One of the main reasons behind the rapid increase in the number of new brands entering the bingo market is the low cost associated with brand conception and launch.
There are now two main ways in which a brand can launch; these are by becoming a stand-alone operator, either using hired, purchased or proprietary software. Or, by becoming a white label partner on an existing network.
The latter option costs peanuts in comparison to the first and some networks are so eager to expand that they are willing to allow a partner to start a new skin (branded theme) for free!
With the low costs associated it is easy to see why many rush into launching their own bingo brand. The added bonus of being part of a network is the low running costs; partners seldom have to worry about staffing issues, interaction with customers or licensing. In most cases a partner’s role is confined to marketing the brand, although it can prove worthwhile for partners to run their own promotions and competitions.
Unfortunately, this is where the troubles begin. With over 350 bingo sites in the UK, it is impossible to overstate the ferocity of the competition. It is also difficult for an outsider to comprehend the depth of the pockets of the big brands.
With the rise in competition, the cost of acquiring new players has shot through the roof. This has made it very hard for those without existing brand identity or a large budget to generate any players and in turn, revenue. The main channels that brands rely on for new customers are PPC, SEO and affiliates.
PPC is very expensive and it is easy to blow large sums of money trying to make a campaign successful whilst SEO is a near impossible art, which requires large investments to make it pay. Even then it is unstable and results can and do disappear with no notice.
One of the most common assumptions is that affiliates will make a new brand successful. This is true for those who have plenty of funds or those who are not members of a network. The problem for white label owners (who make up the majority), is that affiliates know their value and charge accordingly.
White label owners generally cannot afford to pay enough percentage to satisfy the decent affiliates and remain profitable. This is because they have a commitment to pay a high amount, usually 50% of their revenue to the network operator.
What will the future bring?
Consolidation. The current climate of new white labels opening on a weekly basis is showing no signs of slowing off. However, with a bit of snooping around and a little insider knowledge, it is clear that many of the white label brands out there are dormant. Ticking over but making very little or no money.
We have seen a few acquisitions take place so far and it seems very likely that big, established brands will swoop in and snap up smaller brands and their player databases. They will then be likely to do one of the following; scarp the brand altogether but keep the player database and add it to an existing brand. Or, spend money on marketing and establishing the failed brand within the market.
One thing is certain, the sustainability of the white label as a business model is in question, especially for those without deep pockets.