Tel Aviv gets the Morgan Stanley innovation nod

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A research note issued by the leisure analyst team at Morgan Stanley has highlighted how important Tel Aviv is as a hub of innovation in the online gambling sector.

The team paid a visit to the leading companies and subsidiaries based in city including Playtech, 888 and Ladbrokes and suggested the trip highlighted the strong structural trends prevalent across the wider gambling industry. 

One such is the pace of technological innovation which the Morgan Stanley note suggested was “accelerating” with increased automation in marketing, CRM, churn prevention, game suggestion and predictive analytics. “Buzzwords like ‘big data’, business intelligence’, ‘deep learning’ and ‘personalisation’ peppered all meetings,” the analysts said.

What the team found to be particularly striking was the degree to which Tel Aviv fostered both development and expertise in online gambling.

“We were impressed with the level of innovation, the depth of technology expertise, the entrepreneurial spirit and the general level of enthusiasm towards the industry,” they wrote. “Israel is an unusual country to have developed such deep gambling expertise, being a country where gambling is illegal and where most people have not and do not participate in gambling of any kind.”

The result of this apparent contradiction is that Israeli tech companies tend to view gambling in a different way from companies and entrepreneurs in other countries. “We think that the approach to the industry is much more analytical, focusing on the use of technology and data around customer behaviour to drive investment decisions rather than perception or intuition around what customers want in the future.”

Online gambling isn’t the only sector where innovation is flourishing. Two recent articles have highlighted how investment is flooding into technology companies in Israel. TechCrunch wrote recently about a number of venture capital funds which have launched in recent months including a new £250m growth fund from Pitango, a fourth fund from Carmel of $194m and a later-stage investment fund from Singulariteam worth $30m.

A recent report from Israeli-based technology research firm IVC Research Centre showed that technology firms in the country raised $3.2bn in the first nine months of 2015 while venture capital-backed deals peaked at $908m in the third quarter. In the three months to September, 165 technology companies raised £1.1bn, slightly down on the £1.14bn raised in the second quarter by 181 firms.

Corroborating the Morgan Stanley findings, much of this money is finding its way into companies working with big data and also companies founded by serial entrepreneurs. A recent article in the FT spoke to one such Tel Aviv based start-up king, Uri Levine, the man behind traffic mapping mobile app Waze. In comments that could easily apply to some parts of the gambling industry, Levine told the paper that he gets involved in new companies where the gap between the sector and the consumer is “big and dramatic”. “This is where there is a huge opportunity for disruption.”

On their field trip, Morgan Stanley noted that data mining was now “the most sought after prize” in online gambling. “This would allow operators automatically to monitor customer activity in real time, and proactively intervene to improve customer experience… Understanding customer behaviour, what entertains and excites customers, while acting responsibly and ensuring a positive experience, is close to being possible in real time.” 

One recent Tel Aviv-based start-up in the gaming arena is EiG Launchpad competitor and William Hill Labs finalist Skillzzgaming.

Founders Eran Sharar and Dadi Neeman told GamCrowd that the city was full of an innovating spirit. “There is a very supportive culture for starting-up companies in Tel Aviv, there are spaces we can work in, there are a lot of mentors,” said Sharar. “And specifically there are a lot of gambling industry veterans in Israel.”

Skillzzgaming is working on a product at the intersection of social gaming and gambling, another theme noted by Morgan Stanley and one which suggests that Sharar and Neeman could be on to a winner. “All operators discussed social gaming and efforts to learn from the social gaming industry to apply to real-money gaming. All operators were taking elements from social games such as achievements unlocking special levels and leader boards, and applying these to real-money gaming.”