The regulated online gambling industry has delivered significant returns for investors in recent months, but can it continue to hit the jackpot amid new challenges
The regulated online gambling industry has delivered significant returns to investors in recent years. There have been several factors driving this, including an increase in wagering activity, new markets opening up, and a wave of mergers and acquisitions.
But with the industry facing new challenges – increased competition and regulatory scrutiny – can it continue to grow at such a fast pace?
First, it is important to look at why the online gambling sector is such an attractive opportunity for investors and how it has been able to deliver such high returns so consistently and for so long.
The case for investing in listed online gambling operators:
Other industries are struggling to grow due to worldwide economic stagnation and geopolitical factors such as Brexit, but the online gambling industry is thriving in this challenging environment.
Listed companies provide investor confidence
The sector is home to a wide range of listed companies, including technology suppliers and betting brands. The fact these companies are listed – some have been on the London Stock Exchange for more than a decade – reassures investors of the legitimacy and stability of the organization in question.
These companies are large enough to warrant stocks and shares, and in most cases have received significant financial backing in the past. As well as the London Stock Exchange, gambling companies are also listed on the Nasdaq in Stockholm and the New York Stock Exchange.
Notable companies listed on the London Stock Exchange include Playtech PLC, GVC Holdings PLC, Sportech PLC, and 888 Holdings PLC, which operates the popular 888casino and 888poker brands among others.
More people than ever before gamble online
Online gambling is enjoyed by hundreds of thousands of players around the world. In the UK alone, the Gambling Commission estimates that almost half of the population gambles with a significant number of wagers made online. In countries such as India and Africa, there is a similar appetite for gambling products, especially those available on smartphone and tablet devices.
Companies strengthened through mergers & acquisitions
Another case for investing in an online gambling organization is that there have been several high–profile mergers and acquisitions within the last couple of years. This points towards the untapped opportunity these businesses believe exists within the industry, and that by joining forces further value can be unlocked.
Moreover, it points to the market’s wider confidence in these organizations and their ability to raise the capital required to pull off multi-billion-dollar takeovers, and then drive growth once the deal has completed.
These are just some of the game-changing online gambling mergers that have taken place in recent months:
- Paddy Power Betfair acquires FanDuel
- GVC acquires Ladbrokes/Coral
- The Stars Group acquires Sky Betting and Gaming
- LeoVegas acquires IPS
Online gambling technology continues to evolve
If you look at how online gambling has progressed in recent years, much of it is down to developments made in the technology that powers sites. Platforms are now state of the art, and deliver a seamless experience across desktop and mobile play – the latter is a major factor in industry growth. We are also seeing developers experiment with new technologies such as augmented and virtual reality.
Furthermore, the live dealer game – players wager at a real table with real cards and chips, and a real, human dealer – have evolved hugely to deliver a truly authentic casino experience online. In short, the player experience is vastly superior, which in turn is driving growth.
Emerging markets flourish as gambling laws widen
Another case for investing in online gambling companies is that the addressable market continues to expand. In the USA, for example, the Supreme Court recently repealed a law prohibiting states from legalizing sports betting, while the roll-out of online casino and poker continues across the country.
The US has the potential to be one of the largest online gambling markets in the world, and already we have seen a wave of European operators and suppliers strike deals to offer sports betting and online casino in the states where it is legal to do so.
Some of the challenges faced by the sector:
The online gambling industry may be thriving right now, but it is coming under increasing regulatory pressure with operators having to go to even greater lengths to ensure their players are protected. This means offering tools to help players manage their wagering activity, including deposit limits, loss limits and the option to take a break or self-exclude.
Operators are now prioritizing this, and the wider industry is going to great lengths to help players understand what happens in their brains when they gamble and how they can stay on top of their activity so that it remains fun and enjoyable.
Consider the risks and the rewards:
In any potential investment situation, the main factor is to consider is risk vs. reward. Investors must research and understand the industry and organization they are looking to invest in, and how and where it plans to drive growth in the near and long term.
But when you consider the factors above, investing in the online casino sector is not so much of a gamble as other industries. Investors can back a range of companies – some listed, some not – with plans to expand into new markets around the world and where there is a strong appetite for their products and services.
If investors play their cards right, there is a good chance they will hit the jackpot.
Disclaimer: This content does not necessarily represent the views of IWB.