On the gaming trade show circuit – before the days of Covid-19 and hopefully after it – there were a few hot topics every conference agenda wouldn’t dare miss. Some were inevitably buzzwords, on-trend issues that would blow over eventually. Others, however, like regulation, US sports betting and payments, were ever-presents that encompass areas central to our industry’s existence. Emerging markets is a prime example. We in gaming often discuss emerging markets – where the next pot of gold may come at the end of the rainbow – and that’s because new regulated markets will always form. But, delving deeper, what exactly are emerging markets, why are they such a big deal and when does a market officially become the next ‘big thing’?
What constitutes an emerging market?
Seeking analysis from industry experts across gaming, the best place to start is what exactly defines an emerging market – and what makes one so appealing for a gaming company to enter? Vladimir Pavlov, VP product at supplier Pariplay, offers Gambling Insider both a definition and an explanation as to why they can offer new entrants a level playing field. He says: “We consider emerging markets to be those that have not yet reached a plateau when it comes to the growth of the overall igaming industry. This means there are still significant growth opportunities within such markets for suppliers who understand the local conditions when it comes to regulation, choosing the right operator partner and providing content that caters for the needs of the end user. Such markets often lack established brands and offer a level playing field for new entrants. Any company looking for sustainable long-term growth must identify and execute their emerging markets strategy.”
Indeed, organisations that stand still will never grow, so exploring new markets can always be considered beneficial; what better market to enter than one that is brand-new itself? As Bobby Longhurst, Pronet Gaming’s chief commercial officer, explains, a new market with the right pre-existing conditions can be very attractive to gaming companies. Most important, according to Longhurst, is a population that is actually interested in betting and gaming. For the Pronet exec, good-quality regulation, or at least the willingness to embrace it over time, is equally vital, as well as a realistic taxation system. Other factors to consider are a country’s socio-economic status, GDP and demographic breakdown, while Longhurst concludes with access to technology, whether that’s wi-fi, 5G or mobile devices.
Paddy Mann, Omega Systems’ director of business development, has amassed significant experience working with clients from emerging markets. He tells Gambling Insider: “From the perspective of a provider, which is going to be driven by the client, it’s always going to come down to how much resources need to be invested to make it a viable market to target. If a market is truly regulated, we already know there’s a ton of integration work to be done with the national registrar, problem gamblers database (take GAMSTOP for example), specific KYC requirements, among others. “If a market has less stringent entry rules to stay compliant, then we’ll see a huge overlap with responsible gambling, in terms of deposit and wager limits, session times, reality checks and more. Ultimately, I think the more resources a company invests into a particular market, the more they’re going to view it as an emerging market, because they’re going to want to focus on it and make that return on investment they promised their stakeholders.”
Which emerging markets are most promising?
So where on the planet, with such a selection of regions to choose from, do firms feel there is currently most promise? According to Longhurst, the usual suspects of yet-to-be-regulated American markets still hold much potential. “There are still huge areas of the US and LatAm that have yet to legalise any kind of online gaming of course, and many of those could be hugely successful if the ones that have regulated so far are anything to go by,” the Pronet CCO tells Gambling Insider. “History dictates that regulation (and the taxation revenue it generates) is ever-evolving and huge swathes of governmental bodies are trying to tap into this, a lot of the time taking influence from neighbouring countries to expedite the process.” But given gaming’s popularity in Asia already, Longhurst feels China would provide the “holy grail.” He adds, though: “They are not showing any signs of wanting to legitimise the industry there any time soon, in fact quite the contrary is true, sadly.”
In agreement with Longhurst, Mann is also quick to single out LatAm markets. “The combination of gambling cultures within the populations and the improving standards of living has made it a hugely profitable area of focus, one which many of our clients have started to turn to in lieu of traditional markets,” he explains. “At Omega we actually helped launch the first two licensed online casinos in Argentina, Betfin and Casino Buenos Aires – and both were truly exciting projects to be part of. “
Africa, according to Mann, offers similar potential if European-based organizations acknowledge the differences within the many markets Africa has to offer. Through integrating payment service providers like Monnify and Paystack – both aimed specifically at Africa – Omega says it has helped clients overcome hurdles in what is a “very profitable market.” Mann adds: “Africa is very much mobile-focused, and it’s been interesting to see the differences in what works over there compared to Europe.”
For Pariplay, meanwhile, there are still meaningful markets within more established territories which can be considered truly “emerging.” The supplier has paid close attention to US developments state by state; of the 26 states to have either legalised sports betting or passed a bill to do so, many are still very young indeed maturity wise. And, in Europe, Germany and the Netherlands are awaiting new regulations to be finalised and enforced. Another market closer to home for Pariplay is Greece, where the application process for online gaming licences began in late 2020. All this serves to show emerging markets are scattered in multiple pockets across the globe – the opportunities can seem limitless.
Why all the fuss?
But why should gaming companies truly care if a new market opens? Sure, as we said earlier, standing still curtails growth; but what about market-leading operators that already dominate their chosen markets – a market position that has been built over a number of years? Why should it bother a supplier or operator every time a new region opens up? An emerging market would really need to offer something special and unique to make it worthy of dedicating resources elsewhere. What exactly do such regions bring to the party?
“From what we’ve noticed already, it’s that players in emerging markets are eager to try any new product they’re suddenly given access to,” says Omega director Mann. “Which for new providers offers a ton of opportunity to make waves in an emerging market and really find their niche. We’re actually finding some providers are enjoying so much success in emerging markets, they’re no longer focusing on traditional markets, since they’re too busy generating new traffic as opposed to competing against igaming giants for it. Some of these markets offer a whole new ball game and, for those up for the challenge, there are plenty of benefits to reap.”
Enough growth potential to overshadow existing markets is certainly a benefit worth reaping. Pariplay’s Pavlov is in agreement this is the main advantage an exciting new market provides. He states: “The main advantage of entering an emerging market lies in its growth potential. You can create an early-mover advantage by establishing your brand and customer base before the market becomes saturated and customer acquisition costs skyrocket. Gaining market share early will pay dividends in the long run.”
And yet the very same facets that make an emerging market attractive can create risk, Pavlov admits. New markets can lack a clear regulatory framework, creating operational challenges and adding uncertainty for the venture. The Pariplay exec references the controversial Swedish market as a problematic example. Since re-regulation in 2019, operators have faced difficulties in the market due to rules considered by many to be ambiguous. It must be stated, though, that this can also be considered a case of a regulator being tough on its licence holders, with some companies perhaps blaming ambiguity as an easy way out.
Still, it goes to show entering some new markets can offer weaker profit margin, whatever the reason; and add to this the fact you need heavy upfront investment to set up operations, localise your product and acquire customers, and you can see this is no easy feat. Mann agrees the main thing missing from an emerging market, which you are far likelier to find in a mature market, is stability. A risk with immature markets is that governments and regulators aren’t familiar with working with operators, creating a layer of distrust. Mature markets additionally have better player protection implemented, making it easier to encourage and monitor responsible gaming across a population, he adds.
When does an emerging market stop being an emerging market?
Accounting for both the pros and cons of entering an emerging market, it’s fair to say there is a balance of risk and reward – as with most aspects of business (not just gaming). A defining feature of emerging markets, however, is their relative youth and, as detailed earlier, level playing field for new entrants. This depends entirely on a lack of saturation and maturity. A problem later down the line this potentially creates is what to do when a market becomes saturated, thereby reaching maturity. In other words, when does an emerging market stop offering the opportunities it once did?
According to Longhurst, there is no exact answer to this question. But it can possibly be singled out as when the industry is up and running with established operators, competing against one another and advertising in place to support their businesses. “I think the customer base has to have reached critical mass too, when retention becomes as important if not more important than acquisition,” the Pronet CCO adds. “I also think regulation plays a huge part in this; the more challenging the regulation the harder it becomes to operate in those countries (UK for example). This would show maturity in the simplest of terms as regulators look at further ways to improve AML and KYC functionality, challenging B2B providers like ourselves to adapt and change to these requests more and more frequently.”
In the wider world, Pavlov defines an emerging market as “one where growth is rapid but is expected to flatten in the long term, as the market reaches maturity.” When it comes to igaming, though, Pavlov argues that an emerging market is “simply one that is underdeveloped and contains major growth potential.” For the Pariplay exec, a market can be defined as mature once it has been fully regulated and live for a few years, and where major actors have established themselves.
Such a market will still grow but at a steadier pace, without any major disruption. You could also describe this situation as the end of the gold rush. “We rarely see big differences in who the top-performing operators are in established markets such as Italy, Spain and Denmark, for example,” Pavlov concludes. So if your company is targeting a new market, move quickly – as it can be difficult for late entries to really make a mark once that market reaches maturity.
Vladimir Pavlov is Pariplay's VP product, where he leads product vision and strategy across the full suite of Pariplay products. He started his career in gaming in 2009, having held various positions in both B2C and B2B companies.
Bobby Longhurst is Pronet Gaming’s chief commercial officer. He has played a pivotal role in strengthening the company’s growing presence in emerging markets with its operator-focused sports betting, casino and retail solutions. Before joining Pronet Gaming he held leading commercial roles at SBTech and Sporting Solutions.
Paddy Mann is a law graduate-turned-seasoned business development specialist, with a particular focus on software within the ever-evolving igaming industry. Having joined Omega Systems in 2015, Paddy has worked across multiple roles in igaming achieving visibility across all business functions. Since early 2019, Paddy has been heading up the company’s growth as director of business development, making him a key component in Omega’s business management.