Can you tell us your personal story of how you became successful in the iGaming industry?
I started as a poker player when I was 18 years old. I remember I had a friend who earned a huge amount of money, and I obviously wanted to make what he was making. So I decided to read a book about how to play poker. I started to play freerolls and won a lot. It was the early days of online poker, and I jumped in at the highest tables. Then there was a period where I lost a lot, and I decided to take a break from playing and moved over to the affiliate side. I started a site called Rakebacklovers that exploded and became the biggest Scandinavian rake provider. I was very successful until things went sour and poker went downhill. At the time, I also collected a lot of domains, and I put a bid in on videoslots.com. During our first two years at Videoslots we experienced a few ups and downs, however from 2013 onwards we always registered growth. Today, we have 120 employees and are currently looking to hire 30 more people.
What do you believe is the secret to your success?
I think it is our products and our customer service. In terms of product innovation, we have brought new concepts to the industry. For instance, we were the first company to offer players to play against other players in real time on online slots. Nobody had done that before. Our customer service also sets us apart. If we see that something is wrong, we try to fix it immediately. We also built up a reputation for fast pay-outs. Together, these two factors helped us grow organically, with little reliance on affiliates. In fact, we’ve only spent €7 million on marketing since we started operating. That’s not a lot for a company of our size. It was only very recently that we started investing in affiliate channels; and in terms of bringing in new customers, affiliates now account for some 30 to 35% of our business. The majority of our new customers still come from Google because the domain is so strong.
In your opinion, does the industry rely too much on affiliates?
Yes. Affiliates do a really good job, but they take all the profits, and often operators pay them more than a player is actually worth, especially if you consider that some companies pay up to €500 for a player. However, I think operators will rely less on affiliates in the future, and we have already seen some companies dropping affiliates completely. The termination of Sky Bet UK’s affiliate programme is one example. There is increased regulatory pressure on affiliates and operators, with regulators saying operators are responsible for what their affiliates are doing. It is a tricky situation, and many operators are not able to check up on thousands of affiliates. We have taken on the challenge of checking all our affiliates, but we don’t have that many.
Having been on both sides, how do you think the affiliate-operator relationship will evolve in the future?
I think all signs point towards licensing of affiliates, and that will result in tough times for affiliates. In many countries there are also cheaper marketing channels such as TV advertising. We have tested this in Sweden, where it turned out to be more cost-effective to run TV commercials than acquiring clients from affiliates.
You have firmly positioned yourself in the online slots segment. Are you planning to move into other verticals?
First of all, I want to improve our mobile offering. Our desktop product is quite amazing, but the mobile version is still not perfect. We are also working on reviving online poker, because I think an online casino needs to have a good poker product. In a land-based casino, I also expect a good poker room. Our product just doesn’t feel complete without a poker offering. But I want to keep this small, I don’t need a million tables. In an offline casino you also find only a couple of active tables and that’s what I want to replicate online. I am looking at small tournaments, so that players actually know that they have a chance to win. Next year, probably some time between March and July, we will also launch our 3D casino product after acquiring PKR’s software. We have also started working on a sports betting product, but this will take some time to be launched. I believe we can continue to own the slots vertical and have other products on the side.
What are the key challenges that you are currently facing?
Compliance and regulation, and we are fighting many different battles so to speak. We are only targeting regulated markets. We recently had to close our Australia operations when a new bill was passed that bans online casinos from targeting residents in Australia. Then there was the UK Gambling Commission, which forced us to change our game characters, saying that they are too child-friendly, despite them approving the games initially. We are obviously looking at areas such as Anti Money Laundering and KYC; we now have seven in-house lawyers and a strong team of analysts. I sometimes feel as if I am running a bank!
What’s your approach to responsible gambling?
We have created our own system that flags people that might have a gambling problem. However, more importantly, we actually encourage players to bet low, and all our promotions are built around that concept. We don’t reward players that bet big money with more free spins and don’t target the VIP segment. We position ourselves firmly in the entertainment spot. As soon as we realise that someone has a problem, we have to tell them. But the big question for us is: are we actually allowed to stop someone from playing when we feel they have a gambling problem?
How do you find Malta measures up as a base for iGaming companies? Is it a handy Head Office location or are there other countries that you could easily move to?
I have mixed feelings. The MGA is a good regulator; they are working with the industry, not against it. I also think that Malta is a good start-up location as it is easy to find your way around. But I think there is one big problem: while Malta has managed to build the biggest gaming hub in the EU, most of the professionals working in the gaming companies are foreign because the majority of locals don’t possess the necessary skills. There are of course a number of locals with great skills but not enough to support the industry. I think Malta has made a big mistake by not educating its own people to a level required by the industry. This, in turn, also creates a problem for the industry. It is relatively easy to bring in staff from abroad, but only a limited number of people stay for a very long time on the island. This means operators need to constantly recruit and train new people. Then there is the hike in rental prices, which affects our staff and also our ability to attract people from abroad. We are advertising the high quality of life on the island, but when people come here and find out that they can only afford a shared room in a shared flat, they are rightly questioning the quality of life.
Thinking about the future, where do you want to go from here? Would you consider a listing?
We want to stabilise our business and complete our product, and that will take some time. We are looking at new markets. We just completed our licence application for Denmark, which I think was the most comprehensive licence application so far. We are also targeting licences in Romania, Spain, Italy and Portugal. In the future we could also develop a B2B product as technically we can act as a platform. We are not planning an IPO at the moment, simply because there is no need for it. We are well capitalised and financially strong.
What piece of advice would you give to someone thinking about starting up a gaming company in the current climate?
I think it is really hard to start up these days. If you want to build something of scale, you are in for a challenge. You will require a lot of money and won’t have much time for a life outside of work.
Swedish-born Alexander Stevendahl started playing poker when he finished school. He then moved on to becoming a poker affiliate before founding and investing in Videoslots in 2011 together with Mattias Sesemann and Magnus Hyltingö. In 2013, he was appointed CEO of Videoslots.