Red Tiger: market saturation an ‘industry fallacy’

Red Tiger Gaming’s managing director Gavin Hamilton talks to iGaming Business about how the young company has got the jump on many of its more established rivals and explains why it is more likely to be on the buying than selling end of any M&A activity

iGaming Business: One of our recent iGaming Tracker analyses reported on how challenger brands, including Red Tiger, were increasing their presence on operators’ main casino pages. What’s driving this and how does the process work for achieving strong positioning on operators’ home pages? Gavin Hamilton: When I was director of gaming at Paddy Power Betfair we took a lot of games from many suppliers and obviously pushed those with the best KPIs to the top. As the first European operator to have launched Red Tiger I was so impressed with the performance that I jumped at the chance to join the company.

We are very pleased with our speed of growth, but have hardly started yet. The company is only three years old and we didn't actually go live until about two years ago as the first 12 months was spent on building our platform and some of the early games.

As we continue the rollout on to all of the major brands the percentage of home page real estate that we occupy will inevitably continue to climb. The vast majority of our deals are not yet announced or live, so it can only go one way from here. What other ways are you looking to achieve a strong presence with operators? Our relationship with our operators is a true partnership because of the industry’s standard revenue share model. They are always looking for interesting and engaging new ways to promote quality games, so it’s in our best interest to deliver that.

An example can be seen in our Smart Spins bonus application. It is a comprehensive bonusing tool and there are three core components of it. One is allowing the operators to segment their customer base by behavioural characteristics or transactional characteristics.

The second is a rules engine that allows them to set certain rules so that when customers exhibit those behaviours a certain thing happens. And the third part of it is the reward capability.

Currently, from a gaming perspective, the types of rewards in the market are pretty limited; you give a customer cash or you give them free spins.

But our rewards are more gamified, so we will give customers free spins for a period of time or we will say, ‘if you stake £100 we will give you the bonus round in a game or we will give you free spins until you win at least X’. For example, William Hill has been running campaigns offering players unlimited free spins for periods of time from 30 seconds to five minutes.

In a relatively short space of time you’ve signed up most of the major operators. What would you say is the key to quickly gaining traction in an increasingly saturated and competitive space? The idea that the space is saturated is a well-propagated industry fallacy. It really isn't. There are quite a lot of companies making games — we track 58 competitors in the industry — but in each market there is always just a small handful doing anything meaningful.

Then there is an even smaller number that are great in many markets. If we look at games for Sweden, we see three other competitor companies that we admire, for the UK market we see four game suppliers that are objectively strong.

Plotting Venn diagrams to consider the overlaps across all major markets shows how few suppliers really internationalise well. When you dissect the market there is a lot of noise, but far less competition than it may initially appear. Sure many companies are in many markets, but their performance tends to be weak outside of their core geography.

The inevitable exception is for the couple of giant platforms that were early to market and don't really compete for real estate as they have it locked down by virtue of long term, tab-specific contracts.

Then there are many companies that live entirely from the proceeds of investor capital or one good game. When you cut them out of the list you are left with the big boys that are typically declining in the mature markets and the disruptors that are really growing. There aren't that many of those either. What plans do you have to further expand into regulated markets in the future?  Our ultimate goal is to be licensed in every jurisdiction globally in which it is necessary to supply the industry. We are not concerned with the ROI of each market, rather we are working hard to become a truly global supplier.

Our bigger clients expect us to be ready to enter new markets with them, not to just cherry pick the easy ones. Our licensing strategy is to take the rough with the smooth, buckle down and get on with it.

We have an extensive list of countries that we aren't yet live in but are working on the technical and licence requirements.

Which markets specifically are the ‘rough’? There’s a spectrum – you go from the UK and Denmark, which are very open and liberal, down to somewhere like the Czech Republic, which is a lot of more illiberal.

Then there are places in between, like Italy and Spain. You understand why they’ve ended up with the regulations they have, but as a supplier trying to build a scaleable technology operation, the types of technology solutions they are looking for are not scaleable.

You know you are having to meet a set of requirements that no other regulator will ever dream up in a million years because it is very specific to local market conditions, so if you took a very narrow view and said you need to get a return on this investment based on this one deal in this one market it wouldn’t stack up.

But the approach we are trying to take is to look at that investment across the size of our large partners and look at the return in that respect rather than whether we get a return on an upfront investment in one market alone.

Are there other challenges you face in these markets, for example, lower margins to begin with? As partners with our clients we always take the pro rata tax hit on gaming duty with them, in some markets this is a big cost and does indeed lower margins all round. Taxes change over time though and we are in this for the long term, so that really doesn't factor into our thinking.

Other compressors of margin include high bandwidth costs on local infrastructure and the management overhead where regulators like to engage a lot. We are reaching a size now where we can afford to invest upfront to surpass these barriers to entry that we couldn't a year or two ago.

Your website mentions the use of game theorists, mathematicians and secret magicians dedicated to the continuous improvement of the player experience. What are you doing here that’s different and why is no one else doing it?  Entrepreneur-led start ups are inevitably more innovative and faster-moving than the older companies in our sector. It’s a prerequisite as we compete and work towards catching up with the long-established giants.

I genuinely believe that we care more about the player experience than most of our competitors as we ourselves all really enjoy slots. We do company trips to Vegas and other casino resorts where we all play a lot and then spend hours comparing notes on what we felt, why and how that was induced.

We have a few top quality competitors and I'm sure the best of them approach things in a similar fashion. I'm sorry but I'm not allowed to discuss our secret magicians. They are real introverts!

Given you’re a relatively young company, recruitment must be a key priority for you. What challenges do you face in hiring enough new talent to keep up with the company’s growth? Hiring the best people from inside and outside of our industry is at the very core of what we do. We conduct around 12 interviews each day. We also have extensive training programmes to help the staff grow in their careers as this is mutually beneficial. You can't lose money by investing in your people. Fortunately we receive many applications now. In the early days it was hard, but as our games have really started to take off now we receive a lot of enthusiasm.

Twelve interviews every day, year-round? So it’s a constant process of recruitment? There are peaks and troughs but the business is still incredibly young so we’re still taking in a significant number of people month on month; we have around 200 people now.

We set the bar high in terms of who we take in and we are very sensitive of the culture aspect of the business — there is always that risk that the culture gets diluted. In terms of interviews to job offers it is a very low ratio, we don’t just hire people for the sake of it.

The company was founded by serial entrepreneurs with a track record of selling companies, including Cayetano to Paddy Power. Is there any chance of an exit on the horizon? Definitely not. With so many more deals signed than we have live, it would be crazy to get out now. Our month on month growth rate is still in double digits and we are really enjoying the ride. A sale in 2018 is out of the question.

Past that is a long time away, but I'd say we are much more likely to make an acquisition or two than a disposal.

What kind of acquisition? We see a lot of interesting opportunities, both in adjacent markets and in our core business. We have massive revenue visibility from doing more integrations over the next 12 to 18 months, but it does beg the question, ‘once we’ve completed all these integrations, what is the strategy after that?’

We’ve seen opportunities in content studios and in local market niches in products that we don’t offer today. We will be opportunistic if the right opportunity arises but at the same time we still have a long way to go organically in terms of our growth, so we are not in any rush.

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