Appraising the Growth Trends in Virtual Gambling

Posted by Harry Kane on Tuesday, October 16, 2018

In previous posts, we’ve discussed the growth of the online gambling industry at length, while also considering the technologies that will inspire this. When appraising the future growth and potential of this market, however, there’s a tendency to focus solely on numbers and the financial returns available to operators. While these are important considerations, they do not do justice to the immense appeal of online gambling and its growing level of influence in the commercial world.

In this article, we’ll look at the global growth trends that define online gambling from a new perspective, while asking how they’re likely to shape the marketplace in the future.

UK and Global Growth – A Snapshot

The growth of the online gambling market is usually assessed in financial terms, and by this metric the industry is expanding at a faster rate than ever before.

From a global perspective, this market was worth an impressive $41.78 billion at the end of 2016, and it’s expected to more than double to $80 billion by 2022.

It’s also well known that the UK market has been a key driver of this growth, with the region’s remote sector having witnessed a 300% increase since the legislation behind the 2005 Gambling Act was updated in 2014.

This sector generated a record £4.7 billion in the last financial year, while virtual gambling grew to account for 34% of the industry as a whole.

This means that online gambling is also becoming increasingly dominant as it grows, changing the way in which customers wager and pursue their favourite casino games.

Beyond the Numbers – Appraising True Growth Trends in the Market

While these numbers highlight the trajectory of the market, they do not tell the whole story. They certainly don’t offer an insight into the growth trends that will define the online gambling market, either now or over the longer-term.

Below, we’ve listed some of the most prominent growth trends in the global space and taken a sneak peak of their impact over a sustained period of time.

1. 11% of All Internet Traffic Is Now Generated Through Online Casinos

For years now, experts have been arguing that the age of free and open web access is coming to an end.

The reason for this is simple; as the growing dominance of Google and Facebook has significantly altered the dynamics of power online and left a diminishing market share for their rivals.

According to the most recent figures, these two Internet giants now account for 70% of all Internet traffic, with this share having increased from just 50% at the beginning of 2014. This also includes owned sites and services such as WhatsApp and YouTube, while this number is expected to increase incrementally over time.

However, we’ve some considerable and unexpected resistance from the online gambling sector, which is now responsible for 11% of all Internet traffic generated through desktop and mobile platforms. This is a staggering statistic, particularly given that virtual gambling was considered to be a relatively niche pastime until recently.

With the size of the global market expected to almost double between now and 2022, it’s also fair to surmise that online casinos will drive a higher proportion of Internet traffic in the near-term. This will not only translate into a larger consumer base for operators, but it may also create significant opportunities in terms of advertising revenues and the range of services available through casino sites.

Advertising through online casino sites will certainly become more appealing to big brands in this instance, as they’ll be able to target a larger and more diverse audience with their products. As advertising space becomes increasingly coveted in this market, operators will be able to charge more and increase their profitability.

With an ever-increasing flow of customers and traffic, casino operators may also look to integrate additional services into their websites. This is one of the reasons that has enabled Facebook to develop an increasingly competitive search engine, as the brand leveraged its unrivalled swathes of data to meet the demands of its ever-increasing user base.

While we’re not suggesting that online casino websites will suddenly begin to serve as national or local search engines, they may well choose to offer additional features that suit their growing audience and the demands of their commercial partners.

2. Online Casinos Continue to Grow at a Faster Rate Than Sports Betting Sites – For Now

When appraising the growth of the online gambling sector, there’s no doubt that this continues to be dominated by virtual casinos and sports betting sites.

Overall, these two sectors accounted for 93.1% of the gross gambling yield (GGY) in the UK during 2017, and this is indicative of wider trend across the western world.

Despite this, these two markets have not been created equal and online casino gameplay remains considerably more lucrative than sports betting at present. In total, virtual casino platforms were responsible for a shade under 56% of the industries GGY last year, with sports betting outlets trailing behind with a market share of 37.1%.

Interestingly, this gap has continued to widen since the dawn of the 21st century, with online casino products growing at a marginally higher rate than sports betting alternatives. Between 2000 and 2015, for example, online casinos have achieved average, year-on-year growth of 8%, while sports betting hubs have expanded by 5% during the same period.

In fact, the sports betting market share as fluctuated as virtual casinos have become increasingly dominant, declining from 14% to 13.9% by the end of 2014. At the same time, the market share for online casinos has grown, peaking at just under 35% during the last financial year.

We should ultimately expect this trend to continue in the short-term, particularly with casino gameplay continuing to diversify and appeal to a wider audience (both in terms of age ranges and gender). However, sports betting may well become more competitive in the longer-term, with the global market set to benefit form a recent ruling in the U.S. Supreme Court.

Here it was agreed that all U.S. states would be allowed to legalise sports gambling going forward, as a 1992 federal law was finally struck down following significant lobbying. In the process, the justices endorsed New Jersey’s bid to allow this type of wagering to its residents, with a slew of other state authorities expected to follow suit before the end of 2018.

Given the size of the U.S. market, this could see online sports betting grow at a rapid rate in the future and potentially narrow the gap on virtual casino gameplay.

3. Slots Represent the Future of the Online Casino Market

There’s no doubt that the online gambling market in the UK continues to blaze a trail for others to follow, which is why it’s such a good barometer for the growth of the global industry.

This is particularly true in the case of gameplay trends, with virtual slots becoming increasingly popular both in the UK and across the globe.

Of the £4.7 billion generated by online gambling, for example, an estimated £2.62 billion can be attributed to casino gameplay. Interestingly, the bulk of this revenue is generated by slots games, which produced income of £1.69 billion and accounted for a whopping 65% of the sector’s GGY.

While these figures are impressive by themselves, they should also be considered in the context of other casino games. While table games were the next most lucrative channel for online casinos, they accounted for just 16% of the GGY and generated a relatively modest £414.5 million.

Next came card titles such as poker with a market share of 7.8% and a yield of £205.4 million, while a number of remaining games combined to comprise the remaining 11.8% of total GGY.

There’s no doubt that slots have grown at an unprecedented rate during the last decade, with the diversification of this niche at the heart of its success. In fact, this has created a huge range of themed titles that appeal to both male and female players, while the levels of gameplay have also evolved to satisfy every conceivable type of gambler.

It’s certainly no coincidence that online gambling has become increasingly popular during the evolution of slots, which have won over a younger generation of casual gamers and helped to propel the market into the consumer mainstream.

This trend will continue in the future too, with slots likely to feature at the centre of any future innovations and attempts to cross new frontiers in the marketplace. NetEnt has it built its first foray into VR gaming on a revamped version of its iconic Gonzo’s Quest slot, for example, with this pioneering game due for release any week now.

In this respect, slots will remain the face of online casinos for the foreseeable future at least, while continuing to account for the vast majority of the virtual gambling GGY in the global marketplace.

4. The Global Market Will Continue to Grow at Around 11% Per Year

The global online gambling market will breach the $50 billion barrier this year, peaking at $51.94 billion by the end of 2018.

While this may pale in comparison with the land-based casino market (which currently generates around $300 billion per year), the gap between these two entities is closing at a frightening rate.

This is thanks largely to the compound annual growth rate (CAGR) associated with online gambling, with this market expanding at a rate of 11% across the globe. This trend is expected to continue for the foreseeable future, while the bricks-and-mortar industry will see diminishing growth levels during the same period.

The UK market is certainly growing at this rate, with a GGY of £4.7 billion in the year ending September 2017 up 10.1% on the previous 12 months. While land-based gambling remains steady in this region, the amount of active casinos fell by one during this time while there was a 3.2% decrease in the number of open betting shops on the high street.

So while land-based casinos remain generative and continue to grow incrementally, this will change over time as operators adapt their strategies and invest more of their time and capital online.

The emergence of VR technology will probably exacerbate this process in the near-term, as this technology represents the final frontier in the quest to create authentic and real-time gambling experiences in the virtual world. In short, the widespread application of VR will enable gamers to access a three-dimensional casino from the comfort of their own home, negating the need for bricks-and-mortar establishments in the process.

This trend will definitely become evident in the U.S. next year, with the online market in this region set to explode. We’ve already touched on the fact that state authorities are now free to legalise virtual sports betting, for example, while New York, Michigan and New Hampshire are among a number of entities that are poised authorise online casino gameplay.

This will not only have a seminal impact on the future growth of the global marketplace, but it will also trigger a significant increase in the market share attributed to virtual operators.

The Last Word

While the world’s online gambling market has produced some startling numbers in recent times, these figures do not do justice to the rate at which it continues to evolve.

They certainly offer little insight into the growth trends that will define the future marketplace, from the technologies that will dominate the sector to the gameplay trends that will capture the imagination of mainstream audiences.

Perhaps the most interesting takeaway is the universal appeal of online gambling sites and the level of Internet traffic that they’re responsible for. This creates immense potential in terms of revenue generation, commercial partnerships and the integration of additional services, particularly in an age where online gambling is already considered to be a popular and mainstream activity.