The gambling industry needs to overcome its obsession with bonus promotions and free bets.
Those are the thoughts of Steven Salz, video gamer turned CEO of TSX-listed operator Rivalry, which just reported record Q3 results.
“It’s simply not a very sustainable business model,” he said. “If you need to subsidise players to come to your platform, then your only competitive advantage is your balance sheet,” Salz told iGaming NEXT in an interview.
How it all started
Salz, who co-founded Rivalry in 2016 in his mid-20s, had been a passionate gamer during his teenage years.
However, he started a career in asset management at Canadian bank Scotiabank before taking on a position as an analyst at a boutique investment bank.
But when he saw the esports industry edging closer to monetisation, he wanted to be a part of it.
“In 2015, a lot of exchanges were created that allowed players to buy and sell skins, which created a lot of liquidity for these items,” recalled Salz.
“Moreover, a huge community was being built up that traded these items almost like stocks. I reached out to Loot Market, an in-game item marketplace for Dota 2 and CS:GO items, alongside my business partner Steve Isenberg because I wanted to invest in the company.”
This is how he met Rivalry co-founders Ryan White and Kevin Wimer, who back then were in charge of Loot Market.
“We quickly noticed that a lot of the liquidity and transaction volume was coming from skin betting websites, which were not licensed and therefore illegal.
“There were billions of dollars of betting handle in 2016 already, and we thought that this presents an opportunity to build a regulated betting product for players under the age of 30.
“From the start, we wanted to target Millennials and Gen Z consumers, all those who have grown up with video games like we did. So, our visual style and messaging is very gaming focused, while the main landing page is defaulted to esports betting.”
Today, Rivalry generates about 90% of handle and revenue through esports, primarily with people betting on events involving League of Legends, Counter-Strike and Dota 2. The remaining 10% comes from traditional sports betting.
In August, Rivalry added Rushlane, an online multiplayer game designed in-house and last month introduced Aviator, a third-party casino product to counter the seasonal slowdown of sports betting.
Rivalry CEO Steven Salz: “We don’t want to be another sportsbook targeting 35-year-old punters. We really want to build a product for the next generation.”
“I don’t know if this mix is going to change any time soon. If you had asked me a year ago, I would have probably said that this year esports would account for 70% and traditional sports betting for 30%, but there has been a continuous strength in esports for us,” Salz said.
“We don’t want to be another sportsbook targeting 35-year-old punters. We really want to build a product for the next generation.”
According to recent data, 82% of Rivalry’s active users are under the age of 30.
“They are at the beginning of their LTV cycle, in their early or mid-20s, while the typical sports bettor and casino player of most other operators is in their late 30s and 40s,” said Salz.
For the most part, Rivalry does not utilise traditional iGaming marketing channels such as affiliates and bonus promotion but focuses on content-led player acquisition via social channels and influencers.
Due to the firm’s esports focus, Rivalry has long been close to streaming platform Twitch and its content creators.
Discussing Twitch’s decision to ban crypto gambling live streams, Salz said that “it was the first time that something was being done about these nefarious actors”.
The ban, effective tomorrow (18 October), will clamp down on slots, roulette, and dice gambling sites that aren’t licensed in certain jurisdictions and are lacking player protections.
He added that there were always “companies in the industry who operated in ‘darker’ ways, but the hardest thing for them was to move money. “Crypto – and I am a crypto believer – has made it so much easier to run this kind of business,” said Salz.
“You can log in using a crypto wallet, deposit instantaneously and play slots in under 30 seconds with real money. No KYC, no questions asked,” he said.
“Shutting them out from the distribution, of which sponsoring Twitch streams is one of the more important avenues, is one of the last tools left,” Salz said, commenting on the struggle faced by regulators in clamping down on these sites.
Building a brand
Commenting on Rivalry’s own marketing initiatives, he said: “A lot of our ability to effectively acquire new customers and retain existing ones has to do with the brand equity we have created.
“This is a very sustainable way as we don’t need to focus on bonus offers. We pay very little in bonus promotion relative to our peers.”
Salz said he fundamentally believes that it is a “toxic situation” if a business needs to attract and retain customers with the help of bonuses and other incentives.
Looking to the future, Salz said that he believes that Rivalry’s sportsbook will continue to be heavily driven by esports, but the share of traditional sports betting could increase from 10% to 20% by the end of 2023.
The main reason for this is that the esports sector in both Australia and Ontario, two markets which Rivalry has entered in 2022, is not as developed as elsewhere and punters in these areas prefer traditional sports betting.
Does he have a message for other operators wanting to break into the under 30-market?
“Yes. I’d like them to think as long as possible that bonus promotion works,” he laughs.
Jokes aside, Salz added: “For the under 30s, esports betting is the first touchpoint with the betting sector,” so if the iGaming industry wants to future-proof itself, it “should consider esports as a top of funnel of that demographic, and not just an add-on”.