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Digital Advisory Panel: Advice on the Impact of online platforms on gambling-related harm

Recommendations: This paper sets out recommendations on steps the Gambling Commission should consider in responding to the risks posed by online platforms.

Summary of key recommendations

The Gambling Commission should consider…

Habit Forming Apps

Regulating the use of software development techniques for mobile apps and web-based gambling sites that promote addictive and compulsive usage. This might include increasing the ‘friction’ of using this software but will certainly involve consultation with operators and academics.

Single Customer View

Requiring the large operators to form an arms-length joint venture that will provide a service that will consolidate a single customer view for all online gambling activity, so improved interventions are possible for both problem gamblers and gamblers at-risk. In parallel, the GC should continue to drive the agenda for research into markers of harm and specific gambling triggers so that this knowledge can be built into this service in the future.

Online Advertising

Requiring the operators to report annually on the progress they have made in directing their online advertising, free bets and bonuses away from problem and at-risk gamblers, as well as children. 

Gambling Commission operations

Avoiding the temptation to build online or digital technologies to monitor the activities of the operators or gamblers. Instead, we recommend that the GC continue to develop its understanding of the technologies being used by the operators to allow the creation of licence and regulations that can keep in step with technological advance.

 

Considering the appointment of commissioners with digital awareness and background that are comfortable with the topics referred to in this paper.

Introduction

  • The Gambling Commission (GC) asked their Digital Advisory Panel (DAP) to advise on how to understand and respond to emerging risks, challenges and opportunities of online gambling, within the wider context of technological advances and changes in online consumer behaviour.
    • How do online platforms amplify the risks and challenges
    • What opportunities are presented by the emergence of these technologies?
    • How should the GC respond?
  • The DAP brings together experience including from across the gaming, technology, digital strategy and social media spheres. We have applied this ‘experts by experience’ approach to the challenges set by the GC, with the aim of stimulating discussion and complementing experience held already within the GC and from its other advisers from different backgrounds.

 

  • This paper is the DAP’s response and it welcomes the opportunity to assist the GC in developing all or any of these recommendations further.

Background

  • The GC was set up under the Gambling Act 2005 to regulate commercial gambling in Great Britain (GB) in partnership with licensing authorities. There are three licensing objectives for the GC that underpin the Act:
    • Ensuring gambling is kept free from crime and disorder.
    • Ensuring gambling is conducted in a fair and open way.
    • Protection of children and vulnerable adults.
  • Gambling in GB has been rising rapidly in recent years. The Gross Gambling Yield (GGY[1]) in 2018 was £14.5bn up from less than £11.5bn in 2012.[2] The significance of the online proportion of this total has also been rising. Excluding lotteries, online gambling now accounts for over 50% of the total industry GGY, up from 44% in 2015.[3] Within the online segment, the importance of the mobile segment is rapidly becoming dominant. The proportion of online gamblers using mobile phones to gamble has almost doubled, from 23% in 2015 to 44% in 2018.[4]

 

  • The GC estimate that 0.7%[5] of the GB adult population are problem gamblers up from 0.6% in 2012[6]. Problem gamblers being those individuals who gamble with negative consequences and a possible loss of control. The GC estimate 5.1% of the adult population in GB are at risk of becoming problem gamblers, that is they show some signs of problem gambling but remain below the threshold for ‘problem’ gambling.

2018 - 2012 GB Gross Gambling Yield (GGY)(1) - £11.5bn increased to £14.5bn(3)

2018 - 2012 Estimated Online Gambling (GGY)(1) - 34% increased 50%(3)

Problem Gambler % Adult Population(1) - £0.6% increased to £0.7%(4) 

Background: Impact of web-based and mobile technology on characteristics of Online Gambling

  • Web-based and mobile technology enables easy anytime gambling. They allow playing on the move, at home, at work or in a social environment. This means habitual play can become more easily ingrained. In contrast to destination gambling such as casinos, bingo halls, racecourses, bookmakers and arcades that are more of an event, separate from everyday life and easier to avoid.

 

  • Web and mobile gambling remove environment barriers such as visibility and inconvenience. Online gambling can be done hidden from friends and family, without judgement, 24 hours a day, with reduced opportunity for intervention, at the same time as providing the opportunity to play at a dramatically increased rate.

 

  • The easy 24-hour accessibility of certain types of web and mobile play means that binge behaviour can happen at any time. Also, some types of online gambling are particularly prone to repetitive play, such as instant win games and online casinos. Sports/events-based betting in comparison has more of a delay built-in, although frequent players can overcome this restriction by betting in other countries or using in-play mechanics. Mobile and web-based gambling enable the transformation of traditional destination gambling to instant win in terms of ease and convenience of play.

 

  • Mobile and web-based gambling also overlap with other digital entertainment, live gaming and social media. It occupies similar consumer moments and uses similar mechanics, e.g. 63% of UK adults use other devices while watching TV. Some digital games have many similar characteristics to online gambling, which in our view may allow younger audiences to develop an appetite for gambling products.

The Gambling Commission Challenge

  • The extent and nature of gambling in GB is being transformed by technology, particularly mobile technology.  It is also clear that there is no sign that this growth is going to stop. The initial wave of online gambling characterised by the web, mobile apps and the links to social, is being overrun by a second wave of digital technologies impacting on the industry created by big data, analytics, artificial intelligence, the internet of things and wearables.

 

  • The impact of this second wave of digital technologies has yet to materialise fully. These technologies present operators with the opportunity to generate further growth by using the techniques developed by social media and games companies to maintain player engagement with their mobile apps and thereby increase their revenue and profits.

 

  • The operators have also started to use the huge data assets and analytic capabilities that have been built by the dominant internet companies such as Google and Facebook to target potential gamblers; a proportion of these new gamblers will be vulnerable. The ability to target advertisements has increased dramatically in the last five years. A study[7] estimates that the total spend by gambling companies on marketing increased by 56% between 2014 and 2017.  A further study reported[8] that children and young people talked of high levels of exposure to gambling advertising.

 

  • In our view the GC must respond to the challenges being presented by technological advance because they have had such a major impact on the growth of advertising. Given the remarkable increases in overall levels of gambling spend, there must be a significant risk that this growth will drive an overall increase in gambling related harm to adults, young people and children.

Opportunities to Reduce Gambling-Related Harm

  • The DAP has explored three areas where the GC might act to improve protection for children and vulnerable adults from gambling related harm.
    • Habit Forming Apps
    • Single Consumer View
    • Online Advertising

Habit Forming Apps

  • The success of many technology companies and digital content creators depends on their ability to establish and maintain the engagement of their users on their web and mobile apps. Our own experiences show that the dominant companies in this field have succeeded in creating a user base that voluntarily spends hours each day engaged with their apps. Indeed, these companies have been so successful that there are widespread concerns about the negative effects of digital dependency. Ofcom estimate that British people on average spend 24 hours a week online, twice as long as ten years ago, with one in five of all adults spending 40 hours online each week. On average, the British check their phone every 12 minutes of the waking day. Two in five adults first look at their phone within five minutes of waking up, climbing to 65% of those aged under 35.

 

  • The importance of user engagement has spawned new areas of research. A whole playbook of techniques has been identified that can be used to get users engaged with mobile apps and web-based products for as long as possible[9]. One of the easier techniques to quickly understand is the Hook Model[10]. This model calls for app developers to create a looping cycle that consists of a trigger, an action, a variable reward and continued investment. The objective is to create habit-forming products: habits being an acquired mode of behaviour that has become nearly or completely involuntary.

 

  • Instagram is a good example. Users are triggered to start an account to tap into an online social network to see what their friends or celebrities are doing. Once they have joined, they are encouraged to act, in the form of posting photographs and updates, a relatively quick and intuitive process. After they have accomplished an action, they are rewarded with likes and comments from other users. Crucially, these rewards vary depending on the post. Finally, users are encouraged to invest in their profiles by adding autobiographical details and collecting new followers. Together, these elements create a loop that keeps users coming back, eventually making Instagram a daily habit.

 

  • At the heart of the Hook Model is a powerful cognitive quirk described by B.F. Skinner in the 1950s called a variable schedule of rewards. In the Instagram example above the variable reward is the number of likes that a photograph provokes. Skinner identified that variability is the brain’s cognitive nemesis and that our minds make a deduction of cause and effect a priority over other functions like self-control and moderation.

 

  • The risk for online gamblers is clear in our view. If the operators adopt the techniques that have been successfully used by the technology companies and digital content creators to stimulate engagement and habit forming gambling apps, there is a substantial risk that they will create a huge cohort of gamblers with a stronger and potentially compulsive gambling habits, and some of those users will inevitably become problem gamblers. Since this likelihood will be amplified by the easy and anytime gambling opportunity presented by mobile technology, the result could be an epidemic.

 

  • The question is how the GC should respond to this new risk. This matter needs more research. However, the first clues come from looking at reversing the advice to app developers on how to create app habit forming apps.

 

  • Take the Fogg Behavioural Model[11] developed by Stanford behavioural scientist B.J. Fogg that identifies how to organise an app to get users to transact. Users must be simultaneously motivated, able and prompted to take action. One way to impact on the second parameter ‘able’ is to simplify the user’s journey through the app. That is why successful developers have been so invested in recent years in the simplicity of their customer interface. In the jargon of the industry, their objective is to make their app ‘frictionless’.

 

  • Gambling operators are working on the simplicity of their apps. One way the GC could reduce the engagement of gamblers with a gambling app would be to insist on further steps in the process that create ‘friction’. In this way, the users would have additional time to reflect on a bet and should be less likely to make impulsive bets.

Single Consumer View

  • Online gambling operators have taken some steps to protect vulnerable adults from problem gambling in line with their licence requirements. They use technology to monitor the activity of their customers and search for indicators of harm, allowing them to identify problem gamblers or gamblers at risk and engage with them to reduce the likelihood of unhealthy behaviour.  Furthermore, research[12] carried out by PwC on behalf of GambleAware shows that the current accuracy of detection by operators could be improved by expanding the demographic and behavioural markers and by using other techniques such as specific daily triggers to complement the predictive markers allowing operators to investigate and intervene almost immediately. Thirty-nine specific triggers are identified in the report.

 

  • There is a major flaw in the current approach. Gambling operators can only see gambling activity on their website or app. This means that it is easy to miss a problem gambler that does not show indicators of harm with a single operator.  However, across a number of operators, it would be more obvious when a gambler is spiralling out of control. Since the average mobile gambler has four apps on his/her mobile device, and the average problem gambler uses many more, the probability of this risk is very high. Each operator does not have a full picture of their customer’s online gambling activity, so it is unreasonable for the GC to expect them to identify and engage with all at-risk or problem gamblers successfully. 

 

  • If there were a service that could identify problem gamblers based on gambling activities across all operators, identification of problem gamblers would be much more successful. Best practice could be built into that service, and that best practice could be developed over time. In that way, the GC could ensure that all operators are using a consistently high standard of problem gambler identification.

 

  • The service would accept various parameters concerning the gambler’s identity in an industry-standard format, along with transactional level information about bets placed. The service could then return an array of coefficients of harm that could be used by operators to segment their customers and protect them accordingly.

 

  • The technologies are available to build this type of service and progress has been made with the variety of problem areas that would have to be addressed to make such a service successful, such as:
    • Security. It is of paramount importance that any solution is secure because sensitive information about gamblers is being processed. Tokenisation and encryption techniqueshave been developing rapidly in recent years. These techniques and open source libraries could be used to create a service with robust end-to-end security.
    • Identification. Debit or credit card[13] details provide a good start in this area but there are more advanced techniques used in other spheres, such as online identification deployed by HMRC and the pornography industry to protect suppliers from accusations that they are selling their products to children.
    • Analytics. The capability to process structured and unstructured data has developed significantly in the last ten years. It will be important to process the data provided by operators efficiently. This capability is widely available now.
  • The proposed service would benefit all if using these services became obligatory for all licensed operators in GB. The challenge is to decide the roles of each organisation in creating these services.We propose the GC take the lead to facilitate the introduction of such a service,, setting standards and ensuring those regulations and standards are adhered to.

 

  • We propose that the larger operators cooperate through a joint venture to create the required service spreading the costs across all licensees. This would allow each organisation to take responsibility for the part of the challenge that is consistent with their core competencies:
    • Standards setting and research, for example, research into the indicator of harm should continue to be driven by the GC.
    • Developing a secure service software service protected with the latest technology, leveraging leading practice in data warehousing, analytics, security to be owned by a joint venture between major firms operating at arm’s length from their owners (i.e. operators will not have access to the transactional data of their customers from other firms).
    • Identification. There is a range of options that the joint venture might use to identify an individual gambler. The GC should define the requirement, and the joint venture should be responsible for designing, building and testing solutions.
    • Handling people identified as having problems or at risk of having problems. Responsibilities for handling individual gamblers will continue to be the responsibility of the operators. The GC will continue to define standards for those interactions.
    • Policing standard and regulations should continue to be the responsibility of the GC.
  • This exercise will not be a short-term project. It will require the GC to engage in a consultation process with the industry to ensure the requirements defined have practical solutions. It will be important to take an incremental approach to the development of these services. A big bang development would be a mistake. A simple service could be developed based on the current understanding of markers of harm, while the GC pursue research projects to explore improvement with markers of harm and specific triggers in parallel. This improved understanding can be incorporated into the service at a later date.

Online Advertising

  • Volume of spend

 

  • The Gambling Act 2005 removed advertising prohibitions previously in place for many gambling products.  It is unsurprising that gambling advertising has proliferated significantly since then, as a growing number of operators have taken advantage of greater freedom to promote gambling to a GB audience.

 

  • A study[14] estimated that the marketing spend by gambling companies increased by 56% between 2014 and 2017. It has reached £1.5bn. Most advertising activity is focused online because online advertising can be targeted better to those consumers open to advertising. In the jargon of the industry, online marketing can be ‘personalised’ through the use of big data technology and the data sets available from the global technology giants.

 

  • Online advertising represents a substantially better return on investment compared with traditional advertising channels, and the operators are investing heavily.

 

  • Figures derived from audited accounts of the top publicly listed operators and other available financial data for private and offshore companies indicate the areas where GB facing gambling companies spent the most money on marketing in 2017:
    • Direct online internet marketing costs – £747m, almost half (48%) of total gambling marketing spend
    • Advertising through marketing ‘affiliates’ – websites, tipsters and publications who earn a commission for generating new business for the gambling companies – £301m, nearly one fifth (19%) of total expenditure
    • TV gambling advertising – £234m, just 15% of total gambling marketing spend
    • Social media – £149m, more than tripling over three years, 10% of total gambling marketing spend
    • Sponsorship – £60m, double the amount spent in 2014 (£30m)
  • 80% of all gambling marketing spend is now online. There has been significant debate about the amount of advertising by bookmakers, bingo websites and virtual casinos on television, but these figures shine a light onto the huge amount of money being spent promoting gambling on the internet.

Children and advertising

The Gambling Commission reports that:

  • 59% of 11-16 year olds have seen gambling advertisements on social media, compared to 66% on television

 

  • One in eight 11-16 year olds follow gambling companies on social media and they are three times more likely to spend money on gambling

 

  • Of those who have ever played online gambling-style games, 24% follow gambling companies online.

 

  • Compared to other potentially harmful activities, the rate of gambling in the past week among young people is higher than the rates of drinking alcohol, smoking cigarettes and taking illegal drugs.

 

  • In April 2019, the UK Advertising Standards Authority (ASA) created a number of child ‘avatars’ (online profiles that simulate children’s online web browsing) to see the type of advertisements that inundate children online. Over a two-week monitoring period, they identified advertisements by 43 gambling operators appearing on freely accessible ‘non-login’ online environments, and child avatars were served gambling as on 11 of the children’s websites monitored.[15] Regulatory action was taken in response.

 

  • The figures above indicate to the DAP that a licensing objective is not being met with regard to protecting children. The DAP has been unable to find evidence to demonstrate operators are successful at ensuring that at-risk and problem gamblers are being shielded from gambling advertisements.

Consumer response

  • Gamblers, and potential gamblers, are bombarded with advertising in various online forms. The Gambling Commission published the following figures in November 20184:
    • 53% of respondents have seen a gambling advertisement on television in the past week.
    • 45% of online gamblers were prompted to spend money on a gambling activity due to the advertisements that they saw, as were 49% of online gamblers (with a social media account) who saw advertisements on a social media platform.
    • 26% of online gamblers follow a gambling company on a social media platform with rates highest among 18-24 year olds.
  • Free bets and bonuses are the most effective form of advertising, convincing 40% to spend money. Television advertisements are a distant second at 26%, with online advertisements third with 23%. Social media advertising (14%) barely outperformed billboards and newspapers.

DAP reflections

  • A number of major operators have started to react to the obvious risk of advertising gambling. They have agreed to a voluntary “whistle-to-whistle” ban on TV advertising during live sports, in an effort to address concerns about their impact on children and vulnerable adults. However, these measures, in our view, do not fully address the obvious and substantial risks associated with gambling advertising.

 

  • We note that progress is being made with cooperation between GC, the operators and other concerned public bodies such as the Committees of Advertising Practice (CAP and BCAP). New guidance[16] came into effect on April 1st, 2019, although it is too soon to see the impact of these changes.

 

  • Instead, we recommend the operators be required to report progress on targeting their online advertising away from problem and at-risk gamblers as well as children. This may involve the GC clarifying the definition of these terms, but the main onus must be on operators to use their big data and analytic capability to identify vulnerable gamblers better and ensure that their advertising, free bets and bonuses do not increase risk of harm. Currently we can see that while enabling technology is available to them, operators are unable to identify problem and at-risk gamblers reliably, and they are less able to ensure that advertising is directed away from these vulnerable groups. Until the operators can demonstrate that their advertising does not cause gambling related harm with vulnerable groups, this activity can only increase the risks associated with gambling. The dramatic rise in online advertising exacerbates this issue and the possibility that an unscrupulous operator could use the power of big data, ad-tech and other technologies to target vulnerable groups undetected will only increase public concern.

Recommendations

  • At a headline level we recommend that GC continues to focus on its area of core competence, namely: research, regulation, licencing and compliance as it continues to adapt to the new and evolving world of online gambling. Specifically, we recommend that the GC avoids the temptation to build online or digital technologies to monitor the activities of the operators or gamblers. Instead, we recommend that the GC continue to develop its understanding of the technologies being used by the operators to allow the creation of licence and regulations that can keep in step with technological advance.

 

  • Other recommendations that the Gambling Commission should strongly consider:
    • Habit Forming Apps. Regulate the use of software development techniques for mobile apps and web-based gambling sites that promote addictive and compulsive usage. This might include increasing the ‘friction’ of using this software but will certainly involve consultation with operators and academics.
    • Single Customer View. Require the large operators to form an arms-length joint venture that will provide a service that will consolidate a single customer view for all online gambling activity, so improved interventions are possible for both problem gamblers and gamblers at-risk. In parallel, the GC should continue to drive the agenda for research into markers of harm and specific gambling triggers so that this knowledge can be built into this service in the future.
    • Online advertising. Require the operators to report annually on the progress they have made in directing their online advertising, free bets and bonuses away from problem and at-risk gamblers, as well as children. 
    • Gambling Commissioners. Now that online gambling represents more than half of the total, the balance of skills of the commissioners needs to be adjusted. We recommend that the GC consider appointing commissioners with digital awareness and background that are comfortable with the topics referred to in this paper.
  • The DAP welcomes the opportunity to assist the GC in developing all or any of these recommendations further.

Gambling Commission Digital Advisory Panel

September 2019

[1] Gross Gambling Yield (GGY) is the income of a gambling operator minus its pay-outs.

[2] Industry statistics updated 30 May 2019, Gambling Commission – NB: some of the uplift since 2012 can be accounted for by the introduction of the ‘point of consumption’ regulations, which brought overseas-based operators into scope of GB regulation for gambling by GB-based customers. Prior to 2015/16, data for the GB online gambling market is less accurate as this predates the Gambling Commission becoming responsible for collecting data on the whole online market. Nonetheless, remote GGY (from betting, bingo, casino and pool betting) has risen from £4.2bn for 2015/16 to £5.3bn for 2018/19.

[3] Industry statistics updated 30 May 2019, Gambling Commission

[4]Gambling Participation in 2018: Behaviour, Awareness and Attitudes, Gambling Commission, 2019

[5]Gambling Participation in 2018: Behaviour, Awareness and Attitudes, Gambling Commission, 2019

[6] Gambling Behaviour in England & Scotland. Findings from the Health Survey for England & Scottish Health Survey 2012, NatCen – NB although there has been a numerical increase, this change is not statistically significant. 

[7] GambleAware Press Release: Gambling companies spend £1.2bn marketing online, November 2018

[8] Interim Synthesis Report. The effects of gambling marketing & advertising on children, young people & vulnerable adults, 2019

[9] Irresistible: The Rise of Addictive Technology and the Business of Keeping Us Hooked, Adam Alter, 2018

[10] Hooked: How to Build Habit-Forming Products, Nir Eyal, 2013

[11] Persuasive Technology: Using Computers to Change What We Think and Do, B. J. Fogg, 2003

[12] Gambling Aware: Remote Gambling Research: Interim Report on Phase II, PwC, 2017

[13] We note the Gambling Commission is currently consulting on what action it should take in relation to the use of credit cards to gamble

[14] GambleAware Press Release: Gambling companies spend £1.2bn marketing online, November 2018

[15] Harnessing new technology to tackle irresponsible gambling ads targeted at children, ASA and CAP news, April 2019

[16] Regulatory Statement: Gambling Advertising Guidance, CAP, February 2019

Digital Advisory Panel Advice on the Impact of online platforms on gambling-related harm

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