The reinvention of William Hill

Schadenfreude is rarely in short supply in the egaming sector, so it was no surprise to see analysts and commentators quick to put the boot into William Hill following its recent trading update. An 11% fall in online revenues, with sportsbook down 17% and gaming down 4% saw one analyst commenting the ?¬?rm had “dramatically lost its way online”.

For a market leader to stutter is forgivable, but the speed with which the bad news came forth from Wood Green against a backdrop of an otherwise healthy-looking sector meant sympathy was in short supply. In comparison, Paddy Power Betfair reported a 17% rise in online revenue for Q1 2016 with a 17% rise in both sportsbook and gaming revenue. And Sky Bet is believed to be growing at a rate close to 40% in the period.

The May trading update was adding injury to insult, after the ?¬?rm announced in March it anticipated a ?20-25m hit to online pro?¬?ts based on a huge increase in the number of self-exclusions as a result of new responsible gambling controls on the site. The rest of the industry responded with a confused shrug of the shoulders at this news, suggesting this was more a problem unique to Hills’ prior acquisition strategy than any industry-wide trend.

It all points to a picture of some deeper troubles at William Hill than a short-term revenue dip. “Everything suggests that internally things are going badly wrong, and the operating environment is ?¬?ercely competitive and full of operators doing a lot of things right,” one analyst speaking o?¬? the record said. “And there is no evidence things are improving, marketing campaigns have been poor and the app is still struggling to regain its previous dominance.”

But if you look closely there are signs of an arguably stronger ?¬?rm emerging the other side of this very public mess.

Mobile-first

It’s not hard to retrospectively understand why William Hill has begun to go backwards. At the core of any market-leading egaming business is strong acquisition marketing, intelligent retention and a strong product. A successful one has at least two of these in place. Going into the start of the year, it didn’t seem apparent William Hill had any of them ?¬?ring on all cylinders.

The ?¬?rst sign of trouble came in October last year. The drop in sportsbook revenue is explicable bearing in mind the car-crash app relaunch in late-2015 on the new Project Trafalgar front-end platform. While the app has been massively improved since its debut in October that saw ratings slide to 1/5, it’s still arguably not up to the same level of its peers in terms of UX.

It’s hard to overestimate the impact a poor mobile product can have in the current sportsbook market. And it’s plainly apparent that those operators showing strong growth in sports betting are doing it all on mobile. Paddy Power Betfair said 76% of its sportsbook revenue was through mobile in Q1 and Sky Bet is believed to be at a similar level.

Hills is believed to be operating at similar levels, but its product is not quite hitting the same heights as some. A strong mobile product is absolutely vital to capture as much incremental revenue as possible from a hugely ?¬?ckle customer base. And any customers lost through this will be hard to win back in the short term. When it comes to mobile it’s very hard to recover from a bad first impression.

Sportsbook clearly has a knock-on impact on gaming too, with cross-sell a hugely important part of any operator’s acquisition. The fewer players you have in the sportsbook, and the less active they are, the fewer you can sell into your gaming products. And it’s notable the most recent sportsbook app update places casino very much front and centre on the homepage. The time for subtlety it appears may have passed.

Gaming’s troubles also seem more isolated to the Playtech-powered Casino brand too, with the in-house Vegas platform posting growth in Q1. Partly this discrepancy was due to the Casino brand being more exposed to grey market withdrawals, but it’s also a case that Hills is pushing far less cross-sell traffic to its Playtech brands.

With the supplier giant focused on the revival at Ladbrokes and Gala Coral it’s not a huge surprise to see it continuing to fall out of favour at William Hill. And one source said it was focusing cross-sell on “those areas where we have a steady flow of new product and at the moment that is mostly non Playtech verticals”. The recent acquisition of a stake in NYX is also likely to accelerate a move away from a reliance on Playtech ??? it’s notable both bet365 and Paddy Power are still tightly wedded to when it comes to casino.

But arguably to focus too closely on these issues misses the bigger point. From speaking to sources both inside and outside of William Hill, there is a sense that more significant issues than the user experience on an iOS app and a supplier shift are at play here. And in a sense what’s being very publically played out is a battle for William Hill’s future.

Culture clash

What seems unquestionable is the shift from old CEO Ralph Topping to new CEO James Henderson, which many at that time thought was the passing of the torch to a like-minded executive, has heralded something of a sea change. One source suggested Henderson was more focused on systems and processes than his predecessor and is more focused on technology and infrastructure as a driver of future growth.

Speaking to executives at William Hill what comes across most clearly is behind the scenes a major transformation is underway. A business described by one Gibraltar-based source at a rival operator as “addicted to outsourcing” is trying to take control of its future destiny when it comes to tech. And it’s not coming without some pain, not least the loss of some highly-rated executives, who were at the heart of Hills’ golden years under Ralph Topping.

Jamie Hart, the architect of Project Trafalgar, was one of the last to leave following sportsbook director Matt Warner and highly-rated online MD Andrew Lee out of the door, with several sources suggesting the latter was more to do with a clash of cultures than anything to do with Trafalgar’s troubled roll-out. Another big name departure that’s been pointed to was CTO Finbarr Joy, although EGR understands that was simply Joy wishing to move to a di?¬?erent sector and unrelated to any wider changes.

But the loss of several big names has been put forward as a factor in the recent decline, and led to The Times pointing to a “brain drain” from the operator. Henderson has responded with a number of senior hires including Kevin O’Connor as CIO, Crispin Nieboer as online MD and the recent additions of ex-Betsson man Cem Miralay as “director of change” and Simon Rust as CTO.

This new-look team is tasked with reinventing William Hill as a technology-focused betting company. EGR understands there are likely to be more senior appointments before the year is out and there will be an increased focus on commercially focused executives who have “been at the coalface” of the online gambling industry. The incredible growth achieved during Ralph Topping’s tenure is a tough act to follow, but the sense is an entirely new William Hill is emerging from his shadow.

The impression gained from speaking to people close to William Hill is the ?¬?rm is moving from the “old William Hill way, to a new way of operating”. What worked in the early part of the decade is far from guaranteed to work in the next ?¬?ve years, although analysts will point to the revival at Ladbrokes Coral as proof that it might. But those are very di?¬?erent businesses at entirely di?¬?erent stages of their evolution. As one executive at Hills says: “That’s ?¬?ne for the next three years, but then what? What’s your growth plan then?”

Building blocks

So what is Hills’ growth plan? In the short-term it appears to be a mix of expanding into more grey market territories as well and a focus on improving the quality of its customer acquisition. But it’s not been met with open arms by analysts. Certainly the spectre of “volume to value” mentioned in the recent trading update analyst call would have caused a sharp intake of breath for anyone that has been following the bwin.party story over the years.

“I’d argue that a response to a revenue decline that includes an increase of grey market exposure and the dreaded ??˜volume to value’ switch doesn’t inspire great con?¬?dence in future direction,” one analyst said. But while at bwin.party that was a last gasp e?¬?ort from a business in seemingly terminal decline to turn things around, this could be more favourably viewed as a market leader attempting to increase marketing e?¬?ciency.

The question then becomes why was it not already doing so? The answer may surprise some casual observers. “We have some areas where we are good but there are some signi?¬?cant holes ??? and we are working to ?¬?ll them,” one source said. “Ultimately it is a result of under investment over a number of years which will take time to overcome.”

Hills is currently working to build out its data warehouse and investing in internal ?¬?rst party media and third-party media as well as automation with moves towards becoming a more modern data-led marketing operation. It’s also scaling up its CRM infrastructure to improve real-time CRM. It’s a large and ongoing job to build up these capabilities, and is the type of work the likes of Paddy Power took on some years back, but a source said it is making progress in a number of key areas.

The follow-up question is then obviously why is this only being done now? It’s not a commonly expressed view, but it’s arguable the current management team are ?¬?xing faults inherent in the system as opposed to issues of their own creation. Growth can hide a multitude of sins after all. “There is evidence of underinvestment during Topping’s reign in both infrastructure and CRM particularly with regards to data analysis. I’ve spoken to people at Hills who say they are still forced to run manual reports to assess the value of certain player types and their systems don’t talk to each other,” one well-placed source not at William Hill said.

Another source close to William Hill said there was a “need for investment” in both infrastructure and data analysis as these were two areas where it was focused on rectifying the deficit that had built up. “Historically there was a focus on adding more and more incremental products and markets, to drive up short term EBITDA, not worrying about the bigger technology picture, or underpinning with strong data warehousing and CRM. It will take time and investment to fix it but we are underway and focused on addressing it,” the source said.

Final countdown

Opinion remains divided on how long this turnaround will take and how e?¬?ective it will be. Sources at William Hill talk about “pain points” and a transitional period as it reinvents itself for the next decade, but not everyone is convinced this is a brief shock to the system. “Under the current management and infrastructure it’s hard to see how it can turn around, and even then it’s going to take several years,” one analyst speaking candidly o?¬? the record said.

There is a sense that things will get a little worse before they get a lot better, and the H1 results are unlikely to see the bunting out in the streets of Wood Green. The payback for investment in IT and cultural change is rarely immediate and it’s worth noting that Betfair’s revival under Breon Corcoran was not achieved overnight and certainly wasn’t without a lot of pain and some high pro?¬?le departures. If Nieboer and Henderson can pull o?¬? the transformation they are promising, however, we could be looking at a very di?¬?erent William Hill by this time next year.

Ultimately it comes down to the narrative you believe in. Is this a new management team making major changes and riding out a period of pain to set up Hills for the next few years of growth, or one failing to keep up with the pace of the sector? Only time will tell who is right, but we may have to wait a while to ?¬?nd out.