The online poker industry has experienced tremendous changes and difficulties over the course of the last decade, and the legalization of online gambling in some jurisdictions is a major change that can be successfully exploited by entrepreneurs as well as companies already present in the market. Consequently, the number of start-up companies based on online poker has been rising, competing to fill the demand for secure and regulated poker sites.
The floodgate of online poker startups is proof that the industry breathes life and has a future, but the truth is that not all of these industries will survive in this competitive market. One of the main characteristics of the online poker market is competition, and the top 10 poker sites that have already established their names in the industry like PokerStars, PartyPoker, and 888poker have a bigger advantage than the new entrants as they have higher brand recognition, larger pools of players, and more resources.
To thrive in this crowded market, online poker startups must overcome several challenges, including:
Regulatory Compliance
Working in regulated environments is a costly affair due to the need to put capital to a legal and compliance function, in addition to the approval of licenses and permits from the relevant authorities. A failure to observe regulations may prompt stiff sanctions and even the end of operations.
Player Acquisition and Retention
The size of the player base as well as their activity is an important aspect in the success of an online poker platform. Startups need to allocate significant funds for advertisement and promotions to accumulate new audiences and develop efficient retention tactics to retain their existing customers in the long run.
Financial Stability
The operation of an online poker business is costly, with the bulk of the funds being used for operation, marketing, and regulatory compliance. Startups need to make sure they have established enough fund sources and sustaining business models to overcome periods of fluctuating income and possible market downturns.
In spite of such issues, a few online poker startups managed to develop a good market position and are now known as credible and profitable poker rooms. The sector has mostly witnessed investment from reputable investment firms, establishment of highly skilled management teams with knowledge of the industry and the adoption of effective strategies involving player acquisition, retention, and regulatory compliance.
From an entrepreneurial point of view, the future of online poker starts with considering the advantages and disadvantages of the industry. With the constantly changing and developing online poker sector, the chances of success of the startups can decrease steadily.
Several factors suggest that the market could reach a point of saturation in the coming years:
Market Consolidation
Online poker industry has already witnessed high-level consolidation in the past, with bigger firms making acquisitions or mergers with smaller players to get more influence and market share. Being likely to carry on this way, it makes it harder for startups to fight against those giant players who are well-known and well-funded.
Regulatory Barriers
Although the regulation of online poker has made it possible to access new markets, the regulatory framework is uneven and complicated, each jurisdiction applying its own set of rules and requirements. These regulatory hurdles can be a major obstacle to new startups that have not yet built a big enough budget.
Player Saturation
When more poker platforms are online, the market may stabilize and it would be difficult for new players to penetrate existing markets. This may, in turn, worsen the process of acquiring and keeping players that have already been in the market for a long time, and it could be quite costly for startups.
It is hard to get accurate numbers of the startups launched after online poker was legalized. However, it is acknowledged by the industry experts that there has been a phenomenal growth in new entrants after the legalization. But it is not easy for these startups to become successful because they are facing lots of challenges like regulatory compliance, new player acquisition and retention, financial stability and the need to build strong reputation and trust with players.
With time, the market will consolidate, and only those startups with the greatest amount of funding, innovation, and strategic planning will be able to remain in the long run. Others may try to find their position, but may not be able to gain a foothold, or eventually may disappear out of the highly competitive environment.