by Adam Tanner
The company demonstrated that incentives in the data-intensive loyalty program could shift how customers behave. That was great. However, with billions of dollars in debt to pay in the coming years, it still needed to do more to boost its overall revenue. It needed more customers, and more insights on its regulars. Caesars, as well their rivals, looked for more data from beyond the casino walls.
15
New Frontiers in Customer Data
Following the Money
For all the transactional data Caesars capture, they do not know what might be the most valuable personal data of all: how much customers spend in rival casinos. Like a jealous lover peering into the bedroom of an unfaithful partner, they would love to know what is happening when the client is out of sight. At first glance, it might seem unlikely that casinos could find out what people do away from their establishments. But in recent years they have been able to buy information showing how much money clients obtain in other casinos through credit and debit card cash advances and check cashing.
Data on what gamblers do elsewhere are hard to come by, and especially valuable, because casinos remain one of the last strongholds of cash (along with flea markets, tag sales, and underground businesses such as off-the-books labor and drug dealing). With the exception of higher-end players who wire in money ahead of their visit or receive a line of credit, most gambling takes place in cash. Some people arrive with a stack of bills, but many want more during their stay. When gamblers reach the daily limits on their ATM cards, they may cash checks or get credit card advances.
In 2013, a publicly traded company called Global Cash Access (GCA) dispensed $20.2 billion in cash at more than a thousand casinos, accounting for an estimated two-thirds of all the cash distributed inside casinos.1 Gamblers in aggregate draw between 60 percent and 70 percent of cash at casinos through ATM withdrawal, credit/debit card, cash advance, or check cashing, says Scott Dowty, GCA’s executive vice president. The company says it has personal information on more than nine million gamblers’ credit cards, debit cards, checks, and, in some cases, ATM withdrawals. Through a service called Casino Share Intelligence (CSI), introduced in 2010, the company allows casinos to see how much cash specific clients have taken out elsewhere.2 “You will finally be able to see beyond your four walls,” a company promotional video says.3 “Before CSI you’d have no way of knowing where John was when he wasn’t with you. . . . This robust tool can even identify the top players in your market—and analyze how much cash they’re withdrawing in your casino compared to your competitors,” GCA advertises.4
Harry Hagerty, who served as GCA’s chief financial officer from 2004 to 2007, says such information could prompt a casino to boost its offers to a gambler: “A property might say, ‘I’ve got a guy who’s taking out $1,000 in my various properties through cash advance, so there’s a good customer.’ But we could go and show, ‘Hey, that same guy is doing $5,000 a month in other casinos.’” GCA does not share which other casinos the particular gambler went to, but provides an overall amount of withdrawals in all other casinos.
Was GCA concerned about the privacy of gamblers who might not be aware that their transaction data would be sold? “We are doing what they [management] thought would be useful and valuable to our customers, who are the casinos,” says Hagerty. In all likelihood, gamblers do not fully understand that GCA shares information about how much cash they take out because the details are in the fine print. Dowty points out that customers sign their approval when completing their transactions, essentially opting themselves into the program. He adds that customers can also call the company’s toll-free number to opt out of information sharing.
Caesars executive Joshua Kanter says that Caesars once shared data gathered through ATM machines but quit years ago. Some other companies have also stopped participating, he adds. “Our customers really don’t expect that that information would be captured,” he says. “It’s not appropriate for us to be giving a third-party access to information about our customers.” GCA staff confirmed that MGM Resorts did not share data with them—so two of the major players in Las Vegas were nonparticipants. “It was a nice loophole business for a while, but I suspect it’s had its day,” Kanter says. “That loophole has been closing consistently over many years. Good for them while they made money off of it. It’s kind of like those guys when the Internet first became a big deal in the late ’90s, those guys who bought burgerking.com and for a little while there was this opportunity to act on something before everybody got wise to it. I would put this in the same category.”5
The Troubles with Cash
Casinos and other businesses may be able to learn more about customers as mobile and other electronic payment methods become more common. That’s because debit and credit card transactions, and most online payments (excluding virtual currencies such as Bitcoin), show your name as well as that of the bank or institution that handles the transaction. In recent years a series of companies have made deals with card-issuing banks (including Bank of America) that allow them to offer targeted discounts to certain customers based on their purchases. Under such programs, called merchant-funded rewards, a store such as Sports Authority might offer a special deal to all those who buy a certain amount of equipment at a rival every month.6 Those not deemed to be regular buyers at rivals would not receive the offer. Caesars also began learning more about how customers spend their money outside their casinos when they introduced the Total Rewards credit card in 2013.
For the time being, however, casinos still do much of their business in cash, following routines established decades ago that they would be happy to do away with. They spend a lot collecting, transporting, and guarding it. Clay Behrman, who oversees Caesars’ cage operations, says a midsize regional casino might keep $12 million to $14 million in cash on hand at any given time. The labor cost of handling that amount of cash would be $1.5 million to $2 million annually. At Caesars Palace alone, sixty-five people work in the cage areas and fifteen to eighteen in the count room (the place you always see in the movies where stone-faced workers are counting the cash). Hagerty calculated that one casino company had $350 million sitting in cash across all its casino floors at any one time. Over a year, the company’s cost of borrowing and handling all that money would be $35 million, he estimated. Cash is expensive. Because it is so obviously stealable, special provisions are in place to secure it. These include steel boxes and secure rooms. Beyond a mantrap corridor with a double series of doors that open only one at a time lies the count room, where workers typically stand at transparent tables, drink from transparent water bottles, and wear smocks or jumpsuits without pockets.7 Surveillance cameras watch carefully.
From there some of the cash goes to the cage; the rest goes to a vault room. The vault has thicker walls and wire mesh protection against break-ins, as well as security features such as biometric entrance codes. When casinos want to deposit cash in a bank, an armored car service enters the building through a secure indoor location or a gated back area. All these operations impact the casino’s bottom line.
Because most casino jurisdictions do not allow credit cards for gambling (a precaution against incurring debt in a moment of vulnerability), Hagerty’s company, Sightline Payments, has spent years trying to usher in what it calls a prepaid cashless revolution in casinos. The company proposed introducing prepaid cash cards that could be branded like a loyalty card from a casino company such as MGM Resorts or Station Casinos, which runs ten casino hotels in the Las Vegas area typically catering to locals. The cards would fund wagering accounts for casino and online gaming and work only in the casino branding the card. People could add money to the cards online and, for nongaming purchases, use them anywhere Discover cards are accepted. Casinos could also see what other kinds of things customers buy using the card. “Stations previously had no idea what I was spending off their properties,” Hagerty says. “All the casino knows is what you do within the four walls of the casino. Now they can know more about what their consu
mer really values.”
A slot machine player at Caesars Palace. As of 2014, gamblers in Nevada can use prepaid cash cards. Source: Author photo.
He gave an example of someone who buys ice cream from Cold Stone Creamery with a Sightline cash card. Once the casino knew that the person was a fan of those desserts, it could target a promotion giving a free sundae or store coupon as a reward for gaming. Sightline Payments needed a change of regulations to introduce the card in Nevada, and after a long effort, it succeeded in February 2014. It hopes customers can start using its cards in Nevada casinos in the second half of 2014.8 The company is working on getting rules altered in other states as well.9 Another new frontier in gathering customer data from gamblers was opening up.
Cell Phone Apps
Another tool that could help casinos know when loyalty club members are acting promiscuously comes via its cell phone apps, which use GPS tracking to determine where clients are located. Caesars’ apps for Las Vegas, Atlantic City, and Lake Tahoe, as well as for Total Rewards, allow visitors to receive offers via text messages based on their location. Other casinos also advertise cell phone applications that send geo-targeted content. “Enjoy location-specific content that changes depending on where you are. Unlock special offers once you’re within a few miles of The Mirage or actually at the property,” MGM Resorts advertises.10
As marketers and data brokers seek ever more information for insights about prospective customers, they salivate at the possibility of new insights from mobile data. The use of personal data coming from your mobile phone and other devices will continue to generate debate as more and more people acquire mobile technology. Because few rules limit gathering personal data other than in areas related to medical, financial, and hiring records, business executives are cautiously exploring how far they can go without setting off a public backlash or government intervention. “Personally identifiable information versus no personally identifiable information is the red line that may trigger Congress,” says Jack Feuer, founder of Digital Marketing Works, a consulting agency specializing in digital advertising.
Jorey Ramer, founder of Jumptap, a leading mobile ad company, says it is possible to market to mobile devices respectfully and effectively by sending out messages that people actually want.11 His Boston-based startup buys aggregated data from companies such as Acxiom to deliver ads not to individual names but rather to broad groups of people sorted by interests, such as business travelers and suburban moms. Like many advertising executives, he points out that the commercial message allows you to get a service for free, such as access to a sports or news site. “I see digital advertising—in particular mobile, where consumers will spend most of their time—as simply the opportunity for companies to build their own roads to make it easy for the right consumers to visit, at lower cost than any previous method of customer acquisition,” he says.
“We believe we are on the right side of privacy,” he says. “Jumptap does not see information that would allow a person to be identified in real life such as a name, phone number, email address, or street address. Companies that do see such information require special care.”
Some companies are taking a more direct approach and advertising to mobile phones on a one-to-one basis, meaning that you may see a different message from your neighbor because of what they have deduced about you. For example, Catalina Marketing, which advertises that it collects “purchase histories of more than 75 percent of U.S. shoppers and 128 million health consumers,” delivers personalized mobile ads to seventy million households.12 The company gathers data on more than one billion transactions per month, giving it a lot of information to personalize digital media and target mobile ads.13
At a Harvard Business School conference for students hoping to become successful digital marketers and entrepreneurs, one industry official let his guard down when talking about his industry. “We thrive on what a lot of people consider to be invasive, trying to track what kinds of websites people go to,” said Daniel Ruby, suggesting firms had gone too far into people’s private spheres in the name of marketing. He worked at the time as director of online marketing at Localytics, advising companies on using mobile phone location data. “The public doesn’t like that. Nobody likes that.”14
Gary Loveman embraces tailored cell phone messages based on knowing where you are, provided the marketing does not cross certain boundaries. “For example, when I am carrying this stupid thing around and when I land in Hong Kong I immediately get an offer of different types of services in Hong Kong through SMS [text message]. Usually it’s a ferry service or a trip to a sightseeing venue or something like that,” he says. “And the worst case is that you just delete it. I don’t think anybody finds that too troubling. And we’re not using that to call their spouses and tell them they are in Las Vegas at the moment, which I suspect might be disturbing.”
Yvette Monet, a spokeswoman for MGM Resorts International, says her company does not target based on very precise location, although such ability exists. The casino chain’s technology notes what ZIP code users are in, not exactly where they are. Thus it might send an offer to everyone in 89109 around the Strip, not just to people in a rival casino. “We are in the process of expanding our property Wi-Fi capabilities so that we can send to people within our properties some offers, but we’re not there,” she says. “With Wi-Fi, for example, if I go to the swimming pool and then leave the swimming pool to go somewhere else in the hotel, the hotel knows I’ve been at the pool and they’ll send me an offer to lure me back to the pool.” Or perhaps the hotel would send a message about a restaurant special or casino tournament, all aimed at keeping customers engaged and spending at the hotel. Joshua Kanter says Caesars have similar plans and adds that every self-respecting marketing company will do the same.
From a business perspective, knowing more about clients can only help, whether from smart phone GPS information or commercial profiles bought from data brokers. Yet such data gathering raises privacy sensitivities. Unlike the loyalty card data, which customers willingly exchange for rewards, mobile technology allows companies to collect a lot of data about customers without their active knowledge.
Rich Mirman helped fine-tune what was then Harrah’s data collection on its clients. But tracking consumer location through mobile phones makes him uneasy. “Now, to me it seems a little bit unethical in terms of watching their movements without them knowing that you are watching their movements,” he says. “There is a big difference in me pulling a card out of my wallet, either handing it to the pit boss, handing it to the waitress, or putting it in the slot machine—that’s a deliberate act that says I want you to know something about me.”
Walter Salmon, the former Harrah’s board member who is now in his eighties, also has concerns. He says he’d rather that a competitive company not know the very moment that he is shopping in Best Buy, even if the rival is sending a promotion for a better offer. “I think there is a line there because I think it’s disturbing my privacy,” he says. “What if someone went to a house of prostitution?”
As with many areas on the frontier of the business of personal data, Caesars are struggling to find the right mix of advancing their business interests and giving clients something of value in return. “We don’t want customers to feel that we are Big Brother, but there is value in having access to that kind of information, so we are trying to find the right balance,” Kanter says. As for Salmon’s comment that companies could know that someone had visited a house of ill repute, Kanter replied curtly: “That would be useless information to us because it is so unrelated to our business.”
Making real-time use of data from clients’ smart phones remains difficult, but businesses are moving in that direction. Caesars are now beginning to think about how to collect that data at vast scale and interpret it in real time.
Personalizing the Slot Machine
Some insiders believe that the real long-term problem facing casinos is not marketing but demographics: many people wean
ed on video games and the Internet are not as interested in today’s casino games as their parents or grandparents. Kanter, part of a demographic of players in their thirties and forties vital to the future of casinos, admits it took him a while to understand the appeal of slot machines, the big money makers at American casinos today. When he first started at Caesars he just did not see why anyone liked them. “The odds are against you, you’re going to lose, why would you do that stupid thing?” he thought. Then he started playing Slotomania, an online slot game Caesars own and market widely across the Internet, Facebook, and iTunes. He began to appreciate the rhythm: long lulls of losses punctuated by thrills of big wins. “It’s restful and entertaining at the same time,” he says. “There is something Zen-like about being there.”15
Slot developers hope their games of the future will not be an acquired taste but a compelling pleasure. Adding personal data to the mix may help. Patti Hart, CEO at International Game Technology, a leading slot machine manufacturer, says her machines may one day make more use of personal data, welcoming regulars through retinal scans, face or voice recognition, or fingerprints. “I can personalize this slot machine to be the Patti slot machine,” she says. “It has my family pictures, it has my music, it has, you know, my friends and whatever. I can send a Facebook notification to my family that I just won $300 at the Elvis machine.”
“The only impediment for us is not technology; it’s regulation.”
Hart says she is sensitive to privacy concerns, although she believes the issue will fade over time. Some people will not want to be tracked, she says, but she expects such sentiment to diminish. “I think the world has moved to a place where people are saying, ‘I want personalization and in order to get personalization I have to give you data,’” she says.
