Q&A: GiG on the challenge of rejuvenating a fragmented online betting business

Gaming Innovation Group (GiG) became an industry trendsetter several years ago when it combined its managed trading services with a bulging portfolio of B2C brands under a single umbrella to invent the one-stop-shop of online gambling.

This operating model was copied far and wide as egaming companies sought to diversify their revenues, but a substantial increase in regulation on a global scale meant the trend was short-lived. Many businesses that switched to said one-stop-shop model suffered greatly as a result – think Nektan and River iGaming – but GiG realised before most that the time had come to evolve or die.

Chief operating officer Richard Brown was promoted to CEO to replace Robin Reed in September 2019 and wasted no time at all in initiating a comprehensive strategic review of the business, which is still ongoing. Brown – credited for the strong performance of GiG Media and its affiliate arm in his prior role – inherited a complex and fragmented business, albeit with strong proprietary technology and a talented team of employees.

Eventually, the supplier’s B2C segment was identified as surplus to requirements and brands, including Rizk, Guts and Kaboo, were offloaded to Betsson for €33m in April 2020. This left GiG to focus solely on B2B, or software as a service (SaaS), as Brown calls it.

Below, he talks candidly with EGR Intel about further streamlining of the sports department and settling in as CEO.

EGR Intel: GiG was a fragmented business when you took over. Has it been streamlined as a result of the strategic review?

Richard Brown (RB): Very much so. Although if you look back historically, one of GiG’s powers was that it was built up of very different parts of a business. But as the industry has changed over the past couple of years, the requirements to excel in one particular area require full focus. At one point, a couple of years ago at least, I would say that having a B2B and B2C were very complimentary of each other. However, over the past 12 to 18 months, they almost became counterproductive, because there is difficulty in prioritising, and capital allocation issues arise about where to invest. It became that little bit harder to manage.

EGR Intel: Why choose to focus solely on B2B?

RB: I think we have a very high-quality platform and a business where I see some significant traction over the long term, supplemented by a strong media business. I felt going into further regulation in some of our core B2C markets that the marketing levels required to compete and grow that business were probably very difficult for us to achieve at the same time as running a B2B, so there was real strength in removing that area of complexity.

EGR Intel: Did the restructure also allow GiG to reduce its debt position?

RB: The other part of the strategic review was to address the balance sheet. Being able to pay off the best part of €30m worth of debt out of the B2C sale puts the company in a very sustainable and healthy balance sheet position.

EGR Intel: You mentioned the sale of B2C assets to Betsson. What is the key generator of value in the new-look GiG business?

RB: I don’t necessarily want to fragment them, but I think it is the platform services and the media services. As an actual B2B offering, having both is beneficial, even if you don’t necessarily associate synergies between the two different verticals. From a business structure point of view, you have some divisions that are in separate life cycles, which enables any kind of downturn in one to be offset or subsequently improved by the other. The GiG media services department is highly cash generative, which all businesses would appreciate, but there is no jewel in the crown as both are very valuable assets within the company.

EGR Intel: GiG is intending to reduce its headcount to 430 by the end of 2020. Does that include those employees joining Betsson and in which other areas will you cut down?

RB: We’ve been working through this for quite a long time now. Currently we are at 500 employees and, yes, that number does include the staff who transferred over to Betsson. We will continue to look at the whole organisation to streamline. We are placing a focus on sportsbook operating expenses, and we have already rolled out a restructuring in that division, which will also impact headcount.

EGR Intel: What does the sportsbook division at GiG look like right now?

RB: It is still a full end-to-end solution in terms of the sportsbook platform. The bit we have reduced focus on and moved out was the proprietary odds that were being built up by the pricing teams in Norway. We still have dialogue ongoing with potential partners in that section, but it feels at this stage that that area is no longer seen as essential to the sports platform offering. I also think having proprietary odds was an important strategy when we had a B2C sportsbook, because it meant that we could leverage the proprietary prices versus having to spend on marketing. Now we don’t have B2C, that part of the sportsbook offering is not required in the same way.

EGR Intel: Is GiG still committed to sports betting as a business sector?

RB: Yes. I think these actions have been taken for us to maintain a strategic position and be committed to having a sportsbook offering within GiG. There is no getting away from the fact that it was a large investment project, and in order to retain it we needed to reduce the cost base significantly, to get it back into a sustainable position from which it could grow again. I think these actions will lead to that growth again, but we need to get that cost base down.

EGR Intel: GiG is eyeing €400,000 in monthly cost savings from its sports department. Will that be achieved by the measures discussed previously?

RB: Yes, and we have also looked at some of the staff in development. Last year and into the first quarter, we initiated a project to migrate the technical infrastructure, which should lead to significant savings within sports as well as on the core platform as we switch from a cloud-based structure to a hybrid structure.

EGR Intel: Who will manage the new-look sports division?

RB: We have a strong sportsbook management team with Stuart Weston, formerly of William Hill and Scientific Games.

EGR Intel: The B2C sale to Betsson will help improve the debt position but what else does GiG stand to gain from that transaction in the long term?

RB: They have committed to being on the platform for a minimum of 30 months. We have a good structure in our SaaS deal with them and they are a tier-one operator. It will not only help us improve our own offering, but we have a substantial client there, who we believe can help to grow the business. They run an incredibly successful operation themselves. They have a larger marketing budget than GiG had, which will also help to grow those brands and that will be beneficial for us as well.

EGR Intel: GiG has not made a huge impact in the US, despite deals with Hard Rock in New Jersey and Iowa. Are you still confident of delivering an ROI there?

RB: That’s not exactly how I would see it. If you were to look at any of the first movers, which we were for online, it came with a huge investment regardless of whether you are B2B or B2C, and we’re no different. I’m extremely proud of the position that we have, being live in two different states with both the platform and the sportsbook offering. I think that’s a great achievement for a company such as GiG, but the US is a long, long play. You can see that from the bottom line of any business that is active there. It is a large investment case and the potential will take years to come to fruition.

EGR Intel: Where does the US fit in with GiG’s growth strategy?

RB: I think our tech stack is well suited to deployment in multiple states. So that’s a benefit given the structure of how things will roll out and we have a lot of beneficial relationships in the US, but it will take time to come to fruition and for new opportunities to come in. I also think that for us as a company, we are looking at a lot of growth potential in emerging markets in countries that are starting to transition online, especially with a lot of land-based operators waiting for regulation to trigger the online exposure and expansion they will get. We are well positioned in a multitude of markets.

EGR Intel: Will joint ventures be GiG’s chosen method as and when things return to normal?

RB: That remains open. We will investigate joint ventures in sports but will also look at a pure software as a service structure as well. It will depend on the regulatory environment.

EGR Intel: A final question – are you enjoying being chief executive?

RB: I am very much enjoying it. It is a consistent challenge and we have had a very transformative six months since I took over in November. There is never a dull moment, but I truly believe in GiG, in what it stands for as a company and in the people working for it. It is a joy to work with them.