Asia’s multi-billion dollar online gambling industry is an opportunity too big to ignore when it comes to the expansion plans of many global players, yet technical issues ranging from latency, through to security and payment systems can prove to be costly challenges for newcomers.
Given online gambling is mostly unregulated across the region, exact figures for how big the market is are not available, though most estimates run into the hundreds of billions of dollars, with China’s outfacing market alone put at about $600 to $700 billion.
While the volumes are massive, increasing competition, the costs of client acquisition and other market peculiarities can eat meaningfully into margins.
One of the biggest issues facing online gaming operators in Asia is payment processing systems. In unregulated markets the mainstream banking system is generally not an option, with punters choosing popular payment methods, such as Alipay and WeChat Pay.
The problem with these is that they are closely monitored by authorities and client accounts are regularly blocked and shut down. This leads to a continued reliance on the agency system.
“The Western market doesn't have the same issue with well recognized licensing authorities and a wide availability of various payment options including Visa/Mastercard,” one Asia operator who asked not to be named said. “The Asian market continues to be a largely cash market with the clientele not willing, or not able to use bank cards.
“All these aspects lead to the agent networks still being very relevant. Agents also have the ability to provide credit, dealing with customers directly which adds to these networks’ value. However, agent networks eat at the online operators profits largely leaving casinos with a very small margin.”
Nick Hill, commercial director at Flow Gaming, says these payment difficulties are driving research into cryptocurrency models that can be used in a closed network to make moving money much easier.
Also likely to eat into margins is the cost of client acquisition in a highly cut-throat market, where client loyalty is tough to establish.
Hill says that rebates to clients can typically be about 0.8 percent to 1.2 percent of the total game wager, with the operator working on a margin of about 3 to 3.5 percent.
“That means you give back 30 percent, it’s an unsustainable business model,” he says. “We are trying to educate operators into improving loyalty and retention, as the life expectancy of a player in Asia is only about one week, compared with 3 to 6 months in Europe.”
Given the costs of acquisition, keeping clients is a key focus and most operators in the region are obsessively secretive about customer databases.
While a few years ago, web attacks in Asia were mainly DDOS based, aimed at shutting down or disrupting competitors’ operations, hackers are now more sophisticated and seeking rivals’ information.
“To an extent companies are reaching a level of security that they know what to do and what systems to put in place (against DDOS),” says Jaheer Abbas, senior director Southeast Asia & India at Limelight Networks. “Newer kind of attacks are now gaining prominence, with hackers looking for useable information.”
As a result, there has been strong interest in web application firewall products to prevent code being embedded into systems, which is a much harder problem to detect.
Another trend that has been noted is blatant copying of websites to steal clients through DNS hijacking, where the player may not even notice they have been redirected to a mirror site.
“The operator loses out,” says Hill. “They acquired the player through their marketing efforts and spent a lot of money and now he’s betting on another site.”
Online latency has also been identified as an issue, especially in live betting situations, where there is a lag between the actual event and its appearance onscreen. The gap, which Abbas says can be as much as four to five seconds even for a live television broadcast, takes away from the user experience and can create opportunities for manipulation.
This issue has become more complex with the increasing migration of players onto mobile platforms, many of which don’t support Adobe Flash. Users are turning to HTTP Live Streaming to overcome the problem, but the latency is unacceptably high at about 30 seconds to a minute, Abbas says.
“This greatly disrupts players’ game experience, and even results in a loss in revenue for the gaming operator as the high latency reduces the number of playing rounds, which in turn cuts the operator’s revenues from the game.”
Martin Trang, regional director Asia at Frosmo, says the problem is particularly acute for any companies targeting China, given they are likely to need to use content delivery networks, which slows things down.
“It affects the user experience negatively, especially if you have to load content-heavy websites,” he says. Frosmo’s focus is on improving the user experience, in particular by personalizing a site to the individual client. “There is more target on what the user wants to see and when they want to see it,” he says, which can improve load time.
However, even here Trang acknowledges there is a lot of concern in the market that 3rd party solutions may give access to their well-guarded data. “Everyone is scared of giving up any access to their data,” he said.
Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.
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