The Betification of Everything

How Did We Get Here?

The global explosion of online betting, which we now see dominating sports sponsorships, advertising spending, and parts of the digital landscape, is not an exclusively Brazilian phenomenon. In the United States, for example, it's so ubiquitous that it was the subject of a Simpsons episode this year where Bart gets addicted to betting. Similar problems and concerns are multiplying in many other large countries.

But this wave didn't originate in the major markets it now dominates.

The 90s

Online betting began in small, island nations with a history of being used as tax havens. Antigua and Barbuda was the pioneer in 1994, creating the first legislation for the operation of online casinos. Malta and Gibraltar soon followed, first as operational hubs, then with an environment of low taxes and stable regulations, which opened the door for the first global companies in the sector to establish themselves.

United Kingdom, 2005 - The Turning Point 

What transformed this niche into a mass phenomenon came from the United Kingdom with the Gambling Act of 2005. There, the culture of sports betting of various kinds (boxing, horse racing, etc.) has a long and deep-rooted history, even documented in popular culture - movie buffs will remember Brad Pitt as a boxer in Snatch (2000) and that the Shelby family's first business in Peaky Blinders was a bookmaker's shop. It was the first major country to regulate the sector more broadly and to allow mass advertising on television and the internet, which set a precedent for the model to be replicated in many other parts of the world. Have a look:

• 2010: France passes a law to regulate sports betting, including horse racing and online poker, but keeps online casinos banned.

• 2013: Brazil approves the General Law on Sports Betting.

• 2018: The U.S. Supreme Court overturns PASPA (Professional and Amateur Sports Protection Act), opening the door for states to regulate sports betting and online gambling on their own.

• 2021: Germany implements a state treaty (Glücksspielstaatsvertrag) that legalized sports betting, poker, and online casinos with strong regulatory controls, including maximum deposit limits and anti-money laundering policies.

In Canada and Australia, what is permitted varies by province.

In Asia, in countries with stricter laws like China (where the state has a monopoly on gambling and only the lottery is allowed) or South Korea (where gambling restrictions apply even to citizens abroad), spending on betting through gray markets or offshoring (on online platforms in other countries) is enormous. In Japan, another culture with a strong link to gambling (but also with a strong history of repression), there are considerations to legalize some currently prohibited forms precisely to close the massive loophole of these parallel markets, as well as to prevent addiction and consumer abuse.

This online gambling phenomenon is widely discussed for its problematic consequences like addiction, money laundering, and all sorts of perverse incentives that arise when companies become the biggest sponsors of professional sports. But what flies under the radar for many is how mechanics taken directly from gambling are increasingly present in markets with far less scrutiny and debate.

Entire categories of products and services are based on the appeal of surprise and random rewards, even some we consider more innocent.

Check it out.

Free-to-Play Games

Free-to-play (F2P) games, from Candy Crush to Clash Royale, from Fortnite to Genshin Impact, generally become profitable because of a small percentage of players known as "whales." Whales are the big spenders, and although they are a tiny fraction of the total (in some cases, 0.15% of players can account for over 50% of revenue), their spending adds up. The cost per transaction is small, but the cumulative lifetime value (LTV) can reach thousands or even millions of dollars - replicating the dynamics of online and traditional casinos, where a small minority (often problem gamblers in the case of casinos) brings in the majority of the revenue.

The mechanics are so similar that "loot boxes" (treasure chests with random, luck-dependent items purchased with real money) have been completely banned in some countries (Netherlands and Belgium, since 2018) and must disclose the odds of obtaining rare items in others (China, 2017; South Korea, 2019, among others), with more countries studying regulation or bans, seeing them as analogous to gambling aimed at children and teenagers. This idea of "treasure chests" isn't entirely new. Thirty- and forty-something players of Magic: The Gathering, the card game launched in 1993, know well that the chance of getting a rare item can change the course of a game. Since these items are randomly distributed in sealed packs, it keeps many players constantly buying card packs. The difference now is the scale and ubiquity.

This behavior of whales makes them highly valued by the industry, so much so that the entire design of these games revolves around monetizing this small part of the user base, using not only the levers of randomness and reward but also status: personalized offers, VIP experiences, and more. They depend on them to stay afloat, as the vast majority of players of these games spend nothing. The idea is so present in popular culture that many young people refer to people of average appearance as having a "free skin."

This model has been so successful that several developers like EA and Ubisoft have introduced microtransactions into paid games, much to the disgust of most gaming communities and, arguably, another case of enshittification. Some types of free-to-play games are known as "gacha" because they borrow a mechanic from the physical world: that of...

Gachapons

Gachapons are machines with a random assortment of simple, often serialized toys (different groups of kittens, various miniature food dishes, Naruto characters, etc.), where some may be more desirable than others. So you keep putting in coins until you get what you really want.

Gachapons are almost as common in Japan as vending machines and were inspired by the gumball machines we associate with American diners of the 50s and 60s. They exploded in popularity in the country during the 70s and 80s, partly thanks to Bandai Namco, one of the world's largest toy manufacturers. Bandai is known for Ultraman and Astro Boy figures in the 60s, for Tamagotchis by those who grew up in the 90s, and by anime fans for Dragon Ball, Gundam, and One Piece—which makes the idea of collectible toys with a variable reward element old news in countries within Japan's sphere of influence. You know what else everyone is talking about that operates on an identical logic?

The Labubus

Although the spark that supposedly caused the social contagion explosion was Lalisa Manobal (from the K-pop group Blackpink and an actress in the latest season of White Lotus) talking about her obsession with them to Vanity Fair, a critical part of the appeal of Popmart's viral sensation is precisely the blind boxes - this is evident in her own testimony.

Although it's possible to buy some models directly, it's estimated that 70% of the company's revenue comes from the sale of these boxes. And this combination (celebrity exposure in the right context, variable rewards, collectibility, and partnerships with other licensed products) is a much more reasonable explanation for their success than the empty words of "design" and "authenticity" circulating in some carousels out there. For those without repertoire, everything is new. There is a much deeper analysis of their business here.

Speaking of collections...

How Has the Logic of Gambling Affected Collecting?

Collecting is one of those deliciously human irrationalities that has been with us since our earliest days. For anthropologists, collections represent lived experiences and social identities. For psychologists, the act of collecting satisfies needs like identity reinforcement, social connection, and memory preservation, in addition to activating reward mechanisms in the brain.

Our grandparents collected stamps, coins, porcelain, teaspoons. Those shadow boxes for wine corks sold like hotcakes. Everyone has a friend who has collected something beer-related: bottles, cans, caps. Watches, bags and backpacks, audio equipment, perfumes, orchids - anything goes! And each of these worlds has passionate enthusiasts who can see millimeter differences between products and editions, almost like archaeologists of their own consumption.

Collecting is an extremely desirable circumstance for any market due to its direct effects: recurrence, loyalty potential, upsell potential, etc. Even the indirect effects are profitable: they can create a vibrant secondary market, in some cases an extremely speculative one, or even open up space for related services. For example, eBay, one of the great meccas for various types of collecting, has offered authentication as a service since 2020 for watches and sneakers and has been expanding to other categories like streetwear, jewelry, and bags.

What's different today from those collections of the past? Simple: brands are actively controlling the supply and manipulating the odds to create scarcity even in categories where such mechanics didn't exist before. How?

The "Drop" Culture 

From streetwear pioneers like Supreme to the highly competitive raffles of Nike's SNKRS app, the culture of the "drop" - a limited-quantity release in a restricted time frame (which makes interested parties think there won't be enough for everyone, creating urgency) - has spread to every imaginable market, including those related to collecting.

I mentioned Magic: The Gathering earlier in the text - this year they released a co-branded card series with Final Fantasy, another giant franchise in the geek universe. The limited supply sold out and inflated prices even in pre-orders. In April, Hasbro, the owner of Magic, had already announced that this series was the most successful of all time - but the official launch was in June! There were even $200 million in sales in a single day.

Serialization 

Humans have an innate need for closure and completion - psychologists call this the need for cognitive closure. Some even see the need to complete collections as a manifestation of this need. And there are scientific studies that show that collecting is correlated with certain personality traits, not with any particular generation.

More product categories are being sold as sets or lines, such as Lego's architecture or flower series, which clearly have a very different audience from the medieval castles and police departments made for children.

A great recent example of the intersection of serialization and drop culture was the launch of the "Moonswatch" series, a co-branding of Omega and Swatch, with initially 11 models released gradually. They were based on a rare and very expensive classic (the Speedmaster Moonwatch), but at much more accessible prices, sold only in the group's physical stores with small inventories. Of course, the primary audience is enthusiasts and collectors, but the huge lines and media buzz helped break into the mainstream and bring in excellent numbers. Furthermore, the original 11 have now become 31. And some people still think this market is dead because of smartwatches!

The "Grails" 

Any psychoanalyst can attest that our desire is intimately related to the unavailability of the object.

A "grail" (in the sense of the Holy Grail, the object lost to history), in the world of collecting, is what we call the most desired or unattainable item, due to cost or rarity - the pinnacle, the pièce de résistance of a collector. It could be a pair of Yeezys from when they were still with Nike. It could even be that amber Duralex dinnerware set, a Brazilian classic from the 80s and 90s, now with hugely inflated values because they are no longer produced.

While some products achieve this status naturally for enthusiasts and collectors (like a ghost orchid, due to its difficulty to cultivate), many brands play with this legendary status and may bring back reissues or reinterpretations. It happened with the Jordan 1 "Lost & Found" in 2022, which is a reissue of the 1985 Jordan 1 "Chicago," the model that started it all. Or even the launch of the Nintendo Classic Mini in 2017, which shows that the Japanese company noticed both the growth of classic game emulation and the value of old consoles on the secondary market.

Just to wrap up: three key points about "betified" collecting: the speed and scale of communication, the integration with highly speculative digital secondary markets (which enhances the sense of urgency and scarcity), and the entry into many non-traditionally collectible categories.

Where else is this logic spreading?

Investing as Collective Entertainment

Investing was once strictly a solitary act or one mediated by a financial agent (bank manager, advisor, broker, etc.). Today, in many cases, like at a poker table or a roulette wheel, part of the experience is social - watching others win and lose, as well as endorsing people and companies.

Several behaviors demonstrate this appeal: mass shorting and longing with zero basis in future projections, but on earning calls and balance sheets—as was the case with GameStop, a story that became a book. Celebrities and politicians issuing their own cryptocurrencies. Replicating Nancy Pelosi's portfolio on Robinhood just for the joke (not that the results aren't noteworthy or even worthy of legislative change). Posting "loss po*n" on Reddit, both on the American r/wallstreetbets and its very Brazilian counterpart, r/Farialimabets.

Many of these mechanics, while satisfying and effective, can move the needle in unethical ways or cause significant individual harm. If Kotler himself sees marketing as "the original Behavioral Economics" (a great read!), how do we steer the incentives to prevent this from happening?

Can we deliver experiences that people value without amplifying problematic aspects?

The Benefits

Many of these initiatives have very cool, mutually beneficial sides that are extremely attractive for the long-term value of brands:

• They create context for socializing around shared interests. Think of school friends getting together to complete the World Cup sticker album. But what if that interest is perennial and not just transactional...

• They are capable of creating real communities (today, the "grail" for so many brands) almost spontaneously, depending on the product. The existence of enthusiasts and collectors provides meaning, belonging, status, and symbolic value that transcends physical and digital products, in addition to reducing dependence on the constant shouting for attention that the "Promotion" P of marketing has become in the last decade.

• The lines at store doors on drop days, the unboxing videos, people publicly displaying their creations and collections (think Lego and Minecraft)—all of this is both social proof and earned media.

The thing is, many businesses that use these mechanisms eventually reach a crossroads. As with so many things in life, the dose makes the poison. On one hand, there is the path of cultivation: embracing enthusiasts to create closeness, using surprise to generate delight, and uncertainty to create a sense of suspense and adventure...

The Risks

On the other... the problems begin when the goal is to maximize the lifetime value of the little human out there at all costs, even if it destroys their well-being and could put an expiration date on their future consumption (exactly like in a certain sector dominated by international organized crime), ignoring all sorts of collateral damage, both to them and to the brand. The same mechanics that create healthy bonds can be used to fuel compulsions. The entry point to an "abusive" customer relationship is often quantitative myopia. It's the McNamara fallacy: an obsession with what can be measured that ignores much of what really matters but is qualitative and involves finding the stories your dashboard doesn't tell.

The inflated numbers are addicting, right Tony? On our side of the table, the little colored numbers going up and down also affect our reward systems...

The result of this obsession is an extractive relationship, with no balance between the value it creates and what it takes. It's not just an ethical dilemma—if we're willing to mine the reward system or the dependency of those being harmed to the last consequence (even if it's a small part of the whole!), the truth is we are already planting the seed of the business's own demise. This gradual "let's-see-what-we-can-get-away-with" degradation of the offering is the root of the concept of enshittification. You can't blame everything on free will (which is increasingly questioned scientifically) and individual responsibility when we ourselves act to suppress both.

The first path creates loyal fans, a collective sense of purpose, and subcultures with a life of their own. The second creates captive customers with an expiration date and regulatory liabilities.

Customer experience isn't (just) an NPS of 75+; it's being able to answer "yes" to two questions:

• Are we ensuring our actions don't cause any significant negative impact on our customers' lives?

• Are we melting down the accumulated value we've created for short-term gains?

Long-term bonds, as in human-to-human relationships, require mutually beneficial relationships, not exploitation. Any relationship that is strictly transactional tends to be short-lived and have zero trust between the parties - it's applied Game Theory. That's why I say that our work here at Zeitgeist is to do "couples therapy for brands and people."

To finish, a short digression: what other movements might be related to this one?

Serendipity > Predictability? 

If the space for chance and spontaneous discovery has shrunk because we are surrounded by algorithms pushing us more and more things that reinforce our existing tastes and beliefs (which is why I always say the evil of this century is confirmation bias), could this have something to do with the "productization of surprise" spreading to categories and products where it wasn't present before?

Re-evaluation of Digital Dematerialization and Minimalism 

People who grew up or are living their adult lives without bookshelves, furniture full of CDs or vinyl, vast collections of physical game cartridges, or other types of collections may be more interested in having physical representations of their tastes and cultural references - as well as signaling their affiliations to others.

The Great Shift to the East 

The growing influence of East Asia (China, South Korea, Japan) on global culture is a fact, appearing in both small and large things. On a micro level, readers in São Paulo may have noticed the gastronomic "Little Japan" in the Paraíso neighborhood, the gastronomic "Little China" in the South Zone, and the increasing presence of Korean restaurants outside of historic immigrant neighborhoods and into the most upscale culinary districts.

On a macro level, the tourism volume and the growing aspirational nature of these Asian destinations mean more cultural exchange. As has happened at other times in history, it's safe to expect that these exchanges will increasingly influence our business models, strategies, and ways of seeing the world. Just as our old Brazilian friend installment plans exploded in the developed world as Buy Now Pay Later, things established in these countries have a greater chance of being successfully appropriated by brands elsewhere - blind boxes are a great example. If you want help thinking about how these things affect your business, just say hi.

Thank you very much for reading to the end, and until the next edition!