In his latest exclusive column for iGaming Expert, Consultant and former CEO of 888 Holdings, Itai Pazner assesses marketing strategies for operators struggling to maintain the bottom line in the face of eye-watering tax rises.
The recent rise in gambling taxes, particularly in the UK, is forcing operators to reassess their approach to marketing.
Similar dynamics are unfolding across many regulated markets, with Massachusetts expected to be the next in a series of US states to raise its sports betting tax – this time to 51%. As taxes increase, profit margins tighten, and marketing budgets inevitably come under pressure.
For operators, marketing is one of the fastest, most effective and most immediate levers available when profitability is squeezed. Unlike staffing cuts or operational restructuring, which take time and involve additional costs such as severance payments or capex investments in technology, marketing spend can be adjusted almost overnight and the impact on the bottom line is immediate.
But while cutting marketing spend may be simple operationally, it has complex strategic consequences. The choices operators make now will shape not only their profitability but also their long-term competitiveness and can have an impact on top line further down the line .
Why cut marketing spend?
Marketing in the online gambling sector generally falls into two categories. The first is external marketing – starting with above-the-line advertising for brand building and customer acquisition, such as sponsorships, affiliates, and paid digital channels designed to bring in new players, build brand awareness and positions, and remind existing players about the brand.
The second is marketing to existing customers, which largely takes the form of bonuses and incentives delivered through CRM systems.
Both of these areas are under pressure when taxes rise.
Historically, operators structured their businesses around a relatively stable cost framework. In online casino gaming, acquisition marketing generally accounted for roughly 20-30% of net gaming revenue (NGR), while bonuses and incentives could represent 20-25% of GGR. For large sportsbooks, it might be a little bit less – around 15-20% – due to their brand awareness through High Street bookmakers or length of time in the market; plus the higher number of sports bettors in the market, making them cheaper to acquire.
Under tax regimes of around 20%, this model allowed efficient operators to maintain EBITDA margins in the 15-25% range. But when taxes double – as has effectively happened in the UK – those margins disappear. In response, the first area most operators are addressing is marketing expenditure.
Reducing marketing from, say, 25% of revenue to closer to 15% can quickly restore a portion of lost margin. Yet this decision is complex. Marketing reductions have a direct impact on visibility, customer acquisition, and revenue. Competitor behaviour also plays a crucial role. Reducing spend while competitors maintain theirs can result in a loss of market share as players see and remember competing brands more frequently.
Some operators may attempt to delay cuts to capture market share, but this strategy requires deep financial reserves, as maintaining high marketing expenditure in a high-tax environment can quickly render a company unprofitable.
Brand strength also plays a pivotal role. Companies with well-established brands can reduce marketing spend without immediately losing engagement, while smaller or newer operators may struggle to maintain visibility and player acquisition.
Striking a balance between brand and performance
As budgets tighten, the composition of marketing spend is shifting. One of the most immediate changes is the move from brand marketing toward performance marketing. Brand marketing, including television campaigns, sponsorships, high-profile brand ambassadors, and major media partnerships, is costly and difficult to measure.
Performance marketing, by contrast, focuses on measurable channels such as paid search, affiliate programs, and programmatic advertising, where returns can be tracked directly.
When budgets are squeezed, CFOs typically push CMOs toward the channels where performance can be measured directly.
In the UK we have already seen operators making cuts. Entain ended 52 years of sponsoring the Coral Cup at the Cheltenham Festival. Bet365 has cut long-term sponsorship of events at Newmarket and Haydock. BetMGM withdrew from the Fighting Fifth Hurdle at Newcastle after just two years. BetGoodwin has cancelled all racing sponsorship, while other operators such as Evoke, Flutter, JenningsBet and DragonBet have said they will follow suit.
Operators that previously allocated something like 50% of marketing budgets to brand activity may shift that figure closer to 30%, with the remainder directed toward performance-driven channels.
While reallocating resources towards performance marketing will provide a boost to short-term efficiency, it might also have an impact on long-term brand strength.
Reducing brand marketing can weaken emotional connections between players and operators. Metrics such as brand awareness, recommendations, and loyalty are largely driven by these broader campaigns rather than transactional advertising.
While performance marketing drives immediate acquisitions, it does not foster emotional engagement. Over time, diminished brand recognition may erode organic traffic, increasing customer acquisition costs.
High-visibility operators such as Betfred, Ladbrokes or William Hill with established retail presence maintain a natural advantage. An operator with 1,000 high-street betting shops effectively has 1,000 billboards across the country. That physical visibility creates ongoing brand awareness and trust that purely digital competitors struggle to match.
Smaller operators, particularly those with annual revenues of £50-100m, will likely cut marketing budgets much more aggressively. Many will eliminate television advertising or other brand-building channels entirely. As I pointed out in my last column, some will likely exit the market.
The result is that the share of voice for large brands increases, even if their absolute spending declines. Over time, this dynamic marginalizes smaller competitors and makes market entry significantly harder for new brands.
Entering a regulated gambling market has always required substantial marketing investment. In high-tax environments, that requirement becomes even more demanding, often requiring operators to spend more than 100% of revenue in early stages just to build brand recognition.
Not many companies have the financial capacity to sustain that level of investment.
The shifting sands of performance marketing
While operators shift towards performance marketing, performance marketing itself is becoming increasingly sophisticated. Restrictions on tracking and data-sharing require advanced marketing technology and analytics capabilities, as well as statistical attribution models to evaluate campaign performance accurately.
Interestingly, some of the most advanced performance marketing practices exist outside real money gambling.
Social gaming companies are widely considered among the most sophisticated performance marketers in the digital economy. Their heavy reliance on data-driven acquisition has pushed them far ahead in terms of optimisation and analytics.
Real-money operators will likely need to learn from those models.
The savings and changes will not only apply on the budgets, they will also affect how operators do their CRM and player management activity and will expedite the implementation of AI-based tools and automation which will create further efficiencies. Historically, player management relied heavily on broad segmentation. Operators divided their player base into categories such as high-value players, casual players, or churn risks, and then created standardised promotional journeys for each segment.
Artificial intelligence allows for far more granular personalisation, enabling operators to treat each player as a unique segment. Offers, incentives, and communication can be tailored to individual behaviour and lifecycle stage, vastly increasing efficiency and relevance.
AI-driven CRM systems automate manual tasks traditionally handled by large teams, such as segmenting players, granting bonuses, and monitoring for abuse.
Personalisation becomes highly precise: players who are less responsive to certain incentives can receive alternatives, while high-value players may be offered tailored bonuses designed to maximize engagement. This reduces operational costs while improving effectiveness.
Some operators may develop these AI tools internally, creating bespoke systems at a fraction of the historical cost, while others may rely on external providers who are racing to deliver competitive platforms.
Fighting the black market
Bonuses remain a critical retention tool and they will come under pressure as taxes rise. Where bonuses previously represented 20% of GGR, this may now decrease to around 15% or less.
While reducing bonuses increases net revenue, it can also create incentives for players to migrate to unregulated platforms that offer significantly higher bonuses. Operators must balance financial sustainability with competitive retention strategies, employing both data-driven personalisation and strategic bonus structures.
Gamification represents another major trend in player retention. Loyalty programs, leaderboards, tournaments, and progression systems add layers of engagement around the core gambling experience.
Again, social gaming operators are the masters of this because they rely on it as their players can’t win money – which is, in effect, one big gamification.
While gamification does incur costs, the impact on retention can be significant, complementing bonuses and CRM strategies.
Overall, the rising tax environment is forcing operators to become more disciplined, technologically adept, and operationally efficient.
In the short term, the tax increase creates significant pressure on profitability. In the long term, however, it may accelerate the professionalisation of the marketing function.
Operators that adapt quickly – embracing automation, advanced data systems, and more efficient marketing strategies – will emerge stronger. Those that fail to evolve will find the new environment increasingly difficult to navigate.
The UK may be the first major market where this transformation becomes visible. But it will not be the last.
