#53: More Gold Is Required

In my days as a Warcraft player, I constantly heard the phrase “more gold is required”.

And I’m glad it became a worldwide meme. Firstly, because it gave me fuzzy feelings of nostalgia. Secondly, it makes me think of one of the biggest issues with our industry.

Because in an industry obsessed with quick wins, I'm going to make a counterintuitive argument:

The faster you try to get your money back, the more you damage the long-term health of your brand.

Operators launch, immediately fixate on breakeven metrics, and start squeezing margins wherever possible.

Customer service gets outsourced to the cheapest provider. Product development gets the bare minimum investment. "Nice-to-have" features are perpetually deprioritised.

The results are predictable but somehow still surprising to those who implement these strategies: high churn rates, declining engagement, and ultimately, a business that takes longer to achieve true profitability than competitors who initially invested more deeply.

This essay will explore why this happens, what the alternative looks like, and how you can practically implement a more strategic approach, even if you've been conditioned to chase immediate returns.

The Margin Squeeze Trap

Let's be honest about what typically happens in our industry. A new operator launches with significant initial capital. Investors immediately start the clock on payback expectations. Leadership responds with aggressive cost control measures:

Customer Service: Outsourced to the cheapest provider, with minimal training and tight handle-time targets. "It's just a cost centre anyway," they rationalise.

Product Development: Limited to essential features, with constant pressure to release quickly regardless of quality. "We can fix it later" becomes the mantra.

Operational Infrastructure: Bare-bones systems that meet immediate needs but lack scalability. "We'll upgrade when we're profitable."

I've been in those budget meetings. I know the pressure to deliver immediate results. But I've also seen the long-term damage these decisions inflict.

The true cost isn't just in customer dissatisfaction. It's the silent killer of business potential: churn. Just a modest single-digit improvement in player retention can have an incredible impact on profitability.

Yet retention is precisely what suffers when you squeeze these critical margins.

The Mathematics of Mistaken Priorities

Here's the uncomfortable math that rarely makes it into the quarterly review:

1. Acquisition Costs vs. Lifetime Value: When you underinvest in product quality and customer experience, you dramatically shorten the average player lifetime. A player who might have stayed for 24 months now leaves after 6. Your customer acquisition cost (CAC) remains the same, but you've quartered your return.
   

2. The Leaky Bucket Effect: High churn forces you to continuously refill your customer base just to maintain revenue, creating a perpetual dependence on expensive acquisition channels.
   

3. The Hidden Costs of Technical Debt: Every corner cut in product development becomes a liability that eventually demands more resources to fix than it would have required to build properly in the first place.

The math is clear: squeezing margins in critical areas doesn't accelerate payback, it extends it.

The Alternative: Strategic Investment for Long-Term Payback

The smarter alternative isn't reckless spending. It's strategic investment in areas that create genuine competitive advantages and foster player loyalty.

Let me be clear about what this means:

1. Upfront Investment in Key Differentiators: Commit significant resources to making specific aspects of your offering truly exceptional, whether that's game quality, customer service, or platform reliability.
   

2. Temporary Margin Acceptance: Be prepared to operate with lower margins initially, with the confidence that this approach leads to stronger, more sustainable profits over time.
   

3. Focused Excellence Over Mediocre Breadth: Rather than being average across all functions, aim to be exceptional in specific, strategically chosen areas.
   

I know what you're thinking: "Easy to say when you're not the one explaining to investors why margins are below target." And you're right, this approach requires conviction.

But the data supports it. Companies that focus on quality and customer experience typically achieve stronger long-term metrics, including:

• Higher Net Promoter Scores (NPS)

• Longer player lifetimes

• Greater share of wallet

• More effective word-of-mouth acquisition

• Stronger price resilience

Let's translate this into a concrete approach you can actually implement.

Implementation: The Focused Dominance Strategy

Here's the practical framework I've seen work repeatedly across different iGaming verticals:

1. Start Small, Go Deep

Begin by identifying a single area where your business has the potential to truly excel. This could be:

• Your VIP customer service

• A specific game category

• Your mobile user experience

• Your bonus or loyalty program

The key is to be ruthlessly selective. Don't try to improve everything at once. Pick one area and commit to making it exceptional.

2. Invest Disproportionately

Once you've identified your focus area, invest in it at a level that might initially seem excessive. This means:

• Hiring the absolute best talent in this domain

• Giving them the resources they need without nickel-and-diming

• Protecting this initiative from budget cuts during difficult periods

This will help you create a genuine competitive advantage in a specific domain.

3. Build, Measure, Learn, Then Expand

After achieving clear excellence in your initial focus area (validated through metrics like retention, NPS, or engagement), systematically expand your approach to the next strategic area.

This sequential approach allows you to:

• Concentrate resources for maximum impact

• Build organisational capabilities one step at a time

• Create multiple pillars of excellence that collectively defend your market position

Cross-Industry Lessons: The Patience Paradox

iGaming's obsession with rapid payback and margin protection starkly contrasts with other industries that have built tremendous value through patient investment.

These comparisons are both illuminating and humbling.

The SaaS Revolution: Investing in Growth

Consider the trajectory of leading SaaS companies. Salesforce famously operated at a loss for years while building what would become a $20+ billion revenue business.

They invested heavily in product development, customer success, and creating an ecosystem that would be difficult to abandon.

The SaaS model explicitly recognises that the value of a customer accrues over time, not in the first month or quarter. The industry standard CAC:LTV ratio target is typically 1:3 or higher, with a willingness to wait 12-24 months for a customer to become profitable.

Meanwhile, many iGaming operators panic if customer acquisition costs aren't recovered within weeks.

This short-term orientation has kept most operators from building the kind of defensible, sticky products that characterise the most successful tech companies.

Luxury Retail: The Quality Premium

The luxury sector offers another instructive parallel. Brands like Hermès have built incredible margins (often exceeding 60%) not by cost-cutting but by investing deeply in craftsmanship, materials, and exclusivity.

They've created experiences and products that command premium pricing and foster extraordinary loyalty.

What's the iGaming equivalent? It's certainly not another cookie-cutter casino with identical games and a slightly different colour scheme.

It would be a genuinely differentiated experience that players value enough to choose even when competitors offer more aggressive bonuses or promotions.

Consumer Subscription Services: The Retention Game

Netflix, Spotify, and other subscription businesses understand that growth ultimately comes from retention, not endless acquisition.

They invest billions in content and user experience because they know that reducing churn by just a percentage point has an exponential impact on their lifetime economics.

The lesson for iGaming is clear: your best source of growth isn't the next marketing campaign. It's keeping the players you already have for longer.

Yet many operators continue to treat retention as a secondary concern while pouring resources into increasingly expensive acquisition channels.

Conclusion: The Courage to Play the Long Game

The irony of our industry is striking: in a business centred around risk and reward, we've become paradoxically risk-averse in our operational thinking.

We choose the safer path of short-term margin protection over strategic investment, even when the data clearly shows the limitations of this approach.

The question isn't whether you can afford to make these investments. It's whether you can afford not to.

Playing the long game, in my view, is the only reliable path to building something truly valuable in an increasingly competitive landscape.

The payback paradox teaches us a crucial lesson: sometimes, the fastest way to get your money back is to stop focusing so obsessively on getting your money back.