Placing bets on online gambling

The pulse is MediaGuardian.co.uk's new thinktank, with research from the UK's leading market analysts. Each week, we tackle a micro-sector to give you a statistics and analysis-packed snapshot of the sectors that matter. This week, Amanda White, a leisure goods consultant at Mintel, explores online betting

Table: attitudes to online betting

Amanda White
guardian.co.uk, Tuesday June 19 2001 16.05 BST

The abolition of the 9% betting tax in January 2002 is set to revolutionise the online gambling industry and spark a massive marketing blitz as traditional and online bookmakers compete with each other for customers.

Once the tax is replaced by a 15% levy on bookmakers' gross profits, the traditional gambling industry will be able to fight back against tough competition from offshore, tax-free betting websites.

Offshore operators will return to the UK and the government will reap the rewards generated by punters placing tax-free bets. An increasing number of foreign bookmakers, such as Paddy Power, could enter the UK market.

Although the abolition of betting tax will benefit the industry overall, it will take away the advantages currently enjoyed by the websites.

At present, UK punters avoid paying betting tax by using websites run from outside the UK.

In the run-up to the abolition of betting tax, the online bookmakers will have to work harder to attract new players and promote loyalty among their existing customers.

But the target audience of online and traditional bookies varies enormously.

Traditional bookmakers are generally used by C2DE men aged over 30.

In contrast, a high proportion of people who bet online come from the AB socio-economic group and are affluent and computer literate.

Although this situation is positive in presenting online operators with a new market, many serious betters are not able to get online.

The key task for gambling websites is to create targeted marketing that appeals to the typical internet user rather than the typical betting shop punter.

Sportingbet.com, for example, plans to adopt a customer relationship management programme to encourage loyalty.

It will combine this with a reward mechanism and email marketing tied to the sporting calendar.

Sportingbet's database will allow the emails to be personalised in line with the betting habits and sporting interests of the customer.

However, the success of online betting may depend on the quality of the impartial information given to customers to help them place their bets.

In the online arena, those websites with familiar brand names tend to be the most succesful.

Two years down the line, Ladbrokes, Coral and William Hill are likely to be the major players in this market.

Despite the lack of brand loyalty in betting, the advantages these clicks-and-mortar organisations enjoy is immense.

Niche companies that command a small share of the market can only hope to maintain their share.

The key to success in the online market is based solely on the number of "active", registered users.

Any bookie can set up promotions, offer free bets and claim to have 100,000 registered users but if those punters do not come back after placing their free £5 bet, the venture is likely to fail.

• Mintel is a market research company covering consumer markets. See Mintel.com for further details.