What you need to know about the US Market, Interview with Lloyd Danzig, CEO, Sharp Alpha Advisors
Its widely agreed that the US market has the potential to be the largest gaming economy on the globe. With recent events highlighting vulnerabilities in tax infrastructures, many States are experiencing an increase in online conversations.
But what are the core challenges the market will experience on its global ascendancy?
We caught up with Lloyd Danzig, CEO at Sharp Alpha Advisors to hear his thoughts on everything from mobile gaming behaviours, the affiliate licensing framework and the complex relationships between regulators, operators, and government figures.
Betting online and via mobile is still very new to the US consumer. How long will it be before it’s fully adopted and integrated as consumer behaviour? What can operators do to help facilitate this?
“Of course, the speed of legalization will dramatically impact the pace of adoption. That said, innovative products and marketing will drive substantial activity, allowing operators an opportunity to capitalize on the increase of sports betting expenditures as a share of total consumption.
In the immediate-term, existing infrastructure will be supplemented by social functionalities as well as the leveraging of celebrity and influencer personalities to stimulate customer acquisition.
In the near-term, new user interfaces will simplify the sports betting experience, dramatically expanding the Serviceable Obtainable Market (SOM).
Content also plays a vital role in adoption, as do research tools and analytical frameworks that nudge customers further down the conversion funnel.
Tier 1 operators will leverage strategic partnerships as well as mergers and acquisitions to effectuate holistic approaches that optimize engagement at numerous touchpoints.”
Affiliates need a license to operate in the US, will this result in less online traffic for operators because of the extra barriers to entry? Or will only the large corporate affiliates be able to succeed in this market?
“The definition and profile of affiliate marketers will expand and evolve rapidly in the United States as an increasingly varied set of stakeholders seek to take advantage of the growth of online sports betting, particularly given the impact of COVID-19 on the entertainment and leisure landscape.
Goldman Sachs has projected that casinos and gaming operators will be significant beneficiaries of the estimated $230 billion in annual discretionary spending that is up for grabs as a result of COVID-related restrictions and behavioural shifts.
To this end, there has been substantial growth in sports betting partnerships and deal flow, particularly in the media space.
Professional sports venues are serving as acquisition channels by integrating sportsbooks, wagering lounges, and interactive experiences, all of which drive online traffic.
Fantasy sports provide a natural onramp for sports bettors and those with robust DFS offerings (i.e. DraftKings and FanDuel) are especially well-poised to market to customers in the 18-21-year-old range.
As the sports media landscape continues to evolve, new verticals may arise as compelling affiliate funnels and acquisition channels.”
With the success of the New Jersey online gaming infrastructure, can New Jersey act as a roadmap for the rest of the country? Can New Jersey become the new Vegas for online gaming?
“Particularly in light of the difficulties and delays that some states have faced in their attempts to ratify sports betting legislation, stakeholders continue to discuss methods for easing the regulatory burden associated with operating in the US.
One approach would have New Jersey’s framework serve as a template for states that wish to fast-track the launch of sports betting.
Another approach would provide a federal framework and tax structure for sports wagering.
However, the complex political, legislative, and economic landscape in the United States will serve as a significant headwind to any substantive streamlining of the legalization process, with each state possessing a unique mix of priorities and constraints.”
Will we see increased cooperation between regulators, operators, and government figures as a result of Covid?
“There is a strong hope that this is the case.
Overseas markets offer valuable lessons learned as related to marketing, responsible gaming, and payment processing.
Cooperating to avoid these pitfalls would likely be an effort enjoyed by the entire industry. In fact, all stakeholders would benefit from a “rising tides lift all ships” mentality.
For example, leagues and operators got off to an adversarial start with discussions over integrity fees and official data.
Instead, both would likely have been better served to recognize the massive value-add each business represents for the other and then work together toward optimally capitalizing on available synergies.
In many states, operators are finding themselves pitted, in a zero-sum relationship, against the tax interests of jurisdictions in which they seek licensure. Especially to the extent that this has delayed legalization or the roll-out of key features that facilitate customer acquisition, the lack of cooperation has had detrimental economic impacts on virtually all parties involved.
A pro-business climate that promotes competition will result in the best possible user experience, in turn maximizing revenue for both operators and tax collectors.
While this point may seem obvious to most, intertwined political interests and a labyrinth of other factors have resulted in some regulators struggling to see it as such.”
What role can AI play in the development of the US sports betting market?
“Currently, Artificial Intelligence is being incorporated into business models across industries because of its powerful pattern recognition and prediction capabilities.
Oddsmaking, risk management, fraud prevention, and targeted marketing are all critical functionalities for sports betting operators that ultimately rely on these exact capabilities.
Machine Learning, the most relevant subfield of Artificial Intelligence, can serve to vastly augment such functionalities, improve product offerings, and ultimately drive customer retention.
Studies show that while most people do not recognize the term “Machine Learning”, they have grown quite accustomed to the value it provides in the forms of curated content recommendations, smart digital assistants, and adaptive spam filters.
Ultimately, the sports betting industry will need to bring its technology up to the standards that adjacent industries have normalized.
It is less a question of the theoretical benefits that Machine Learning frameworks can provide to sports betting operations and more a question of which stakeholders are sophisticated enough and free of technical debt to truly be able to benefit from implementing the approach.”