Comments: Details on UK’s online gambling reveals global picture

Online gambling generated over $9bn in revenue from over 22 million players worldwide in 2007 according to the most recent data from Point Topic.

“We used data from our most recent consumer survey in the UK* along with other inputs to establish the global online gambling market,” said John Bosnell, Senior Analyst at Point Topic.

Just under 12% of men and 6% of women gamble online in the UK. The numbers climb to over 14% in the 25-34 year age bracket.

“We estimate that the gaming sites earn $35 per player per month in the high income countries, which is fairly conservative, and around $10 per month per player from the low income territories,” continues Bosnell. “If you extrapolate from these numbers you get to just over $9bn from all countries in 2007.”

Global penetration is at 7% of the online population which in theory leaves plenty of room for growth but there are a number of issues specific to online gambling which make the market intrinsically unpredictable.

“As many authorities impose strict regulation on what is regarded by many as an addiction comparable to alcoholism the market is subject to external controls that set it apart from other online value added services. Online gambling is illegal in China and difficult in much of the US. Potentially major markets like these are currently either out of bounds or only available for certain types of gambling, usually delivered by offshore operators. In combination with irregular changes in regulations in other countries it can be difficult to generate a reliable business model,” says Bosnell.

Despite the problems it’s a crowded market. There are many different types of online gambling, from betting on sporting events, spread betting and poker specific sites through to the full range of games available in physical casinos and there are hundreds of sites vying for business.

“It’s technically straightforward and cheap to set up the sites. The major expenditure is on marketing. When you’re an online business you’re operating in a marketplace where users find it easy to compare your offering with your competition. Free offers, improved gaming experience and straightforward advertising are the primary differentiators,” continues Bosnell.

Online gambling will continue to grow in revenue terms. However, with regulatory uncertainties always present and leisure spend under threat in times of global financial insecurity there are certain to be sites that suffer. Growth will slow and insolvency and consolidation will be a dominant characteristic of 2008 and 2009.