At present, an estimated 200 million people in western Europe and the US are playing internet games via mobile phones, representing four out of five users. Visually rich, technologically accessible applications can now be easily downloaded and played on a variety of handsets, and this has made gaming one of the most talked about mobile entertainment services.

Despite this, some within the industry continue to dismiss the mobile gambling sub-sector as a non-starter. However, while the format itself does certainly still hold a number of weaknesses, many observers remain certain that, with a little perseverance, mobile betting will soon be revolutionised into a mainstream consumer activity.

Why mobile betting?

The rise of mobile gaming has been linked simply and explicitly to people’s natural propensity to gamble and the fact that mobile devices have - in the western world at least - become an almost indispensable part of modern society. Consumers almost always have their mobiles with them, and many possess more than one device.

The compact format also offers a greater degree of privacy than other forms of gaming, such as those found on the television, or even online. Consequently, mobile channels provide an ideal opportunity to deliver casino, poker and a whole host of other games directly into the hands of players.

The value of bets placed via mobile phones will reach $16bn globally by 2011, according to Juniper Research. The latest report on the sector, Mobile Gambling - Casinos, Lotteries & Betting, 2006-2011 (Third Edition), states that in 2006 gambling accounted for just 5 per cent of all mobile entertainment services. However, by 2008 this figure is estimated to be 32 per cent, with more than 450 million wireless subscribers worldwide playing some form of mobile game.

Speaking at the BetMarkets sports betting conference in Vienna last March, Marcel Puyk, Chief executive of London-based applications developer Cellectivity, said that he believed these figures somewhat overestimated the future value of the mobile gaming industry, but still, he anticipates “very good” growth in the sector, with 40 per cent of this growth occurring in Europe.

This anticipated growth has been attributed to the fact that people are slowly becoming more confident in mobile gambling, and, specifically, the fact that mobile technology is improving at a tremendous rate. The ever-increasing penetration of third-generation (3G) technology has all but sealed the mobile phone’s fate - it will never shift back to simply being a telephone. Mobile phones are becoming computers; they are now versatile devices that are used for much more than just making a phone call. Already they are being utilised as music players and cameras. Indeed, many new mobile devices contain a better built-in digital camera than many purpose-built cameras currently on the market.

As this technology renaissance continues to filter down through many aspects of the mobile world, developers have been afforded the opportunity to enhance the quality of their games. Mattie Zinder, cheif executive of Spin3, one of the giants of the mobile gaming sector, provided iNTERGAMINGi with a demonstration of the company’s roulette offering. And, indeed, while the game is not perhaps as slick as an online equivalent, it is obvious that a huge effort has been placed upon elements of real play - a three-dimensional wheel is accompanied with realistic sound effects, and when a player wins, the device vibrates.

“In terms of our graphic design, ease of use, functionality and game logic, mobile applications developers have never had it better. They are now able to provide a very broad, advanced product offering,” said Zinder.

Uptake is certainly increasing. However, while the Juniper report places a great deal of value on the mobile gaming industry in five years’ time, last year just $1.3bn of bets were placed worldwide through various forms of mobile gambling - and this figure pales in comparison to the online equivalent. Why is the large-scale community not there yet?

A myriad of constraints

Puyk said that although mobile gaming is slowly making headway, there are “still a lot of problems.” It soon becomes apparent that the common limitations of any mobile games can be applied to mobile gambling.

Mobile games tend to be small in scope and often rely on good gameplay over flashy graphics, due to the lack of processing power of the client devices. And despite massive technological and artistic advances and a steadily increasing public profile, mobile gaming still flops too often over a simple hurdle: phones were not meant for playing games on.

From an operators’ perspective, one of the main constraints is compatibility. There are currently hundreds of different handsets on the market, manufactured by several companies, all with competing technologies. With this, applications developers are faced with literally thousands of combinations of sizes, colours, screens and keyboards. To compound this problem, identical phone models are set up differently from operator to operator. Thus, porting applications to new models has become major task. As a result, the user experience changes and it is not consistent from application to application. What may work well on one device may fail completely on another.

While issues of functionality and feature sets remain an ongoing problem, further difficulties arise when we consider the issue of consumer ignorance. Many users still do not know how to download applications to their phones; they don’t know what a URL is, and, as Puyk noted, they will give up very quickly. “People’s resistance is the main problem,” he said.

John Lancelet, director of online gaming at Slotland.com, confirmed this view: “A user’s technical capabilities and education seem to be the biggest obstacles. Other hurdles are the price of data tariffs, and technological fragmentation of the mobile technologies as opposed to the online internet world.”

Puyk drew attention to another important point: “Mobile operators are facilitators - not gambling operators. They don’t understand gambling or betting at all, but they own the entry points and remain the most important link in the chain, as everyone who owns a mobile phone has to have a mobile network.”

The fact that operators are king may initially appear problematic for merchants. Indeed, many have found that, perhaps understandably, operators are extremely protective over their customers. Puyk, however, said that while it is still very difficult to agree upon value-added sales activity, such as coordinated SMS campaigns, operators are now starting to understand because they have seen the positive results that come out of such marketing techniques.

Following on from this, it must be noted that operators’ portals still rule. Merchants simply cannot find a large amount of users without striking deals with mobile operators. The real traffic flows through operators’ portals, and so the bet way to get people playing is, simply, to be on that mobile portal. This, however, can prove costly - sometimes taking up to 70 per cent of merchants’ profit margins.

One thing remains clear: products must be placed shrewdly within portals. Relevance is key, and the successful uptake of a mobile gaming application relies upon the premise that the content and the betting opportunity are interdependent. “Even placing a small sports betting link anywhere on an operator’s sports news page will make a difference,” Puyk added.

While the general consensus is that mobile gambling is slowly becoming a more mainstream consumer activity, churn remains a huge issue. In its broadest sense, churn rate is a measure of the number of individuals moving into or out of a collection over a specific period of time. Puyk said that, in terms of mobile gaming, churn in excess of 80% in a year is not unusual.

This figure is obviously hugely unfavourable for all those within the sector - whether operators, aggregators or merchants. Possible reasons for include the fact that some consumers find it difficult to actually find an application once it has been downloaded.

Bad user experience is also a key symptom of involuntary attrition, and this is no doubt linked the functionality issues mentioned above. Moreover, user apathy may also feature in this equation: because consumers often change handsets at least once a year, they would need to download the application again on their new device.

Overcoming the hurdles

Puyk was emphatic when it came to offering a solution to the various problems that are currently afflicting the mobile gambling sector: “CRM, CRM, CRM,” he said. “Customer relationship management is key. You must know the betting behaviour of your customers; data must be collected and analysed on a weekly, and sometimes daily, basis; and you must develop a robust contact strategy. An aggressive approach will work.”

SMS a good way to do undertake research, but, as we have seen, merchants must behave responsibly because users are, first and foremost operators’ customers. Indeed, who would want to receive four or five text messages a day?

Overload will no doubt put customers off, but user-defined, opt-in SMS campaigns seem to offer a more happy medium. For example, consumers may sign up to receive free horseracing tips - and this opens up the opportunity to place special offers at the end of the message.

Puyk was also keen to point out that brands matter. “The more you work with in-brand names, such as Paddy Power or Ladbrokes, the more trust you will generate, and this, in turn, is driving the acceptance of mobile gaming.”

While the issue of churn may seem to hang over the sector like a cloud, it should be noted that, once acquired, users are extremely lucrative. To cite just one example, Cellectivity’s mobile sports betting brand, Bet2Go Experience, has been growing between 200 per cent and 300 per cent year-on-year. The service currently has some 20,000 active users, who place €1.5m a month in bets. The average bet, according to Puyk, is €30, and the average user places 25 bets per month. This alone should be enough incentive for those within the sector to keep trying to find new ways to overcome the hurdles.

Innovation is key

Trip Hawkins, head of Digital Chocolate, the San California-based developer of games and applications for mobile phones, kicked off the mobile track at the GameDevelopers Conference 2007 with a broad overview of the mobile gaming world. He noted that almost two-thirds of all mobile games could be classified as ‘retro’, or age-old games like solitaire or poker.

While it is certain that there will always be a place for classic games, Hawkins stressed that if all mobile developers are doing is giving people games they’ve played for years, the industry is not going to expand the market. If that approach were taken for television, it would be nothing more than radio with a talking head. Every new media has to find what it’s good at and expand that.

In terms of functionality and feature sets, it is clear that mobile devices differ greatly from other formats, such as online. As such, mobile needs to be considered as a unique game platform, and not just a phone with secondary capabilities. Developers need to think carefully about the information that will be presented on the small screens of mobile devices. Equally, the limited interface of buttons cannot be seen as a barrier, but a challenge.

One key demographic - middle-class businessmen in the 25-to-44 age range - continue to shun the mobile gaming format. It is important for developers to focus upon this category, because, as Douglas Edwards, co-founder of game maker Handmark, notes: “Business executives buy mobile devices because they have a business need that has to be met, but they live with the device itself intimately and it becomes very personal.”

In hopes of making headway with men in this category, Handmark now offers about 30 titles for the BlackBerry - everything from Tetris to Texas Hold ‘Em - and is adding about one game a week to its line-up. The games sell for $9.99 to $19.99, Handmark, which also offers a variety of business and entertainment applications for Palm Treos, Cingular Blackjacks, and other popular PDAs, says that the BlackBerry games are by far the fastest-growing part of the business and now boast conversion rates about twice those of Palm and other mobile devices.

A focus on the future

When asked whether he thought the mobile market would begin to accelerate, Puyk said: “Yes, it is showing signs. The FIFA World Cup last year gave mobile gaming a great boost. We just need users to become more comfortable using phones as transactional tool.”

While Bet2Go is experiencing no small amount of growth, other successful companies have been developing new innovations in order to bolster their penetration. One particular product, owned by Spin3, has proven to be ideal for marketing acquisition and player retention programmes. The company’s Ki-Bi cards are electronic, credit card-sized devices that deliver mobile gambling content directly into the hands of players. Using the system, players call a designated number, press a button on the Ki-Bi card, and the content is delivered instantly to their phone.

The card has a built-in chipset and speaker, and encodes content and payment codes into a short acoustic signature. To the user, the signature sounds like a short tune related to the theme of the card. The content provisioning tool supports all three of Spin3’s products: GameWire, a real play casino system; SpinFone, a play for fun or play for points tournament system; and SpinLite play-for-fun games.

“The Ki-Bi gambling card is a powerful call-to-action tool that enhances an operator’s brand while facilitating mass distribution,” said Spin3. “Ki-Bi cards are ideal for direct marketing campaigns because activity via the cards are tracked to measure effectiveness and ROI.”

Although Europe and the US remain the key geographic markets for mobile gaming, Spin3 has recently been pursuing an aggressive growth strategy in Asia.

The Juniper report on mobile gambling claims that the Asia-Pacific region is expected to grow from $647m in 2006 to over $6.7bn by 2011. While these figures look extremely tempting, Zinder maintained that integration of mobile gaming into new foreign markets should not be taken lightly.

“SpinLite is now available in simplified Chinese, and we continue to localise products specific to new markets. Full localisation is essential, but in order to localise a product, you not only have to get the front end to function in specific language, the trickier part is to make sure your back-office complies with the changes, because a huge mess would be created if your database does not support the front-end language.”

Eget subsidiary WinOne recently launched the first real-money scratch card game and mobile, multi-player bingo application. Rufus Miles, vice president of business development for WinOne, claims that mobile players around the world look for responsible gaming solutions, excitement, security - but above all varied entertainment.

Meanwhile, Ongame Network, the world’s largest online poker network, has created what it calls the “ultimate” real money mobile gaming experience. Using patent-pending anti-collusion software, the company’s new mobile solution is now available for real money multi-player gaming against opponents within the entire Ongame Network. Through a range of popular mobile devices, users can hook up to the same online poker tables normally played at from home.

Going truly mobile

While the issues surrounding the future of the mobile gambling sector are complex and varied, it remains clear that mobile users must be considered differently to online users - mobile is not simply an extension of online. “When people go online and place bets, they will go and visit Ladbrokes or Betfair because they really want to go there,” said Puyk. “Mobile users are different. They need to be encouraged and given the incentive to bet.”

At the same time, however, mobile gambling applications need to offer the same high quality experience as their online counterparts. Players expect high quality graphics and sounds, making the speed of the application and the speed of mobile data connections critical. Going forward, applications must be programmed in a way that utilises all the technical capabilities of the latest mobile phones.

A degree of contention still surrounds the pace of future growth in the mobile sector. Interestingly, Miles says that too much importance is placed on this issue, and that companies need time to position themselves in order for them to realise their full potential.