or Norway. To put the numbers into a British, French or Italian context, multiply them by 10. But even then, if this was in French context, if you spend that 33,000 Euros to deploy a mobile service which in 3 months manages to deliver about 260 Euros of total value of betting traffic (and a tiny fraction of that is your income as the provider) obviously this is a massive commercial failure.

40 total bets over 90 days by the national betting agency, in a country where mobile phone penetration even back in 2006 was over 100 percent per capita. You can see why Tipos management decided after 3 months that this experiment was a costly error and terminted the mobile betting service. They were further very wary of considering any newer mobile betting and lottery service ideas by their innovation team, even where some other markets would report successes in mobile betting and gambling and lotteries.

WHY DID IT FAIL

Milos was very open and honest talking about this painful lesson for his employer and to his career. Why did they fail? They were too early to the market for several reasons. The payments industry and regulations were not prepared for this. The Slovakian mobile telecoms industry did not offer micropayments at that time due to some banking regulations of that time. So the mobile phone user could not just click to bet on the phone. They had to use a separate payment mechanism for which the user had to register separately online with credit card or banking info.

The service also could not pay out directly to the mobile phone account either as money or any equivalent credits. The pay-out of betting would also have to be settled via a separate account and its payment would be slow and cumbersome, to your bank account or an online payments system (which in 2006 were not very convenient, widely accepted and not easily convertible to cash).

TRY AGAIN, TRY AGAIN

The banking regulations evolved in Slovakia and also the technologies of applications, featurephones (and early smartphones) using Java etc enabled more elegant and immediate types of technical solutions and the mobile industry introduced micropayments to the Slovakian market. Milos had proposed several revised concepts for mobile betting or lottery for Tipos, and eventually his management was willing to try again, two years later.

So they launched sports betting using a Java application and micropayments. They also offered their online betting users a migration path to do their online betting also on their mobile phones. The success today? 8 million euros worth of bets on an annual basis.

Now as the mobile betting was finally proven, the team was allowed to expand the concepts and Tipos introduced mobile casino games style gambling (Blackjack, Roulette etc). That has grown to a 7 million Euro gambling business.

And they expanded again, they then launched the mobile lottery. In just a year and a half from launch, last year the mobile lottery delivered 10 million Euros in lottery payments.

The mobile customer base of Tipos has reached 540,000 (obviously led by lottery users). Note, in a nation of 5.5 million population, this is almost exactly 10% of the total population who now engage with the national betting and lottery provider via mobile phones. Most of their business is not on mobile yet but all mobile services are growing.

SEND REMINDER BEFORE LOTTERY CLOSES

Which brings us to the mobile marketing element, and why Milos was invited to speak to the Slovakian Mobile Marketing Forum. They have of course experimented in and learned to use mobile not just as a betting channel, but as a marketing/advertising channel directly to their customers. Tipos has been expanding their mobile marketing. Why? Because they have measured the effect of their marketing, and mobile marketing consistently delivers nearly twice as big a boost to betting activities than their other main advertising channels, print ads and online ads.

The most successful method? SMS of course. The best-performing mobile ads are the SMS lottery reminders which are sent to regular lottery users one hour before the lottery closes for the week. The SMS reminder includes the link to the mobile web page to do the instant lottery submission. Milos was not able to give us the exact performance of this advertising but I am confident it is in the high double digits in mobile advertising conversion rate.

SOME LAST COMMENTS

Milos Prelec was very open and honest and humble in his presentation, and we could vividly share the struggles his team had gone through with the early problems. Milos ended his presentation with several very valid observations. First, most of their users are older, sports betting, gambling and the lottery are generally not the young person's hobby and activity. Their average users are well above the age of 40. So they had to make the betting, the registration, the payments and pay-outs very easy.

They never spam random consumers, they only contact registered existing users on an opt-in database. And they of course take advantage of any significant events, like just now the world ice hockey championships held in Slovakia.

Thank you Milos, for an inspiring and insightful case study of betting, gambling and lotteries on mobile. Good luck to your team. And for our readers, its yet another example like so many in the past (like Habbo Hotel, like Angry Birds etc) where the developer struggled with a great idea to begin with, and they had to launch and re-launch and re-launch again, until after a long time they figure out what works in mobile. But its worth trying again if you belive in your concept. Tipos gets 25 million Euros in bets and lottery payments annually out of 540,000 Slovakian consumers, meaning an average betting transaction revenue of 3.85 Euros (5.50 US dollars) per active Tipos mobile betting user per month.

If we adjust that for a USA context, the equivalent mobile betting, gambling and lottery business as they have built in just four years in Slovakia on mobile, would be reaching about 31.4 million Americans, who would generate about 170 million dollars every month, or about 2 Billion dollars of betting activity per year. Not bad. Mobile IS the Magical Money-Making Machine.

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