After the ban was lifted – the latest on Google’s new gambling policy

So Google has done a complete U-turn on its gambling policy, allowing gambling ads to target England, Scotland and Wales. You may well have read the news here first in last month's newsletter, when we revealed the search engine's plans the day before they officially broke the news.

Google announced in a company statement that the policy reversal was caused by 'several factors, including business, legal and cultural considerations'. But we said it in October's newsletter and we'll say it again. We think the policy reversal is partly a reaction to the credit crisis, partly an attempt to increase Google's market share even further - and partly a response to encouragement from major industry players.

While Google's actions have far from surprised us here at Greenlight, we were certainly interested to see how the situation would develop, and have not been disappointed. 

Google previously introduced the ban in June 2007. As of 17 October this year, the search engine giant allowed online gambling adverts to target mainland Britain - so long as the advertiser is registered with the Gambling Commission, can provide a valid licence number and is not directing their ads at an under-18s audience. In addition, a link to or must be prominently displayed on the advertiser's website.

The application process

Once it has met these criteria, the advertiser must go through a rigorous application process. First, they need to agree an initial budget with Google, then provide billing details for approval. Next the Google consultant creates an account shell and forwards logins to the client.

The advertiser must then confirm Google's Terms and Conditions and complete a legal declaration form online at Google claims they should be able to 'whitelist' the advertiser in as little as 48 hours, after which point the account will be activated.

Quick off the mark

At Greenlight we wasted no time in whisking our gambling industry clients through the application process. For these advertisers the transition was quick and seamless. But we've heard the ease and speed with which our clients were able to apply was a feature of the policy reversal's honeymoon period - and now there is a backlog of applications.

What's in it for Google?

As we were quoted as saying in the Guardian and the Times at the time the news broke out, we wouldn't be surprised if additional revenue from gambling advertisers adds at least £100 million to Google's turnover a year from now.

There are 10 major gambling and betting companies in the industry, such as Betfair, 888 and Ladbrokes, and about 30 others with products in this area. With each company promoting at least two gambling products, the average advertising spend could be anything from £100,000 to £500,000 per month per brand.

Let's take the term bingo as an example. This has 3,957,000 searches available per month. So assuming there is one click for each term (at an average cost-per-click of £2.50) Google can expect to make almost £10 million in advertiser spend per month, totalling approximately £118 million a year. In fact, Google could well make up to £300m a year, if the bidding wars that have started over gambling-related keywords continue to gather pace.

This may well be the case since competition in the online gambling sector is fierce, and gamer loyalty low. Many people playing gambling games use about three or four companies, and move when they are incentivised by deals.

But with gambling clicks becoming ever more competitive and highly priced, an average cost-per-click of between £6 to £10 is not unlikely either. This could completely blow many advertisers' chances for profit right out the water. 

What's in it for the advertisers?

While the Google ban was in place many major gambling brands used Yahoo! and MSN to advertise (without Google there was limited advertising space so many of the smaller brands lost out). The major gambling brands and affiliates who used these search engines now face higher costs-per-click and acquisition costs on Google (which is used by many more searchers than Yahoo! and MSN). While these rising costs are not so much a problem for the larger brands, they will certainly make competing in the marketplace more difficult for the affiliates and smaller businesses who now hope to take advantage of the ban's lift.

But for the clients with search engine marketing agencies who know what they're doing, the new policy can be viewed as a cost-effective strategy. One particular Greenlight client had an average cost-per-click of £3.10 on re-entering Google; in a very short time this has risen to an average cost-per-click of just under £6. Not so good. But the cost-per-acquisition is the lowest it's ever been for this client, which is certainly a pleasing result.

We've seen this pattern with all our gambling clients, too. Cost-per-acquisition has dropped considerably in every case.  At Greenlight we'd certainly say the policy change has proven cost-effective so far. But we're only too aware the marketplace is still fairly empty at the moment. When it starts to become saturated (which we expect it to do in the next month or so), the new policy will become far less cost-effective for advertisers who can't compete in the market.

The rest of Europe

The change in Google policy will also impact on Europe as Google now accepts gambling advertising from non UK-based advertisers in the 30 countries that make up the European Economic Area. Gambling companies in this area can target ads at Google users in mainland Britain as long as they hold a licence in the country where they are based.

The other search engines

It's clear that before the Google policy reversal Yahoo! and MSN benefitted from the Google ban. Advertisers previously assigned a substantial part of their search engine marketing budget to the less popular search engines. Now many advertisers are pausing their European expansion and pulling money from Yahoo! and MSN.  

The Greenlight client we mentioned earlier has raised their Google budget to 90% and reduced their Yahoo! budget to 10%, whereas before the policy change they split the budget 50/50.
In summary

The news is currently good for gambling clients. But our advice to anyone in the sector who hasn't placed ads targeted at England, Scotland and Wales (and wants to) is to invest now. There is certainly no guarantee the cost-effectiveness picture will be so rosy in a few months' time. 

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