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NEWS 15 August 2018

GiG CEO exclusive: We are targeting several new markets

By Harrison Sayers

Robin Reed, CEO of Gaming Innovation Group, speaks exclusively to Gambling Insider about the group's financial results for the second quarter of 2018 and future growth opportunities. GiG's revenue grew 39% year-on-year to €36.9m ($42.1m), while organic revenue went up 30%. 

 

 

With your revenues increasing so rapidly, why has your EBITDA fallen slightly from €1.9m to €1.7m in your latest Q2 report?

We are in a state where we are heavily investing. In order to ensure that we are competitive, we have had to expand across multiple verticals, having now expanded to the point where we have a surface offering on every major vertical. Of course this expansion period has impacted our EBITDA negatively in the short-term, but we are now ready to grow as we are firing on all cylinders. As a result we will see our EBITDA improving in the future. 

GiG Comply is set to sign two new external customers. What effect can you see the website having on your future performance?

Compliance is arguably the most important aspect right now facing all of the major operators in the online gaming industry, so many of them, including ourselves, are putting compliance at the heart of their business operations. We have started to tour the GiG Comply product now, already securing two upcoming agreements and large amounts of interest. It could definitely be beneficial to our business and revenues in the future, due to the strong interest we have already seen.

Marketing costs are down compared to total revenue. Why is that?

We upped the marketing spend ahead of the FIFA World Cup in Russia, and as a result, our proportion of spend on marketing increased in the period prior to the tournament. However, we are now focusing on performance marketing. Following the end of the World Cup, we expect that marketing portion to become even leaner.

Could you tell me of any new jurisdictions where GiG are currently looking to expand into in the near future?

We are currently very happy with the product portfolio which we currently have and are developing. It is therefore about expanding our geographical system. It is also about improving our existing products even more, making them top class, and generally optimising where we can.

What is the thinking behind your partnership with Hard Rock International?

We are very happy that we were selected by Hard Rock for this partnership, as well as helping them to go live in New Jersey with their casino offering in July. Another thing which we were pleased with regarding the partnership was the fact that Hard Rock has ambitions to be the largest online operator in the state, which could also stand to benefit us financially.

Can you see many more regulatory opportunities, such as the repeal of the Professional and Amateur Sports Protection Act (PASPA) in the US, opening up new opportunities for GiG in the near future?

Yes. We are obviously incredibly excited about the US Supreme Court’s decision to repeal PASPA. We are already one of only a few companies to be fully certified in New Jersey, which of course has and will allow us to make many new connections. We are also very well positioned in the US to enter into other states as more markets begin to open up.

Sweden is now beginning to undergo its re-regulation so we are submitting our application there. We are also looking into entering the Danish market, along with several other places in Europe where we are looking to gain new licenses next year. The advantage that we have is that we usually enter into a new market with one of our B2C operators in order to justify the investment into new regulation. It is our own unique approach.

Can you see the gap between your B2C and B2B businesses shortening in the future?

GiG has an aim to be the largest full service company in the online gaming industry. We are focusing on our B2B business and it is growing incredibly fast at a rate of 80% year-over-year. The operators play a role in achieving that goal, supplying affiliates that are in our affiliate program. This helps drive up our volumes and helps us secure a better supply width. The B2B business could potentially grow even faster than the B2C business moving forward as a result.

What are the main strategic initiatives for GiG moving forward?

We are focusing on our operator business as we want to build powerhouse brands in a few selected markets, so we are consolidating our focus and marketing expenses. We are turning away from traditional online gaming marketing and instead moving towards digital performance marketing. Sustainability, along with compliance, is being put at the heart of our business. Ultimately of course we are a technology company by default and everything that we do originates out of our own technology and our products. It is all about focusing on ensuring that our technology and our product are enhanced so that we can become the most scalable company on Earth.

RELATED TAGS: Online | Industry | Sports Betting | Financial | Feature
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IN-DEPTH 16 August 2019
Roundtable: David vs Goliath – Can startups really disrupt the industry?

(AL) Alexander Levchenko – CEO, Evoplay Entertainment

Alexander Levchenko is CEO of innovative game development studio Evoplay Entertainment. He has overseen the rapid expansion of the company since it was founded in early 2017 with the vision of revolutionising the player experience.

(RL) Ruben Loeches – CMO, R Franco

Rubén Loeches is CMO at R. Franco Group, Spain’s most established multinational gaming supplier and solutions provider. With over 10 years working in the gambling, betting and online gaming industries, he is skilled in operations management and marketing strategy.

(JB) Julian Buhagiar – Co-Founder, RB Capital:

Julian Buhagiar is an investor, CEO & board director to multiple ventures in gaming, fintech & media markets. He has lead investments, M & As and exits to date in excess of $370m.

(DM) Dominic Mansour – CEO, Bragg Gaming Group:

Dominic Mansour has an extensive background of nearly 20 years in the gaming and lottery industry. He has a deep understanding of the lottery secto,r having been CEO at the UK-based Health Lottery, as well as building bingos.com from scratch, which he sold to NetPlay TV plc.

What does it take for a startup to make waves in gaming?

DM: On the one hand, it’s a bit like brand marketing; you build an identity, a reputation and a strategy. When you know what you stand for, you then do your best to get heard. That doesn’t necessarily require a TV commercial but ensuring whatever you do stands out from the crowd. Then you have to get out there and talk to people about it. 

AL: Being better than the competition is no longer enough; if you’re small, new and want to make a difference – you have to turn the industry on its head. Those looking to make waves need to come up with a new concept or a ground-breaking solution. Take Elon Musk, he didn’t found Tesla to improve the existing electric cars on the market, he founded it to create the industry’s first mass-market electric sports car. It’s the same for online gaming; if you want to make waves as a startup, you have to bring something revolutionary to the table.

JB: Unique IP is key, particularly in emerging (non-EU) markets. As does the ability to release products on time, with minimal downtime and/or turnaround time when issues inevitably occur. A good salesforce capable of rapidly striking partnerships with the right players is vital, as is not getting bogged down too early on in legal, operational and admin red tape.

How easy it for startups to bring their ideas to life? How do they attract capital?

AL: It depends on the people and ideas behind the startup. Of course – the wave of ‘unicorns’ is not what it used to be. Some time ago the hype was a lot greater in terms of investing in startups, but that’s changed now. Investors now want more detail – and even more importantly, to evaluate whether the startup has the capacity (as well as the vision) to solve the problem it set out to address. That’s not to say investors are no longer interested in startups – they certainly are – but now more than ever, it’s important for startups to understand their audience as well as dreaming big.

JB: To get to market quickly, you need a great but small, team. If slots or sportsbook, the mathematical engine and UX/UI are crucial. Having a lean, agile dev team that can rapidly turn wire framing and mathematical logic into product is essential. Paying more for the right team is sometimes necessary, especially when good resources are scarce (here’s looking at you, Malta and Gibraltar).

Building capital is a different beast altogether. You won’t be able to secure any funding until you have a working proof of concept and, even then, capital is likely to be drip fed. Be prepared to get a family and friends round early on to deliver a ‘kick-ass’ demo, then start looking at early-stage VCs that specialise in growth-stage assets.

How do you react when you see startups coming in with their plan for disruption?

RL: We welcome the innovation and fresh thinking startups bring. This is particularly the case in Latin America, with a market still in its infancy. One area we’d especially like to see startups making waves is in the slot development sector. Latin America is a young market that needs local innovation suited to its unique conditions – especially in regard to mobile gaming.

Operators eyeing the market have Europe‐focused core products, which creates a struggle to work to the requirements of players and regulators. To succeed there, it has become more important than ever to work with those with a knowhow of the local area to adapt products and games to besuitable from the off; we welcome the chance for local talent to develop and grow.

Do you think it’s easier for established companies to innovate and establish new ideas? 

AL: From a financial perspective, yes. It is without a doubt easier for incumbent companies to establish a pipeline of innovation via their R & D departments, as well as having the tools to hand for data gathering and analysis.

But it stops there. Startups hold court in every other way. Not only are they flexible, they can easily switch from one idea to another, change strategy instantly as the market demands and easily move team members around. Established companies know this – and this is why we’re seeing an emerging trend for established companies to acquire small, innovative online gaming start-ups. They have the right resources and unique ideas, as well as the ability to bring a fresh approach to businesses’ thinking.

RL: For me, it’s always going to be established companies. Only with the resources, industry experience and know‐how can a company apply technology and services that truly make a difference. Of course there are exceptions. But when it comes to providing a platform that can be approved by regulators across multiple markets – as well as suiting an operators’ multiple jurisdictions – it is simply impossible for a couple of young bright minds with a few million behind them to get this done.

DM: I actually think it’s harder for established companies. It’s key to differentiate between having a good idea and executing one. That’s where the big corporates struggle most. They’re full of amazing people with all sorts of great ideas but getting them through systems and processes is nearly impossible.

Is it essential to patent-protect innovative products?

AL: It’s a very interesting subject. If we take IT for example – patents can actually become a block to the evolutionary process within the industry. Of course, getting a patent future proofs yourself from the competition copying your concept but, having said that, if you’re looking to protect yourself from someone more creative, smarter and agile, you’ve probably lost the battle already!

In our industry everything is moving faster and research takes less time than the development itself. No matter how good you are at copy pasting, you can’t copy Google or Netflix. The most important thing is not the tech itself but rather its ‘use-case’ – or in other words, does it solve what it’s meant to solve? Competition is healthy and the key to innovation. If you spend your whole time looking behind you, you’ll never be able move forwards.

JB: Tricky question, and one that depends on what and where you launch this IP. It can be difficult to patent mathematical engines and logic, mostly because they’re re-treading prior art. Branding, artwork and UX is more important and can easily be copied, but the territories you launch will determine how protectable your IP will be once patented. US/EU/Japan is easy but expensive to protect in. But China/South East Asia is a nightmare to cover adequately. Specialised patent lawyers with experience in software, and ideally gaming, can help you better.

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