Ahead of the game: The future of online sports betting

For the first time in years, sports betting is at risk of becoming the ugly duckling of the UK online gambling industry. In Q3 2017, online sports betting revenues grew at half the rate of online gaming, at a meagre 4.9%, according to analyst firm Eilers & Krejcik Gaming. Of course the absence of a major tournament has much to do with it, but there is also talk of a structural stagnation within the sector.

“The last large innovations in sports betting were two or three years ago around mobile betting,” says Marc Thomas, a veteran of William Hill and Betfair, and now a consultant at Propus Partners. “Most top-10 or even top-50 UK sportsbooks are mostly offering the same product and doing the same thing. Some have looked at how in-play is presented, and the request-a-bet stuff is flavour of the month, but you could put all of these things down to window dressing. If you look at the evolution of gaming in the last year, it’s come on leaps and bounds whereas sports betting is stuck in the mud.”

Indeed, the lack of innovation seems to have crept up on the industry. Back around the time of the original mobile betting explosion in 2014/15, companies were more willing to take a punt. BetVictor had its in-house-built, push-driven Instabet app, Paddy Power created the WhatsApp-esque Paddy Power Messenger app, while William Hill offered slots-style Shake-A-Bet. More recently, Unibet rolled out its live pool betting game Bet Up before shelving it early this year.

And the shelf is where most of these innovations remain. In the last few years, the focus has instead been around perfecting functionality, with small incremental enhancements to speed and UX, rather than any major leaps forward. Erik Backlund, head of sportsbook at Kindred Group, argues that the big firms have been tied up with “regulatory requirements, speed, automation and feeds-integrations,” in trying to optimise sportsbooks for mobile.

And it’s also true that the big beasts have been tied up with major tech projects this year, with the likes of Paddy Power Betfair and Ladbrokes Coral admitting their product pipeline is behind where it should and probably ought to be.

Fatally flawed

However there is a creeping faction of the industry arguing the lag in innovation isn’t just a temporary blip, but rather, it has become a structural issue. Andreas Bardun, the ex-head of sports at LeoVegas, recently accused the industry of complacency, arguing firms were simply tweaking their desktop product for mobile when they should be reimagining the mobile sportsbook completely.

“Some of the big companies are making a lot of money but they don’t dare risk it all,” Bardun told EGR.

Meanwhile, Johnny Robb, co-founder of start-up app Bet Blocks and former William Hill engineer, says the industry is stuck in a “classic innovator’s dilemma”. “The incumbents have these large user bases and they can’t rock the boat; they are beholden to these users,” Robb argues. “They’re at the top of this innovation S curve where they’re making minor incremental changes and anything more than that, they risk alienating their user base. In this competitive market, you can’t afford to lose ground, so they don’t risk it.”

The major change in sports betting will be the socialisation of the activity: Credit: iStock

Robb says the next game-changing product for sports betting is much more likely to come from a start-up, which doesn’t have the same restrictions in terms of customers, shareholders and profit targets.

“Over time start-ups could work on things that may take this industry by surprise,” he says. “If you look at start-ups who go on to disrupt industries, no-one takes them seriously at the start. They don’t have funding, the product is buggy or in development but over time they might acquire new types of users or encourage new types of behaviour and the product can hit a critical mass where it actually becomes good and then gets honed with each new iteration. If a start-up survives long enough, they could create a new way of betting, a new type of market, or something that can take the industry by surprise.”

But Robb is perhaps dismissed as a dreamer by sportsbook executives. Of course the start-up entrepreneur would say start-ups are the way to improve the sportsbook experience. What is less easily dismissed however is Sky Bet, the seventh largest online operator in the world, according to the EGR Power 50, and a firm which saw sports betting revenues rise 46% year-on-year to £314m in the year to 30 June 2017. Despite those lofty figures, and a string of recent innovations including instant withdrawals and fingerprint log-in, Sky Bet recently turned to start-ups in search of further development.

The unlikely disruptor

Back in September, Sky Bet launched a new collaborative programme, offering start-ups and small businesses an opportunity to work with the operator. In short, the firm asked start-ups to pitch ideas and products that Sky Bet could help fund and develop. Specifically, the bookie said it was keen to invest in less-tested areas, including voice recognition, new user interface technologies and free-to-play products.

“The project is one strand of us asking ‘are we being disruptive enough?’” says Paul McCormick, the sports betting technology director at Sky Betting & Gaming. “I think most of the innovation we do within the squads is what I would call sustained innovation. It’s not necessarily looking for a brand new device we’ve never thought of. The team are looking for disruptive innovation.”

As one industry executive put it to EGR recently: “If Sky Bet is doing something, I just assume it’s the right thing to do. I don’t even question it anymore.” And if Sky Bet is looking for the next game-changer, everybody else had better get their thinking hats on sharpish.

So what can change the game, disrupt the industry and mark the next generation of sports betting? For Bardun, the first step is layout. He advocates stripping away the pages and pages of derivative markets which clutter a mobile screen, in favour of the half dozen or-so markets which generate 95% of the turnover. “A lot of companies are not brave enough because they feel they might be missing out, but I think you will gain by removing stuff,” he says. “I have to rely on Google sometimes to find markets and then I may end up at a competitor’s site. That is absolutely stupid. Why are sportsbooks so darn bad at search?”

William Hill’s online MD Crispin Nieboer also sees speed and simplicity as the way forward, suggesting that new features are “interesting” but ultimately just “talking points”.

“The big trend is going to be around personalisation but that is fundamentally linked to speed and performance,” he says. “The only reason Amazon and Google personalise is to make your experience faster and easier. People get hung up about personalisation but speed is really what it’s all about.”

Social climber

For Robb, the major change in sports betting will be the socialisation of the activity. It’s not a straightforward task of course – operators and affiliates have been trying for years without much success, but the upsides are obvious, with organic customer acquisition, better engagement and free word-of-mouth marketing. “Traditionally, betting is something you did on your own, but that’s now an outdated mind-set,” he says.

“The majority of operators are managed by baby boomers and Gen Xers, but the millennials and Generation Z who are using these products now have radically different mind-sets towards betting. They are so much more accustomed to sharing. My mother would never take a selfie, and I rarely would, but a 21-year-old has no shame in doing it. They share everything, and they’re sharing their bets in private conversations already.”

That assumption is the driving force behind Robb’s Bet Blocks application, dubbed the WhatsApp of betting. In short, the messenger app recognises key betting terminology in group chats such as players or teams, and links the message to betting markets. If a group is discussing whether Lukaku is likely to score, for instance, that message is turned directly into a link to the market.

BetVictor’s head of sportsbook product Eoin Ryan agrees that sharing is indeed caring. “No-one’s cracked it yet, but I think the focus will be on building features and functionality that make it possible for customers to share their betting successes and achievements within their private social groups,” he says.

He adds: “These tend to be chat groups on WhatsApp and Facebook Messenger and if you can become a relevant voice in these discussions, it’s very powerful as there is a sense of recommendation from peer-to-peer.”

Wisdom of the crowd

Indeed, Bet Blocks is far from the only innovation on the market trying to “socialise” sports betting. Sky Bet and Paddy Power, for instance, have been experimenting with crowd-powered bets, where the more customers get on, the bigger the price gets. It’s the type of risk only a major operator can afford to shoulder but it also demonstrates the power that social media can have in generating some free marketing for sportsbooks.

“Sky Bet’s Crowd-Boosted Accumulator product is interesting because it harnesses the power of ‘social’ but in a way where every single participant can feel the benefit,” Ryan adds.

Another firm that can arguably claim to have cracked the social code is Colossus Bets with its Syndicates product which lets players club together to fund a bet into the operator’s jackpot pools. The product is designed to let punters get a greater number of tickets into jackpot tournaments, boosting engagement as more entries stay alive throughout a sporting event. Colossus also included a variety of social elements in the product, allowing syndicates to vote on when to cash out, for example.

And according to the firm, its engagement levels are through the roof, with 32,561 Syndicates launched from players in 96 territories across 21 network partners since launch in January 2017. Crucially, Colossus Bets has seen a 104% increase in 12 weeks in retention of players on its own B2C site. There indeed appears to be some material upside for operators to tap into the social space. As Robb puts it: “I don’t see how the status quo is going to suit the next generations, and it’s going to need to become more social and less isolating.”

Firms could also be well suited to learn from the aforementioned gaming vertical, which is busy stealing customers with social techniques. In the last year, small independent gaming operators have been grabbing market share thanks to improvement around the meta-game, adding in achievements, missions and various other social features to keep players engaged.

Ryan admits sports betting operators have perhaps ignored this area to their detriment, adding: “With social becoming increasingly important, I believe we will start to see more gamified product development initiatives being rolled out.”

Get personal

One area where change could be coming sooner rather than later is personalisation. As Propus Partners’ Thomas puts it: “Operators, myself included, have been banging on about personalisation since the turn of the decade, but we’re still not that far along.” Indeed, sportsbooks have fallen behind the rest of the ecommerce world in this area. Netflix, for instance, famously ran a competition, offering $1m to any developers who could improve the algorithm behind its recommendation engine, while 35% of all Amazon sales are estimated to be generated via the recommendation engine. What sportsbook wouldn’t take a 35% boost in turnover?

“Personalisation is something that the industry has been talking about for a few years now, but in truth, we’ve yet to see any major inroads there,” says Ryan. “I do think that it is coming though, and that with technological advances in areas like AI and machine learning we will start to see some deeply personalised product development over the next 12-24 months.”

Indeed, sportsbook provider Betgenius hails personalisation as the “next major driver of success in the sector, driving engagement and revenues while also allowing challenger brands to make an impact in what is always an incredibly competitive marketplace”.

The often cited example is pinging football fans when their team is about to play and offering them a bet. However the opportunities could go much deeper. Betgenius says the fundamental change will be the reduced reliance on a broad-brush approach to CRM. Instead, the provider aims to combine factors like a customer’s preferred sports and market types, along with their location, betting and transaction history, moving the entire interaction onto an individual level.

“The days of traditional segmentation are numbered,” says Betgenius MD Matt Stephenson. “Modern sportsbooks have to think like technology companies and by combining the rich data sets from the core parts of our business – trading and digital marketing – we can serve up highly tailored communications in real time, with minimal manual intervention.

“This could be letting a customer know one of their favourite horses has hit a price we know they will be interested in, or it could be offering them a personalised price boost as they consider their betslip to drive engagement if they look like they are about to lapse.”

The now ubiquitous request-a-bets already demonstrate the appetite among consumers for a personalised bet, and while these markets are arguably one of the most innovative things to emerge from the industry in the last year or two, there is still more room for improvement.

Thomas from Propus suggests an operator will soon come up with an “open sandbox” for customers to create truly any bet they want on a given contest. “Why can’t a customer select this person to score in this minute, this person to score next and be yellow-carded, and for this to be the final score?,” Thomas asks.

“We have the technology to price this and automate it in theory. Everyone wants good news stories and if you get people predicting a match from start to finish and making hundreds of thousands from a pound, that’s great for everyone,” he adds.

Step back to move forward

However, all this talk of automation, machine learning and artificial intelligence is arguably putting the cart before the horse. Matthew Howard, former head of sportsbook at BetConstuct and current consultant, says one easy way to steal a march on the increasingly crowded field, is a return to the rather outdated notion of running your own book.

“We’ve all seen the rise of the turnkey solution and it’s been wonderful in that everyone can get into the market at a very low price point. But the top two providers alone must be running 200 operators at least and 90% of what they offer will be identical,” he says. “There are published drop off rates of over 60% for sportsbooks in the first 16 months and that’s because no-one is giving the customer reasons to bet with them beyond having a different logo.”

Howard points to a firm like Black Type Bet, which is attempting this old school model, running its own book on horseracing and football, with the less popular sports and markets provided by FSB. “If you don’t understand how to make a book and are using a pooled solution, you have very little control and your margins will suffer because of that,” Howard says. “But if you have real traders and risk managers, you can say: ‘This weekend, we want to take on Man Utd’. Then you can get your marketing team telling all your customers you are best price on United and blasting that out on email and social media. That helps get new customers and retain existing ones. You can also offer some very interesting unique markets rather than the 200 derivatives no-one is looking at.

“The demand from the punters is there,” Howard adds. “The industry has spent fortunes on marketing, machine learning, virtual reality and AI. Everyone has moved away from actually looking at managing your odds and managing risk. It seems like madness to me.” The demand for punters is indeed there. It’s hard to go on Twitter these days without a shrewdie bleating about restrictions and the current state of bookmaking.

Demand and supply

What’s crucial here is that there is much less trading talent and experience available than there used to be. Operators considering this kind of step will be watching closely the experience of Black Type, which appears somewhat encouraging so far. The firm attracted the second-most click-throughs on outright World Cup betting via Oddschecker in the week after the draw. Only bet365 attracted more clicks than Black Type, whose success was driven largely by its stand-out price on Brazil, offered at 8/1 compared to a market price of 11/2.

But it would be wrong to say it’s been all plain sailing for the firm. It’s marketing on launch in 2016 centred on its pledge to lay all bets up to £500 on major markets and not restrict customers. Those promises have quietly been dropped and certain customers have indeed been restricted.

It was arguably optimistic for the firm to make those pledges, especially focused, as it is, on horseracing, which is rife with inside information and cannot be effectively modelled. It might be a more feasible model for a football-focused firm, which is the theory behind Mustardbet, which re-launched in the UK as a football sportsbook in November, promising “tight margins, no account closures and re-betting just like on Pinnacle”. Its progress will also be watched closely by these calling for a return to old fashioned bookmaking principles.

Ultimately, opinions on what the next generation of sports betting looks like run the gamut. There are those like Robb who suggest the current model should be blown up in favour of a more social, intuitive product. There are those like Bardun and Nieboer who favour speed and simplicity over the race to add more gadgets and products. And there are those who suggest the product itself may not need to change, but the way of running a sportsbook is in need of a revolution, with real trading and risk management re-installed over off-the-shelf solutions.