Let's start with a little background on the current betting market in Cyprus.
In 2020, the current population of Cyprus is 1.2 million. The male population is slightly more than half at 51.1%, with 48.9% female. According to statistics from major Cyprus media, approximately 75% of Cypriots over the age of 15 are involved in some form of gambling.
Based on the age structure, our Chief Expert Alexey Khobot determines the potential market capacity at 510 thousand people. Based on the fact that 75% of Cypriots engage in some form of gambling, actual market capacity is about 380 thousand. However, as far as available market capacity is concerned, we must also account for the shares of existing competitors. This may be problematic since not all companies publish reports.
Currently, there are only 15 licensed bookmakers on the market. According to various estimates, there are 92 thousand unique users. In 2019, GGR (Gross Gaming Revenue) was EUR 88.7 mln, or 1% less than in 2018. Betting companies in Cyprus differ by licence type (Class A or Class B). Class A licenses are for offline betting companies, and Class B are for online betting companies. The profit margin of betting companies differs significantly based on class: they amount to 19% and 7%, respectively. However, the margins in both classes have been declining for the last 4 years.
Comparing the results of 2018 and 2019 Q4, the NBA (regulator) indicates growth of 21%. However, in general terms, 2019 results were lower than 2018. The number of betting company websites blocked by the regulator reached a record high of 11,363 per quarter. In 2016, this number was only 2,473 sites. Margin indicators have continued to decline for betting companies with both types of licences (A and B). For betting companies with license A* — 19%, and for bookmakers with license B** (in particular, Fonbet) — 7%.
Let's begin with growth rates. In the betting industry, there is a separate concept for determining "total revenue" called Gaming Gross Revenue. According to Fonbet Chief Expert Alexey Khobot it is almost impossible to find this indicator in Russia because not all betting companies publish reports.
In Cyprus, the National Betting Authority (NBA), or the betting companies' regulator, makes this indicator transparent. The NBA collates all betting company reports in full and issues quarterly reports on the industry's results on its website.
As can be seen in the table and graph above, from 2015 to 2018, there was a significant increase in annual GGR. However, in 2019, GGR fell slightly, while growth rate declined significantly. This "radical change" may indicate that the industry is moving into the Mature stage.
To be certain that the market is indeed transitioning from the Growth stage to the Mature stage, it is important to look at smaller periods (quarter, rather than year), as suggested by Chief Expert Alexey Khobot.
At the moment, we can observe minor GGR fluctuations in Cyprus by quarter. As shown in Fig. 18, the level of revenue in the industry has not changed for two years. The largest drop in the indicator can be seen in Q2 2019 (causing a decrease in the annual indicator).
Thus, we can state that the industry is in the process of transitioning to a different Life Cycle stage. Notwithstanding the affiliate strategy up to the present point in time, it needs to be changed, as recommended by Chief Expert Alexey Khobot.
Market development zones
Sports simulator betting — a potential betting market development area in Cyprus. While the regulator currently prohibits any bets on Simulated Reality League, Fonbet Chief Expert Alexey Khobot says that he expects the ban soon to be lifted. Betting on sports simulators can expand the lines of all betting companies, providing additional revenue even in periods when all sports matches are canceled
The potential to take a share of the illegal betting market — this outcome is possible if online marketing is developed competently. For example, according to information from the NBA (the regulator in Cyprus), more than 11 thousand illegal betting companies's sites were blocked in Q4 2019. By placing ads on all blocked pages, a large number of new customers can be drawn in
Transitioning customers to mobile apps — an additional channel for communicating with customers. Currently, a very modest number of customers use the mobile app because they prefer the mobile version of the site
Improving the internet structure in Cyprus — today, we are observing an increase in the number of households with internet access. We also assume that these indicators will increase. Along with the increase in the client base of internet providers, the state of the online environment will improve proportionally. For online betting companies, this is an opportunity and a challenge, since it will require development in equilibrium with the market as a whole
Development of local sports in Cyprus — today, Cyprus sports are neither international nor popular. Most of the teams are known only in Cyprus, and top football clubs (APOEL, Omonia, Apollon, Anorthosis, AEL, etc.) rarely make it on the international sports arena. However, our Chief Expert Alexey Khobot assumes that the Cyprus sports market still has potential for growth. This will create a large amount of sponsorship
Product profile expansion — in Cyprus, online casinos are popular. Also, based on the reports of Greek betting company OPAP, it is clear that one of the key factors of success is product diversification
The opening of physical betting shops/having an offline presence — as mentioned earlier, offline betting companies have higher margins than online betting companies. Therefore, as stated by Fonbet Chief Expert Alexey Khobot, focusing offline efforts will be a worthwhile solution for the Cyprus market
Macroeconomic factors (PESTL analysis) — this group of threats can include all macro factors that affect the industry. In our opinion, the most powerful factor is the threat of a global recession. Cyprus is a very small country, and any changes to the external economic environment can lead to significant consequences for the island's economy.
Microeconomic factors (Porter's five forces) — this group of threats includes the microfactors faced by individual Cyprus betting companies. The most significant, as stated by our Chief Expert Alexey Khobot, are the low costs of switching between competitors (and, in fact, substitute goods as well). Customers can switch from betting company to betting company in Cyprus, and also use all betting companies where registration is carried out with a Cyprus passport
Game cannibalization — gambling includes several categories (betting, casino, lottery, etc.), so it is often the case that one category begins to "devour" the customers of another. For example, after getting tired of casinos, customers can transition to betting, or after betting to lotteries. This phenomenon is known as game cannibalization
Reputation losses due to current issues with the main brand — this factor is only relevant for non-local companies in Cyprus. This is one of the least alarming threats, but it cannot be ignored.
Intense competition on the online betting market — analysis of Fonbet's competitors on the Cyprus market conducted by our Chief Expert Alexey Khobot show mainly international brands. Moreover, since Cyprus is not isolated from the European betting market, a portion of customers use a VPN to register in other countries
Lack of geographical diversification — the small territory and lack of division into regions makes any harm to the company's reputation a serious risk.
The most appropriate tool to elaborate recommendations is SWOT analysis. This will allow the company to compare the influence of different factors and identify development zones and inconsistencies.
The main macro threat is global economic recession. As mentioned earlier, this factor is significant because the Cyprus economy is extremely small and any fluctuations in the external environment can cause significant issues.
The main micro threat is the low cost of switching between competitors. Customers can choose any betting company licensed on the Cyprus market, as well as any betting company from other markets (the main condition is the ability to register with a Cyprus passport).
As far as transition to a mobile app is concerned and improving the internet structure, this may further simplify customer transitions between bookmakers (i.e. further complicate one of the threats). Betting on sports simulators will reduce mobility only if they are permitted in a single betting company and win the trust of conservative users.
In this regard, the most effective potential is the expansion of the product portfolio. The first betting company in Cyprus that manages to reach customers with an interesting new offer will be able to attract maximum attention.