The sports betting industry has always been a massive market and dates back hundreds of years. Back in the day, bookmakers used to operate from shanty huts at local horse racing tracks, most illegally at that. The industry progressed to offer fully licensed opportunities for these bookmakers and in turn allowed them to trade without prosecution, providing that they met the necessary rules and criteria of course.
As with pretty much any progressing industry over the last 20 years or so, the natural move for sports betting was that of online. These days it’s not uncommon to see bookmakers report that over 50% (some much, much higher) of their trade is now done online or via mobile betting. This article will be looking at just how far online betting has come and also where the industry is heading.
The First online bookmakers
1994 is the key year for online gambling and it was then that Antigua and Barbados pass the Free Trade and Processing Zone Act, which in turn allows offshore licenses for online betting operators. Throughout the first couple of years, it was casinos that were getting the first real shot at online gambling via Microgaming, who are still one of biggest software providers for online casino games even to this day.
Sports betting took a couple more years to really get going with online, and it wasn’t until 1996 that Intertops were to introduce the first online bookmaker. What was interesting about Intertops is that they weren’t a known brand in the sports betting world and they had no high street presence. Whilst they were based in the US they did accept players from the UK, but the scene was limited in all honesty, mainly due to the fact that few people knew about the company more than anything.
In just the first couple of years of making the switch to online betting, in 1996 the industry announced that over $60million has been wagered in the first two years, highlighting just how popular online betting had become in a very short space of time.
It wasn’t until 1998 that the UK started getting their first taste of the online betting scene with powerhouses William Hill being the first to open their doors to online punters. The company were also regarded as the first of the ‘known brands’ to enter the online marketplace, whilst many other were waiting in the pipeline to asses how the market was going to react.
The wait didn’t take too long, and after figures of online gambling revenues hitting $830million by 1998, other companies started to really make their move over the next couple of years. In 2000 the likes of Ladbrokes, Betfair (who almost hysterically accepted just 36 bets on their first day of trading and now report incomes well in excess of £70million each year), Paddy Power (2003) and probably most importantly for the industry, bet365, all opened their doors which in turn lead the way for so many others.
We state that bet365 were probably one of the most important because they were one of the first companies to enter the online sector without any bookmaking pedigree behind them. Brands like William Hill and Ladbrokes are tow of the oldest bookmakers in the world, but when bet365 entered it highlighted that as long as you were prepared to offer up a wide range of sports and markets to bet on, you didn’t need the history of a high street bookmaker behind you.
As the industry continues to grow, in 2003 ORC International had stated that online gambling activities were up 46% and that offline gambling activities had dropped 25%, giving huge early indications of where the industry was heading. This also highlighted just how popular online betting had become!
2006 was the first year the juggernaut that is online betting faced their first hurdle. The US Government passed a law (UIGEA) making it illegal for banks to process financial transactions to and from online gambling sites. This was a massive decision for US punters and one that saw many online gambling sites simply pull out of the industry altogether or at least turn their focus to offshore betting.
Whilst the US fall out hit poker and casino outlets hard, the sports betting industry, especially for those that were more UK/Europe facing bookmakers, didn’t long term affect their productivity. In fact, many would say that it was the US fallout that really spurred the online betting industry on within the UK as more companies entered trying to get a piece of the action.
From 2009 the industry really started to embrace new technologies. This included live betting, celebrity endorsements, cash out betting, live streaming, social media interaction, betting promotions and so much more. The range of sports, markets and events that you could bet on were simply outrageous, highlighted by the fact that punters bet over £1.5million on the sex, name, weight and even hair colour of Prince William and the Duchess of Cambridge’s baby!
This brings us to the current day and we can announce that online sports betting is as strong as ever and most definitely here to stay. In 2015 Google announced that over 11.1 million searches a month are made for the term ‘bet365, which is approximately 2 million more than that of ‘Nike’. It’s also estimated that online sports betting contributes around £70billion in an industry though to be worth around £700billion.
Betting Goes mobile
You’ll probably notice the biggest omission from the information above is that of mobile betting. We felt that this is such an important inclusion, that it deserved it’s own sub section.
Mobile betting was first introduced in 2003 from a company called Sporting Index. They decided to produce a program that would allow punters to place a limited number of bets on via their mobile device. The design was done on WAP and JAVA, meaning that it looks very different to the flash graphics and usability you see on today’s mobile betting apps.
The development of the Sporting Index ‘app’ was as big a revelation as the development of online betting itself. These days, many bookmakers state that mobile betting is quickly, if not already, their biggest output of bets.
As technologies developed, so did the format and layout of mobile betting. The iPhone had almost single handily revolutionised the way in which we use our smartphone in everyday life, which in turn allowed companies to develop much more sophisticated apps for use on larger screens and also touchscreen technology. The development of the App Store was, and still is, one of the biggest feats that Apple have produced to this day, but it also showed that mobile betting industry could develop apps for users to download directly to their smartphone device.
The development of Android devices was soon to rival Apple and they also had their own standalone App Store. But, both Apple and Android were very reluctant to initially allow bookmakers to offer up gambling apps in their respected stores. Whilst users of Android are still unable to download betting apps from their App Store, Apple have relaxed their views on the matter somewhat, with some of the bigger firms having the ability to promote their sports betting apps in the Apple Store.
A work around that a lot of bookmakers have used is from the development of HTML5. Now, for those of you who aren’t familiar with this, it’s basically a way in which websites can now be designed, an improvement on the capabilities of previous versions. HTML% also means that sites can be designed much easier to be compatible with mobile devices. This has meant that companies no longer need to use dedicated, downloadable betting apps. Instead, HTML5 will detect when someone is visiting the via their mobile or even tablet and in turn re-direct them to a specially designed, dedicated mobile version of the bookmaker.
Current Status of Mobile Betting
The future of mobile betting looks set to be bright, very bright indeed! The industry has grow exponentially over the last 5 years of so. In a report from the UK Gambling Commission it was stated that in the remote gambling market (includes betting, casino and bingo) was worth £710 million, whilst in 2015 it was then worth a staggering £3.6 Billion, a monumental increase of almost 500%. We realise that this does include both bingo and casino mobile gaming, but it gives a great indication where not just mobile betting is heading, but also mobile gambling on the whole.
Whilst this market growth for mobile betting is definitely going through a ‘boom’ period, a report from Deloitte on ‘The Future of British remote betting and gaming industry’ has stated that the growth looks set to continue, but expect to see the market consolidate somewhat over the next five years, with smaller operators falling away due to the strength of the already existing brands. We are also likely to see an increase in the quality of mobile betting apps as a result, with bookmakers making sure that they offer the best product available, due to the competition on show. All of which is great news for the punter, but possibly not for the smaller bookmakers in the industry.
Is Online Betting Legal?
The first thing we want to point out is that online gambling in the UK is very much legal. You can bet as you please on any site that is licensed. Licensed being the key word!
In 2001 a bill was passed changing the way in which bookmakers had to apply for a license and in turn, changed certain aspects of their business to adhere to fairer and more regulated laws. At the same time it was decided that the gambling in the UK would be overseen by the UK Gambling Commission, with all this coming to fruition in the from of the Gambling Act 2005.
The Gambling Act 2005 is essentially in place to protect the punter and safeguard amongst any wrongdoing. Without going in to too much detail about the whole process, the bookmaker will need to apply for a license and then hit certain guidelines to protect their players. The following is a sub section taken from the act giving a quick overview of the Act’s objectives:
- Preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime,
- Ensuring that gambling is conducted in a fair and open way, and
- Protecting children and other vulnerable persons from being harmed or exploited by gambling.
Whilst the Gambling Commission will always be the authority figure for online bookmakers, the increase in exposure that bookmakers have via marketing, social media, TV advertisements and online advertisements has also triggered the eyes of the ASA (Advertising Standards Agency). Since gambling has been legal to advertise across all media since 2007, the ASA are in place to make sure that bookmakers aren’t stepping over the line when it comes to promotions, offers and services that they claim to provide.
Some of the key rules include that they must not encourage gambling that could lead to financial or social harm, be likely to appeal to under 18s, suggest gambling to be a financial solution, exploit minors to encourage them to gamble and link gambling to seduction, sexual success or enhanced attractiveness. Whilst the ASA can’t technically punish a bookmaker for breaching these rules, they work very closely with Ofcom and the UK Gambling Commission, who will both be informed and it’s up to them to impose any sanctions to the bookmaker.
Point of Consumption Tax
For many years bookmakers had been able to access a loophole in the 2005 Gambling Act, which basically stated that as long as they were licensed within a UK-approved ‘whitelisted’ sector then they would be able to offer their services to residents based in the UK. These companies would often flee to other ‘tax-friendly’ nations and pay a mere fraction of what they would in the UK.
To overcome this it was decided and signed in that all gambling companies who offer their services to UK based punters and accept wagers from them would have to pay a point of consumption tax of 15%. This wouldn’t apply to companies already based and paying taxes within the UK, but only target those based outside of the UK.
Where Are Most Online Bookmakers Based?
The stark reality is that the majority of online bookmakers are actually based out of places such as Gibraltar and Malta. The reason behind is that they are able to both conform with UK gambling legislation in these types of countries (as they are UK friendly and have been ‘whitelisted’ by the UK Gambling Commission) and also are able to pay just a fraction of the tax that they would in the UK because of how each respected government is run.
The point of consumption tax, as mentioned above, has given the UK government a way in which they can still make money from these companies by charging 15% of total profits from each. But, in reality, if they were to be based in the UK then these percentages would be much, much higher and overall, they are still likely to be getting a better deal by being in either Gibraltar, Malta, Isle of Man or places similar.
Some of the major brands that hold licenses in Gibraltar are Ladbrokes, BetVictor, Stan James, Bwin, 32 Red, 888Sport, William Hill, bet365, Betfred and Betfair, to name but a small few. These guys have been shifting over since about 2006 onwards after the 2005 Gambling Act was brought in. It’s tough to say if there were going to come back and you would think that if the laws remain as they are, you’d have to say that it’s highly unlikely that they will come back. One of three things would have to happen for this to occur:
- The UK relax the tax laws that these corporations fall into, or
- Countries such as Gibraltar increase their tax percentage meaning that the 15% POC tax makes it financially nonsensical, or
- The UK makes it illegal for companies based outside of the country to trade within the UK.