Top Reasons Why Online Sportsbooks Go Under

According to IBIS World, you can find a little over five thousand gambling websites today, representing a 5.2% increase from the 2023 figure. That said, many of these platforms do not live past the two-year mark, and below, we seek to unravel the primary reasons for this.

Poor Marketing

In our eyes, the chief cause that online bookies close up shop is poor marketing. What many readers fail to realize is that many gambling sites offer the same or super similar betting solutions to what you would get elsewhere. So, you get dozens, if not hundreds, of platforms with the same odds and wagering functions. Thus, this raises the question of how some succeed and others disappear into oblivion quickly. The reason for this, in most cases, is bad marketing.

Now, what do we mean by bad marketing? For us, this primarily refers to no or poor built-up brand awareness. Without a strong brand presence, it is hard to attract new users. We say this because it has been proven that people gravitate towards hubs with better visibility, perceiving them as more trustworthy.

For many online gambling industry pros, marketing here refers primarily to promotion and generous affiliate fees. The latter is the practice of enticing others to drive traffic. While that line of thinking certainly holds, a strong brand presence can also get manufactured via crafty social media activity, creative ads, premium customer support, and decent reputational management. Neglecting these things reinforces negative brand perceptions. That leaves a sportsbook at a sizeable disadvantage in an ocean of thousands of competitors. Failing to get enough word out about an online bookmaker is often a nail in the coffin, as people cannot use what they do not know exists or are sure that it offers a high-quality service.

Regulatory Issues

Here is something that many people do not consider when it comes to offshore betting sites, meaning ones operating from regions like Gibraltar, Panama, or Curacao. A vast majority of online gamblers think operators select these regions due to their lax laws and tax incentives. That is accurate, but bettors also believe these territories will not change their regulations to where their rules will affect their desirability, allowing operators to run their business in a low-stress environment, beneficial to both them and their users. Nonetheless, this is not accurate.

In 2011, Gibraltar doubled its corporate tax, chasing away many gambling companies. Moreover, currently, Curacao has gotten forced to tighten up regulations by creating a singular licensing entity that will take hold of this island’s gaming/betting industry. Curacao is doing this under pressure from the Netherlands, which gave it financial aid during the COVID-19 crisis, under the mandate that it must reform the gambling sector after the pandemic ends, which Curacao is doing now.

Additionally, some offshore bookmakers get created to target only specific regions. If you check our review section and go through some of our scanned sites, you will see that a few only allow users from less than a dozen nations. We have bookies listed that only try to appeal to North American gamblers. In those kinds of situations, one law change in a target country can affect a massive slice of its user base. For instance, the Unlawful Internet Gambling Enforcement Act (UIGEA), passed in 2006, greatly affected multiple gambling websites by prohibiting businesses from accepting payments connected to Internet gambling activities. That substantially hurt top offshore brands like Bodog, causing them to refocus on other markets.

Bad Risk Management

When running a gambling company, especially a sports betting one, knowing how to handle risk adequately is paramount. That refers to hedging dangerous wagers as a tool to offset potentially dramatic losses. Then, offering overly generous odds without understanding the hazards of this and true outcome probabilities. 

A general lack of data analysis can lead to misjudging betting volumes. Ignoring market trends and just not having enough cash reverses to cover unexpected wins. The latter is vital as not producing timely payouts because of liquidity issues brings about drastic reputation damage, which can be deadly. Inadequate assessment and management of risk can lead to heavy losses, especially if they offer overly generous odds or fail to balance their books properly.

Scandals & Poor User Ratings

There has been an expansive list of bookies closing their doors because they could not pay out bets, which caused them so much damage that they had to cease operations, connecting to the subheading above this one. BetButler is one such example. Once rumors start flying that a bookie is not liquid, no one wants to bet there anymore.

Interestingly, hacking scandals can also severely hurt an Internet sportsbook’s reputation. But users are more forgiving when it comes to these, even though they leaked their data to nefarious third parties. UK giants Betfair and Ladbrokes had both allowed access (not intentionally) to sensitive customer information to unauthorized individuals/groups, and this has not hurt them to a degree where it significantly affected their business. Still, the point stands that cybersecurity breaches can impact a brand’s reputation.

Sometimes, a personal scandal can also be crippling. 5Dimes, one of the first online offshore bookmakers to make a splash with Americans, in 1996, shut down after its owner – William Sean Creighton, got kidnapped and murdered in Costa Rica. Also, Bodog’s owner, Calvin Ayre, money laundering allegations and personal legal risks from US authorities caused him to license and sell Bodog to the Mohawk Morris Gaming Group, after which this site’s visibility diminished. That led to the birth of Bovada, the US arm of Bodog.  

All this noted, horrible user reviews also do a heap of destruction. If a platform has primarily bad reviews online, it is doubtful it can survive. We say this since virtually everyone today likes to consult with sites like Trustpilot before handing money to a service-offering business.

Economic Factors & Competition

State-of-the-art platforms have high operational costs. That includes staff salaries, marketing expenses, compliance costs, sponsorship agreements, and investing in tech infrastructure. For everything to be top-of-the-line, operators must lay down some dough. However, in today’s landscape, where there are several thousands of gambling sites, it sometimes is hard to stay afloat.  A few years ago, Playbetr was a sponsor of the top European football club PSG, and now it no longer exists. So, it is hard to maintain in this sector, and economic downturns affect discretionary spending on betting, which seriously reduces sportsbooks’ revenues. Hence, operators have to be careful about the general global economic situation, as well as what is happening in their industry and the trends to note. Failure to adapt to these challenges will no doubt be super detrimental.

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