Analysis: A closer look at Ladbrokes Exchange
Following its launch, eGR takes an in-depth look at Ladbrokes' eagerly anticipated exchange product
Ladbrokes’ acquisition of Betdaq earlier this year rose more than a few eyebrows at the time, with CEO Richard Glynn’s acquisition strategy the subject of criticism by some of its rivals. Nine months later and the operator has become the first mainstream fixed-odds bookmaker to challenge Betfair’s grip on the exchange market and we’re about to find out who was right.
The UK bookmaker is ahead of schedule. “When we were estimating when we thought we’d be able to get across the line, we were factoring in normal workloads, the interactivity of the businesses within Ladbrokes, when actually it’s proven to be simpler than that,” Lewis Findlay, managing director at Betdaq, told eGaming Review. The exchange was forecast to launch in Q1 2014, but the project has been expedited since a major upgrade “ which Ladbrokes are keen to keep under wraps for now “ was put on ice to allow for an early launch.
Ladbrokes, Findlay said, had been flirting with the idea of entering the exchange space for years before purchasing Betdaq. Seeing it almost as a separate vertical in its own right, the operator treated it how its rivals adopted poker products, the difference being that betting exchanges are comprehensively more difficult to obtain. “When someone went and got a poker provider, we all went and got a poker provider. How do you go about getting an exchange? It’s not that straightforward,” Findlay added.
Pushing innovation
“Just delivering a Betdaq product wouldn’t have been enough,” Findlay said, considering competing with Betfair to be an unavoidable side effect of such a product launch. A Ladbrokes-themed exchange targeted at the more recreational punter stands far more of a chance of grappling market share away from Betfair than one bearing the Betdaq moniker.
Prices and commission rates are being prepared as such. Ladbrokes Exchange will initially come in at the standard commission rate of 5%, with customers having the ability to earn down to 2% with points. The operator has also ruled out premium charges, stating them to “run in the face of everything we believe in.”
“People come down this long journey of learning how to bet on sport and learning how to bet on exchanges, they then get good at it, and then you tax them 60%. It’s not in either of our worlds,” Findlay said.
The key advantage for Ladbrokes lies in the product’s push-price technology, which automatically updates the various prices a market can attract in the run-up to kick-off. “It doesn’t make it more difficult to make a bet, it just provides you with more information,” Finlay adds, likening the effect to fairy lights on a Christmas tree.
The rate at which prices update is delivered at real-speed, but fully customisable. Bettors can slow the rate down if it’s too confusing or distracting, while rates automatically slow if the network recognises access to be from a mobile network to preserve data consumption. The technology is unique to the Ladbrokes Exchange, offering a crucial point of differentiation.
Toppling the monopoly
Ladbrokes also holds an advantage over Betfair in that it will not maintain the level of costs that its rival does. Betdaq will continue to serve as the hub of the exchange, with no further administration costs required unless the company chose to ramp-up its marketing expenses. The operator could, if it wanted to, cut out commission and use the exchange purely as a client acquisition tool, although such a notion is not currently on Ladbrokes’ agenda.
The exchange technology is to be operated by a company in Ireland kept separate from both Ladbrokes and Betdaq. This decision has been made to maintain the exchange’s integrity, a key point that arose during Ladbrokes’ market research. “Yes marketing will be able to know what customers are doing, but in terms of London trading and the exchange, there’ll be a Chinese wall between those two,” Findlay said.
The company also remains bullish over the threat of cannibalisation, a fear referenced repeatedly after it acquired Betdaq. People losing money to the exchange, rather than Ladbrokes itself, is going to occur to some extent, but Findlay is quick to refer to the fact that if 30% of its customer base is using an exchange product elsewhere, then 70% is not.
Those expectant of a glamorous marketing campaign for the exchange will be disappointed. Ladbrokes’ promotional activity so far comprises a single advert uploaded to YouTube, with the operator insisting not much further will occur this year. For now, Ladbrokes remains focused on launching the exchange and working towards developing it early next year with features it decoupled from today’s launch.
“Right now it’s a 9/10 experience. We’ll be looking to add an extra half a mark in Q1 2014,” Findlay said.