Ladbrokes to focus on UK and Spanish markets
eGaming Review speaks to digital MD Jim Mullen about the firm's international ambitions and PoC preparations
Ladbrokes is unlikely to enter any new markets in the near future as the operator continues to prepare for the onset of December’s Point of Consumption tax, according to its digital MD Jim Mullen.
Speaking to eGaming Review yesterday after the operator’s H1 2014 results Mullen, who joined the firm in October last year to help lead the overhaul of its digital business, outlined how the firm’s current international businesses in Australia, Belgium and Spain will be given every chance to deliver growth.
Other operators have sought to spread their nets as far and wide as possible in an attempt to gain scale ahead of the new taxation regime and, with a number of international markets such as Italy, the Netherlands and even South Africa attracting strong interest from the likes of Unibet, bet365 and Betsson.
But Mullen has ruled out entering other markets, at least for the time being. “We review everything on an ongoing basis but we’re really on focused on the markets we’re currently operating in to make sure they get the focus they deserve,” he said.
Latin ambitions
The only other market Ladbrokes looks set to enter is Mexico. Sportium “Ladbrokes Spain-facing joint venture with Cirsa “ has a presence in the country and the firm first revealed plans to launch an online offering there in August last year.
Ladbrokes initially hoped to be live prior to this summer’s World Cup, however regulatory issues caused delays and while the new NFL season “ a huge draw for Mexican punters “ would also act as a good lead-off point for the firm, a launch date has yet to be set.
Since Sportium was launched online in Spain last year Ladbrokes has looked to build on its land-based success in digital. It stepped up marketing spend in the country during the World Cup as part of a “significant” campaign, recruiting former Spanish international footballer Jose Antonio Camacho as a brand ambassador.
Ladbrokes’ Belgium-facing business was also launched online in H1 but, unlike in Spain, continues to use the Ladbrokes brand. While Ladbrokes has forecast a loss of between £2m and £3m for the two markets combined during H2 as efforts in the countries are increased “ there is every expectation they will make a positive contribution in the medium term.
On top down under
The operator has even higher hopes for Australia. The firm’s entry into the notoriously competitive market in September with its acquisition of Bookmaker.com.au last year came as no surprise, but its second acquisition “ April’s purchase of Betstar for AU$20m “ made the market sit up and take notice.
Having spent circa £25m on its market entry to date, the Australian business has beaten expectations and is already a material contributor towards the firm’s revenues. Ladbrokes.com.au amounted to 16% of stakes and 14% of revenue for the firm’s total Q2 digital performance.
Mullen says the firm has been encouraged by the initial success of the business and attributes it to the team down there. “It’s run by a team there who have a strong affiliate network and experience,” he said. “They understand the digital business, they understand customer lifetime values, they understand how to deliver yield on marketing spend and I think those fundamental basics are why we’re seeing those signs in Australia.”
Whether or not Ladbrokes can continue to grow and challenge other UK firms in the country “ William Hill especially “ remains to be seen. This year’s Spring Carnival “ Australia’s foremost horseracing event “ will be a true test of the operator’s capabilities in a market even the likes of Betfair and bet365 have found difficult to get to grips with.
A storm back home
Back in the UK, things are looking less rosy. A new licensing and taxation regime set to come in later this year looks set to cause further disruption to a business still finding its feet after the migration to Playtech’s software suite. Ladbrokes’ digital profit of £3m for the first half of the year would’ve been wiped out if the Point of Consumption tax regime was in place for this year, with CFO Ian Bull saying yesterday it would’ve taken approximately £11m off the firm’s bottom line.
Yesterday’s announcement that Ladbrokes is to withdraw from a number of grey markets is likely to have little impact on the business “ Bull suggested around £2m would be wiped from H2 EBIT with almost 90% of traffic Ladbrokes.com traffic originating from the UK “ but it again places emphasis on the need for Ladbrokes to get its PoC preparations right.
Mullen says instead of scrimping on supplier negotiations and partner management, what he refers to as the “bread and butter of managing Point of Consumption”, Ladbrokes will instead gain ground on their rivals through a better return on investment in marketing and CRM.
“The real benefit of delivering a growing and sustainable business in a Point of Consumption world is the ability to increase your retention rates, lower your CPAs and ensure your product converts,” he said. “That’s the key to managing PoC and if you get those right you’re in a position to compete. This is where we see we have a key advantage against our competitors.”
Having ridden the storm of a software migration that caused more upheaval than its management first anticipated, Ladbrokes believes it has positioned itself as best possible to compete. The operator is hedging its bets on a small yet carefully considered international approach and is backing its brand recognition to help it beat its rivals in a post-PoC landscape where retention will be king. Only time will tell if it has made the right choices.