SBC Americas talks to Keith McDonnell. Now based in the US, and building on 18 years of online gambling experience across three major international betting brands, McDonnell founded kmigaming.com in 2011 to provide services for the regulated International online gambling sector, helping start-ups launch, fully established businesses grow internationally, and generally providing solutions within the online gambling sector.
SBC Americas: What’s behind the move to the US and what are your initial and longer-term plans for KMI there?
Keith McDonnell: My plan is to replicate what kmigaming.com has been doing in Europe and Asia over the past seven years, and so I set up an LLC in the US last year to help businesses already in, or targeting, the US online gambling sector while looking into interesting investment opportunities.
There is a lot of talk and activity in the US in online gambling right now. The true battle to succeed is not to be first but to be right. This can only be achieved by considered decision making, assessing all viable options. This applies to individual states through regulatory frameworks and tax structures and to operators through software choices, marketing decisions, strategic alliances and key personnel hires.
SBCA: How does your expertise fit into the nascent US sports betting market?
KM: I’ve been in the online gambling industry since 2000. For the first 11 years I worked with three operators in different regional markets, across the globe, setting up their online business and managing them to profitability.
This involved all aspects of what it takes to run an online gambling business including software and product choices, licence applications and compliance, key personnel hires, strategic and marketing planning, delivery of payment choices for customers, building customer service teams and wider Operations, and a LOT of fire fighting.
Since setting up kmigaming.com in 2011, we have leveraged this experience to assist clients move from land based to online and expand internationally while also deciding on personal investment opportunities (with an operator focus to keep experience relevant) in interesting industry projects as they arise.
Given the opportunities that are presenting themselves in the US now, we hope to follow a similar path here, while recognising there are many specific local issues to be aware of and learn about.
Many positives in the US betting space
SBCA: What do you think are the key strengths, weaknesses, opportunities and threats in the US sports betting space?
KM: The US has so many positives going for it. At a basic level it’s a sports loving, tech-savvy, country full of passionate fans that have found sports betting outlets through the offshore online market, casino sports rooms and, more recently, the growth of DFS (daily fantasy sports). There is practically zero education required to teach these people how to wager.
With regulation of online gambling, we could argue there will be an expansion into the wider mass market and some education will be required for that, but we are starting from a real solid base.
Given the complimentary calendars of the major US sports, and the continued growth of soccer, there is no time in the sporting calendar when there isn’t something to wager on.
As for challenges facing the US, well, running an online gambling business is hugely different from running a land-based operation. The pace of decision making, reacting to opportunities and threats, and understanding of customer patterns is very different.
Of course, opportunities exist by having one channel (land-based) promote to the other (online / mobile) but an online channel can not be run with the same mindset as a land based business. This probably requires different people, not just different thinking, as many UK bookmakers found out in the early 2000’s.
Regulators and tax-setters need to understand the commercial overheads their frameworks impose such that the opportunity remains viable. If not, a sector is being promoted through media that will simply swell the customer base for offshore businesses.
How could an operator that is heavily laden with tax burdens and compliance overheads pass the same value on to customers, through sports odds and bonuses / comps, as an offshore book not subjected to these overheads?
There is a tonne of evidence in Europe of countries who have got it right and those that have messed it up. It’s like a “cheat-sheet” crystal ball to see the likely impact of reasonable regulation and taxation versus heavily onerous and greedy alternatives. The former now have highly competitive markets delivering tax revenues and protecting customers. The others lie way behind with a couple of state-owned operators providing very little choice or value to customers who therefore seek options offshore.
Established legacy and clear opportunities
SBCA: Taking your move to the US into account, what are your views on the media talk of a British invasion by betting companies?
KM: Well, I’m Irish, so you at least have to include us as part of that too. Clearly, though, there are a lot of British, Irish and wider European businesses taking a close look at the US just now but it’s not hard to understand why.
There is an established legacy of software provision and operator business in those markets under regulated online gambling environments and, given the size, and culture, of the US market, and the expertise these businesses have developed over years, the opportunities are clear.
These businesses must proceed respectfully though. I’ve had activities in SE Asia for the last 10 years and have always cautioned companies going into that market from Europe against simply translating into mandarin Chinese, adding RMB currency, and expecting to be successful.
While the differences in the US are less profound, they exist nevertheless in areas such as sports bet type (e.g. teasers, pleasers, if-bets), betting / wagering terminology, subtle game rule differences, specific sports focus (the big 4 US sports v soccer), and political & regulatory factors to name but a few.
A humble approach, taking time to truly understand these key differences by partnering with local expertise, before delivering a service, has to be high on the list for those wanting to succeed in the long term. It will only be in the long term that success is truly measured.
SBCA: What can the American operators learn from British entrants and vice versa?
KM: Although different terrain, the decisions required, and pitfalls and challenges faced, will be very similar. Europeans have learned a lot over the years, most notably in correcting original decisions.
They understand the difference between running a land based and online gambling business, what product choices to make to best achieve goals, how to analyse customers on an hourly / minute by minute basis, how to build operations to successfully run an online gambling business and what KPI’s to target and measure. Adding local US factors, why would US operators not want to look closely at this?
There’s also a lot that Europeans can learn from US Operators. Europeans will never understand US culture as well as local operators do. Land based casinos will have plenty of ideas for how to maximise revenues across both channels.
US operators will also have established relationships, built over years, with local regulators and politicians. That could take decades to develop for a new entrant. Even non-operator start-ups in the US will have experience with general business infrastructure that is hard to establish overnight for new entrants who haven’t invested in this area for years before the Supreme Court ruling to overturn PASPA.
Combining these two complementary sets of skills creates a powerful beast with a strong word of caution for the “invaders” – be humble and listen. We’ve seen European operators enter the Asian market with a swagger and reverse back out within months with their tails tucked between their legs. Those that succeeded did so with an inquisitive, open mind, were prepared to listen, and invested in building real local relationships.