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Investing in the online gaming industry: What is your best bet?

The gambling industry is a multi-headed beast, a hydra made of lotteries, online and offline casino, and just about anything else that charges a poker chip as price of entry. And, while each arm fares differently (charitable giving from the government lottery climbed 7.2% between April 2015 and March 2016, while the number of physical gaming machines fell 0.4% over the same period, for example) the numbers associated with gambling trend upwards.

Technology and Security

In many ways, the question of whether to invest in online gambling in particular has been answered – it’s a valuable growth industry, so “yes” – but the sector has long been a rather secretive thing; not a staple of the high street like many bookmakers or even arcade company Quicksilver, which, for all its low profile, is popular enough to own and operate 150 branches in the UK’s towns and cities, but the denizens of islands in the Mediterranean, Gibraltar and Malta.

There’s also a lot of regulation-appeasing involved in operating a casino but it’s arguably harder today to see that trait as anything other than a positive for investors, as it offers clarity regarding taxation as well as significant elements like advertising (casinos can advertise on Premier League football shirts, for example), the scale of customer service elements required, and a company’s obligations towards technology and security.

A Unique Opportunity

So, gambling has struggled for investment in the past both for its lack of visibility and the belief that it’s a fortress of red tape. Consequently, there’s not a vast amount of money in the industry, despite the obvious connotations of endless wealth. Those empty coffers created a technological bottleneck that casinos are only just beginning to overcome; it’s no coincidence that even staple features like social functionality are one of the casino industry’s newer obsessions.

What all that means is that the online gaming industry presents a unique opportunity, as a buoyant and newly-creative thing with plenty of space for investment.

Lotteries are a major growth area, with a brand like Lottoland expanding to support worldwide lotteries and unique gaming options like lottery betting, in which players place a bet on the outcome of the US PowerBall (for example) and have their payout matched by Lottoland. While the differences between the standard lottery and lottery betting are subtle, Lottoland can offer bonuses like free bets and double jackpots by favouring the latter.

Daily Fantasy Sports

Another bourgeoning sector in the online gaming niche is Daily Fantasy Sports (DFS), especially in the United States. A type of experience that transforms season-long fantasy campaigns into a daily activity, DFS may be worth up to $5bn by 2020. Remarkably, despite fantasy sports’ association with the NFL, NBA, NHL, and other US sports, courtesy of TV shows like The League, DFS has links to the UK; one of the largest providers has offices in Edinburgh and Glasgow.

In-play betting is a highly fluid part of online gambling. Bookmakers are increasingly happy to take bets on a range of standard markets (corners in a football match, sin-bin minutes in rugby, etc.) as well as the number of hot dogs eaten in Nathan’s Hot Dog Eating Contest, a tradition in Coney Island. Recently, in-play betting providers have also demonstrated a willingness to innovate, with, for example, cash-out options to save losing bets from catastrophe.

Finally, as mentioned, the likely trajectory for new businesses in gaming is towards social elements; if there’s ever been room for a social network based on group bets, it’s right now.