CIS: the opportunities are major, but so are the risks

The emerging iGaming markets of the ex-Soviet Union CIS countries offer great potential and, in some of the markets, an un-savvy player base. But this also comes with high risks, as Sergei Efimenko, Chief Operating Officer of leading local operator Favbet, explains in his guide to the region.

As gambling in many European countries becomes strictly regulated, restricting opportunities to a few companies in each market, more and more companies are exploring the emerging regions of Eastern Europe, Africa and South America for new opportunities. 

These regions have several factors in common. With the potential extra profits come high risks, as well as specific local practices and rules you will never find written down in any law or article, but with which you will have to deal on a daily basis.

The countries of the Commonwealth of Independent States, which emerged from the break up of the former USSR, also have characteristics which set them apart from the other developing regions above. 

These include a well-developed online infrastructure and a high degree of product competition. Players are also arguably far more demanding and each territory comes with distinct local specifics, all of which make these markets both accessible yet difficult to capture at the same time.

Illustrating the many regulatory movements in the region, news also came out in April that Russia was looking to set up a regulated land-based gambling zone in Crimea.

The backdrop
Sports betting in an organised form first came to the CIS countries in the late 1990s, when the business environment became more stable and regulated after the period of economic instability which accompanied the break-up of the former USSR.

The first companies emerged from the Ukraine. These included Marathonbet (now known as Panbet), Favorit (known as Favbet) and Parimatch. High consumer demand for their products saw these companies grow quickly and expand operations into Russia, Belarus, Kazakhstan and eventually to other CIS countries. Companies such as Fonbet and Betcity subsequently emerged from Russia.

The math-oriented basis of education in the region provided fertile ground for sports betting in the region, a demanding player base fueling intense competition among companies on the volume and range of pre-match markets.

This was and continues to be reflected in the high number of special bets (not just in football, but in all sports) on offer from CIS bookmakers, usually the highest in the world and far greater than the number on offer from global bookmakers (see for example player totals, comparisons, rebounds, assists, blocks and steals in basketball, as well as aces, double faults, serve markets in tennis).

The prohibition of slot halls and land-based casinos in many countries also helped fuel demand, exerting a strong influence on the growth of local “quick sports”-based live betting.

The CIS customer
The CIS customer is one that is characterised by extremes. You get the smartest and the most naïve, the richest and the very poorest, depending on how your target your product.

By way of example, after years working for leading European sports betting companies, I was engaged as a consultant to help improve a local bookmaker’s live and pre-match offering. I checked the level of the local traders and I was shocked when one of the best bookmakers in that company was offering a total of 33.5 points a quarter in one basketball match, while Bet365/WillHill/PaddyPower were offering 38.5+ points.

I was sceptical, so he offered to show me the bets being placed and I was amazed to see that most people had still been betting under 33.5.

Another reason why I found this so shocking was because almost all leading pan-European online betting companies tend to handle customers from this CIS country as “hard clients” who win a lot, but here, in this local company, they had thousands of very naive and easy customers who believed in their “strong” opinion and were indifferent to the market offer.

So how can it be that global giants with well-designed, competitive products and professional support end up with the worst customers in these CIS countries and shy, local bookmakers get the best ones? The answer is simple: cash is still king in all post-USSR countries.

The majority of the population still doesn`t like to use cards or online payments, mainly for security reasons. Almost all VIPs in these countries also don't want to risk exposing their financial position and prefer to send assistants with bags of cash – often after having placed telephone bets - to betting shops instead of using any online payment methods.

Moreover, there is a cluster of local payment methods that very few people in Western Europe have even heard of, these solutions handle a greater volume of payments in this region than the well-known popular global brands.

So if you see a customer from Tajikistan, Azerbaijan, Armenia or Kyrgyzstan registering with a global bookmaker, you can be sure that he went through all these “hard” procedures with some proven strategy or advantage he is going to leverage.

Nothing would prevent this type of customer getting a bet on in games where they have an advantage or can exploit a trader’s mistake, as they would be able to lay their hands on any number of passports from relatives and neigbours, enabling them to go through any KYC process and overcome any IP restrictions.

As well as their relatively low level of average bet, another characteristic of the CIS customer base is the high number of VIPs, particularly in Kazakhstan, Moscow, Kiev.

Given the extreme gap between rich and poor in these countries, the middle class in post-USSR is practically non-existent. So, any operator planning on entering any of these local markets needs to make sure they know how to treat VIPs and where to get them. If they don’t, they should seriously reconsider starting a business there.

Another factor worth bearing in mind is that there is a highly educated professional class with strong math and programming skills. In combination with the low level of salaries for traditional jobs, making a living at online betting suddenly becomes a very attractive option.

Therefore, as an operator, you should think very carefully about how any promotions, bonuses, free bets or new products you plan to offer could possibly be exploited and how you can protect it from such activity. I've seen many companies lose huge amounts of money as a result of trying to introduce promotions which worked perfectly well in the rest of Europe (but not when compared) to CIS countries.

Offers and products
It is important to offer as wide a range of pre-match special bets as possible in CIS countries. Obviously, these not only provide incremental revenues, but they are what brings customers to your site ahead of your competitors’.

In most other parts of the world, online bettors don’t care much about these markets, but this is not the case in CIS countries. In the case of live betting, we have seen a huge impact from [bricks and mortar] casino players who, limited by regulations, have in many cases converted to in-play betting, attracted by the fact they can quickly win and re-bet money.

Which is why a 30-minute table tennis match between two unknown Chinese players often generates more turnover than a Premier League football event.

Low mobile Internet costs in CIS countries means that close to 25% of all bets placed are transacted via mobile devices. In the Asian countries of the CIS, this has also been driven by the high cost of fixed-line Internet services.

For example, as little as two years ago, a 1MB bundle in Tajikistan cost more than $1,000, and even these days, 2MB costs more than €150+ a month.

Marketing and localisation
Due to the anti-gambling propaganda in place during most of the USSR’s history, there is no mainstream culture of sports betting as there is in countries such as the UK, with a far smaller percentage of the population in these countries knowing how or where to place a bet.

Which is why you need to be also very careful with how you target your retention activities – as calling or sending a text at the wrong time can lead to family dramas, as many men in CIS countries still choose to hide their gambling activities from their wives and partners.

At the same time, it’s important to commit resources to gambling education. It’s also worth remembering that once you have managed to convert local players, you will have a valuable period of grace until they become more savvy and confident and start checking out the offers on rival websites.

A key advantage of targeting CIS countries is that not much localisation is required. A Russian-language website and support is generally sufficient, as most of the CIS populations can still read and speak Russian.

The affiliate market is still very underdeveloped across the region. All the significant commercial media resources work only on a fixed-fee and short-term basis.

There are however a few smaller affiliates starting to emerge who understand how to generate traffic and make money and therefore enjoy unique advantages at this point in time.

However, the majority of potential affiliates among the local player base don`t even know about affiliate programmes or how they can benefit, so again, it’s worth investing resources in affiliate managers to educate affiliates and promote affiliate resources.

Country by country

Russia – offers the most potential but also the highest degree of risk. With endless changes in the laws and regulations, every new law drives sports betting towards oligopoly or even monopoly and progressively forces more and more companies (away) from the market. As a result, more than 600 betting shops closed and many online companies stopped all marketing in the market. There are now some quite large operators up for sale or closing down their businesses. Online betting is prohibited, supported by domain and IP blocking, soon to be followed by payments blocking. Offline betting operations are only generally viable in Moscow, St Petersburg and the Caucasus.
Ukraine –  offers considerable potential as a gaming market, although the strength of the local lottery lobby has prevented the passage of new gambling legislation there. Frequent changes in gambling policy have made it too risky and specific to undertake aggressive marketing in the territory.
Kazakhstan – a highly promising market, with a wealthy population and strong gambling culture. Betting takes place online and offline around the clock, mainly on sports, horses and virtual. This is however a territory which is difficult to enter without strong connections and local partners, regardless of your product, brand or financial backing. This also applies to all the southern countries of CIS, even if the legal barriers to entry are quite low. Plus, you will need to be ready to face intense strong competition from local incumbents with strong brands which have been established in the market for many years.
Armenia, Georgia, Tajikistan and Azerbaijan – These are countries with a lower standard of living than the countries listed above. Land-based sports betting however is well developed and among the most attractive markets in the region. Online gambling is underdeveloped and offers plenty of scope for opportunity and development. Although it’s worth nothing that in Azerbaijan sports betting is effectively monopolised, while Georgia suffers from heavy regulation, with every shop requiring a very expensive license, hence why there are only huge betting shops! Competition on prices is also fierce in Georgia, companies often offer incredibly low margins, considerably below what pan-European companies can afford to offer.
Belarus – was once an attractive market and on first impression, still appears so. However, due to huge bureaucracy, the simplest process can take months to complete. The government’s outsourced gambling monitoring system Belatra also cannot withstand the load requirements and has too many bugs, spoiling any acquisition activities. This can serve to make your whole operation very difficult, even if you have the best IT systems in the world.

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