Kambi champions “third-generation” trading as key to a “limitless sportsbook”

Kambi has revealed that it will shift its product strategy to what it describes as “third-generation” trading in a move that could see its trading team numbers reduced.

As explained during the firm’s Capital Markets Day, Kambi COO Erik Lögdberg spoke about how the supplier will now be taking an algorithmic approach to achieve its lofty revenue targets set for 2027, which are estimated to be between €324.8m and €487.2m (£285.26m-£427.9m) based on the firm’s first nine months of 2022.

Lögdberg said that most sports betting suppliers are currently in what he called “generation two”, where humans drive algorithms.

Lögdberg explained: “It is a pretty advanced system. You will have algorithms in that set up that have been evolved and optimised for 10 years. But the thing is, the human is still somewhat at the centre. The human oversees all the information flow and the human essentially drives the algorithm with a set of parameters that the human can understand.

“But what happens when the product gets more and more complex? What do you do with that? And this bubble of information explodes and it becomes impossible for the human to process this,” he added.

Lögdberg noted that that because the amount of data available is ever-increasing, it was time to allow the algorithm to play a bigger role.

He said: “We have to change the process; it cannot continue around the human. We have to build the process around the algorithm itself. If we build it around the algorithm, we can make it literally millions of times bigger than what we work with now. With today’s computing power, there is almost no limitation to what we can do.

“And what we do is we bring in the human right at the end for the questions the algorithm can’t answer. If we can use that bubble of information that is a million times bigger, we can deliver on our trading goals far better.

“When we do that, we can take away all those boundaries for the end users on what you can bet on and how you can bet; moving towards a limitless sportsbook,” he added.

Kambi CFO David Kenyon confirmed that this change in strategy would increase short-term costs but, in the long run, will lead to lower spending by 2027.

Kenyon commented: “There will be a 2023 ramp-up in costs, but ultimately we think we will make savings in the long run as we reduce the resources needed in trading.

“In algo trading, there will be a growth in costs in 2023, but ultimately the costs in that part of the business will be more than offset by the savings we can realise,” Kenyon added.

This change of approach could lead to a decline in staff members in the trading department. CEO Kristian Nylén addressed this, stating: “I think the message was quite clear. We believe there are cost efficiencies to be done in the future.

“We do all our pricing with what is relatively quite a large number of people. And we expect that number to be lower in the future.”

Alongside this change in trading approach, Kambi is banking on new markets becoming regulated in the next five years to hit its financial targets.

These include Brazil, Texas, California and either India or Japan. Kenyon said: “We need to be able to launch in one big regulated market in Asia before 2027. Either Japan or India, or hopefully both of them.”

Kambi has already taken steps to move into Brazil. In December, it signed a partnership with daily fantasy sports operator Rei Do Pitaco to help launch a real-money sportsbook in the country.