We will provide a more thorough update of this trend once the H1 reporting season is complete, but the signs, we believe, are already clear.
Don’t panic – yet…
We hope we have clearly demonstrated that suggestions of significantly slowing growth, or that 4% growth can suggest anything but material UK market share losses, show a misunderstanding of the underlying market data. However, three themes are emerging. First, growth is becoming increasingly polarised, with once ‘good’ operators struggling and strong growth being concentrated into a small group of big (private) operators, and a number of UK market entrants (eg, Scandinavian gaming brands); we believe this is partly a symptom of a market changing to much more mass-market driven spend dynamics, for which few operator / supplier business models are equipped (average customer LTVs declining, average CPA staying the same or going up), while competition for increasingly discerning heavy users goes up in volume terms and becomes more patchy from a quality perspective (putting a premium on strong operations management, UX, value and differentiation). Second, while not stalling, growth does appear to be slowing from recent very strong rates, likely due to the normalisation of mobile adoption and also as the sector is affected by broader UK consumer softness. Third, the UK online market is now big enough for growth (or otherwise) to be really noticed: this is likely not only to increase cyclicality (as a consequence of being more mass-market) but also further increase regulatory-fiscal scrutiny and risk. Operators therefore need to plan for a more mass market and a more socially responsible future, or they will likely see their own growth and that of the sector stall spectacularly.