888 and the US Market: A cautionary tale

March 25, 2024

Gaming America explores the risk of resting on your laurels and the challenge of remaining relevant in a rapidly expanding market.

It’s practically gospel in the business world that the company first to market holds a significant edge over its competitors. The concept even has a name found in essentially every MBA program, the “first-mover advantage.” That term has become virtually synonymous with success in sectors as diverse as safety razors, soft drinks and web browsers. But is the first-mover advantage actually real? And, more importantly for readers of Gaming America, does it apply to fast-evolving markets like sports betting, which seems to be constantly in a state of flux in the US? British operator 888 Holdings offers a cautionary tale about the supposed benefits of the first-mover advantage. For those who are unfamiliar, 888 is, on paper, a giant in the international sports and gaming sectors.

Based in Gibraltar and traded on the London Stock Exchange, 888 owns some enormous brands, including the William Hill Sportsbook (partners with the NBA, the NFL and the NHL) and the Sports Illustrated sportsbook and casino, in addition to several 888-branded gaming sites. It traces its origins back to May 1997, long before online gaming and online sportsbooks were common apps on every gambling enthusiast’s smartphone, making it a prime beneficiary of the first-mover advantage. Or, well, at least seemingly so. Over the years, 888 – originally known as Virtual Holdings Limited – has owned and operated a series of online casinos and poker sites and has thrown around tens of millions of dollars acquiring brands, most notably William Hill in 2022. But a funny thing happened on its way to market dominance: its revenues have declined, and its share price has fallen dramatically, from a high of £4.58 ($5.83) per share in September 2021 to £0.69 at the end of 2023. What happened? 

It’s all about the pace of technology and market expansion

Writing in the Harvard Business Review back in April 2005, researchers Fernando F. Suarez and Gianvito Lanzolla reported that first-mover advantage is actually not an absolute, but rather a “half-truth,” largely dependent on two factors outside of the control of the first mover: the pace of a technology’s evolution and the pace of the market’s expansion. These insights seem to point exactly to the problems 888 has encountered in recent months. You see, Suarez and Lanzolla say that if the technology underlying a particular product evolves quickly, or if the market for that product expands quickly, the first-mover advantage is greatly reduced if not eliminated entirely. You can probably see where we’re going with this. Since 888 entered the sports and iGamingspaces, both the technology underlying the services and the market have evolved at what can only be described as a break-neck pace.

Virtual reality, augmented reality, blockchain, cryptocurrency, artificial intelligence – all of these technologies are working their way into the very fabric of the sports and iGaming ecosystems. And it’s happening so quickly that an app or site that was sophisticated yesterday could be outdated by tomorrow. But then pile on top of that the rapid expansion of the market. In 2022, the sports betting market showed the fastest growth in all commercial gaming segments. It showed a 75% increase in year-on-year revenues, driven (in the US at least) by state-level legalization. Online gambling in general – which of course encompasses sports betting – has seen an expansion, with the software market alone growing to $66.72bn in 2020. You don’t have to be particularly good with numbers to know that’s warp-speed growth. 

Why isn’t the Sports Illustrated Sportsbook rivaling ESPN Bet?

In this rapidly changing environment, the last thing you want to do is rest on your laurels, particularly the laurels of being one of the first in the business. But, that’s certainly the perception 888 has put into the world. While FanDuel and DraftKings, the early entrants in the US market, have clearly tried to innovate and evolve with shifting consumer sentiments, 888 customers in Europe report a static experience. Products just haven’t evolved. The company’s historic failings are particularly noticeable when you consider its rights to the Sports Illustrated brand. Today, Sports Illustrated is a shadow of its former self. But not that long ago it rivaled ESPN as the top purveyor of sports news and analysis not only in the US but worldwide. Also 888 had the rights to operate a Sports Illustrated-branded sportsbook and a casino.

This should, in theory at least, have had the makings of a cash cow for 888. After all, ESPN’s entrance into the sports betting market through its partnership with Penn Entertainment and the roll out of ESPN Bet is expected to shake up the sports gaming world. Sports Illustrated may not be the market leader that it once was, but ESPN isn’t exactly living through its golden age either these days. There’s no reason why a Sports Illustrated sportsbook, properly run, couldn’t have produced some good revenues with that brand identity.

Yet you’ll be hard pressed to find sports bettors who frequented the Sports Illustrated Sportsbook in the US. It doesn’t rank when you look at the top online sportsbooks in the US. Caesars, bet365, FanDuel, DraftKings, BetMGM – and increasingly ESPN Bet and Fanatics – those are the brands sports bettors know and use in droves. Sports Illustrated? That’s a struggling sports magazine that has recently made the majority of its editorial staff redundant. It’s safe to say it isn’t even on most sports bettors’ radars, particularly casual sports bettors. 

Technology and tech culture is where we’re headed

Suarez and Lanzolla write that when “technological innovation and consumer acceptance advance rapidly” early entrants to a market – the first-movers! – are “highly vulnerable.” They point to AT&T and Netscape as two examples of companies that were “capsized by the rapid churning of technology and markets.” AT&T is a behemoth now, but it got its lunch eaten four decades ago, when it was the first company to roll out a cellular telephone system in the US in 1977 and, the next year, tested it with 2,000 customers in Chicago. A few years later, in 1983, Ameritech, not AT&T, became the US’s first provider of commercial cellular mobile services to the general public. Ameritech beat AT&T to the punch because its technology developed faster. Now, of course, AT&T has recovered just a little since then, while Ameritech is a historical footnote, but that has more to do with subsequent developments.

AT&T’s first-mover advantage in developing a cellular mobile system was essentially nil. The Netscape story is much worse. Do readers today even know the Netscape name? There was a time in the 1990s when Netscape was the web browser that everyone used, because it was the first company to market an Internet browser. Netscape in the 1990s was as ubiquitous as Google and Amazon and Apple are today. It was that big. But after Microsoft entered the browser game with its Explorer product, Netscape’s dominance hit a brick wall and its stock price dropped like a rock in 1997. The company doesn’t exist anymore. The tech world in particular is littered with first-mover cautionary tales like this. Remember the first dot-com boom? Remember Blackberry? Those all seem so quaint now, but they were the first to the party and, at one time, the toast of the town. However, technology and market conditions whipped past them, leaving them in the dust. Sadly, that seems to be what may have happened with 888 and in all honesty, it’s not surprising.

Technology is the tail that wags the sports betting and online gambling dog. Close followers of Gaming America and Gambling Insider may have noticed in our recent spate of Huddle interviews that we’re seeing more gaming executives who have a Silicon Valley or venture capital background and who talk incessantly about disruption. Like it or not, gambling and sports betting is a technology industry now and the rules of the tech game are way more relevant than any of the old saws that might have applied to casinos in Las Vegas’ golden era. It’s a new world in gaming. The coders, the survivors of the dot-com booms and the streaming wars; they’ve got the insights into the innovation necessary to make it in an ever-changing market l like sports betting. It’s a Darwinian market: Evolve or die. And, on that basis, is it any surprise 888 is now conducing a strategic review of its US business?




Mar/Apr 2024

As the Tribal gaming sector congregates once more in the Golden State, is it too cliché of me to suggest we are heading for a golden era of Tribal gaming? With the industry set to meet at the Indian Gaming Association t...