Taking back control: why online operators talk up proprietary technology

Taking back control isn’t just a slogan from the world of populist politics. In the business of betting and gaming, mission statements and strategic plans are littered with intimations that having a greater degree of autonomy in technology is a goal worth striving towards. The latest big names to strike a note of self-sufficiency are DraftKings and GVC, which both took the opportunity during recent trading updates to sing from a similar hymn sheet. For DraftKings, the drive towards owning its own tech has been a guiding principle given that the merger with sportsbook back-end supplier SBTech was the catalyst for the company’s Nasdaq float. In an analyst day presentation in March this year, the company talked about how, once it had transferred to the SBTech platform in Q3 2021, it would be “the only” vertically integrated online sportsbook in the US. During the more recent third-quarter earnings call, CEO Jason Robins said that once the migration took place, it would “create a sustainable and differentiated advantage for DraftKings”, including margin improvements. Also determined to differentiate, Robins’ counterpart at GVC, Shay Segev, suggested during a presentation announcing the company’s upcoming rebrand to Entain, that the “long-term winners in the US will be those with the best product and the best service and I think it will be us because of our technology”. He also claimed: “We have a strong position as a tech-driven business. One of our assets is our technology.”

Different drum

The analysts were sold. Ivor Jones at Peel Hunt said technology was GVC’s “most important asset”. “The commercial success of GVC’s technology is evident from the reported revenue growth,” he added. “Management discussed how having technology in-house gives the group a, perhaps underappreciated, structural cost advantage.” Jones’ counterpart at Morgan Stanley, Ed Young, said the group’s confidence in its “core technology capability and desire to be at the forefront of innovation” was reflected in its approach to new markets and new audiences. Meanwhile, Richard Stuber at Numis told clients that GVC’s technology was a “differentiator”. “GVC is a technology-first company,” he noted, pointing to the claim from GVC to have 3,000 full-time IT developers on staff and a “near-perfect record on integrations”. Such warm words are no surprise. Alongside the shareholders, the analysts are part of the gallery to which the listed firms are playing. The phrase ‘market-leading tech’ tells both audiences what they want to hear about companies being in control of their own destinies. But the truth is both more complicated and more interesting. “‘Proprietary technology platform’ is definitely something shareholders like to hear even if they are not sure [about] the extent of what it covers,” says Simon French, partner at consultancy Bixteth Partners and a long-time leisure and gaming analyst. “Online operators are so dependent on a multitude of different suppliers,” says Anthony Evans, VP of product strategy at Playtech. “There are software applications and third-party suppliers right across the business.” The wide array of products offered by GVC, for instance, encompassing sports, casino, poker and bingo across 20-plus brands points to what will be a hugely complex web of suppliers and vendors. “When people talk about owning the tech, they are generally talking about either the sportsbook or the wallet – that is what people centre their efforts on,” says Evans. “And yes, you can own the wallet. But to operate you need all sorts of systems to work with it; the payments providers, the fraud and risk, the marketing providers, all the front-end tools, the back-end platforms, the portals, the open-source tech, the hardware.”

We are the mods

The talk about control does have a direct relevancy to operational capability, particularly when it comes to agility – and of course the notion of agile tech – and speed of deployment. Online betting and gaming operators are rarely at the forefront of tech innovation – no matter what they might say in presentations – but it might be said that their management teams all tend to have imbibed the tech mantra ‘move fast and break things’. “Owning and controlling tech means that we can act fast,” says Mattias Wedar, chief product and technology officer at LeoVegas. “It means controlling the customer journey end-to-end, being able to shift and test without relying on third parties. As speed and flexibility is of [the] essence, my view is that in-house control of tech is a competitive advantage.” And yet, for all that talk of in-house, LeoVegas is reliant on Evolution for its live casino (like pretty much the rest of the European market and now the US sector) and Kambi for its sportsbook back-end. In other words, it picks and chooses where it will make its own tech investment and in this it is helped by the suppliers which, in response to demands around flexibility and agility, parcel out their offerings in smaller packages. “Concerns over outsourcing have largely gone from the industry,” suggests Oliver Niner, commercial director at software company Atlas IAC. “You just need the right company holding the tech reins, without handing over too much control in order to remain a commercially dexterous business.” The phrase that has replaced ‘platform exclusivity’ is modular. “Even bet365 have important dependencies outside their thriving company,” says Niner. “Which is why everything we do is so modular. We’re coming from a scalable, self-contained place that offers our partners unique options and versatility.” Evans explains things in terms of Playtech’s Information Management System (IMS). “For instance, if we have a customer with their own wallet and payment system, fine,” he says. “But we might have provided the casino platform and live product. And the players can be managed from a marketing and automation context within the IMS, in conjunction with the other systems. The functionality is extensive when it comes to real-time marketing, a full marketing and engagement platform is embedded.” Moreover, with most platforms, further layers of third-party software will need to be deployed. “The customer might use external systems to run their global CRM. So, the system that executes that CRM, if it isn’t a wallet customer to us, will be a third-party system.”

Welcome to the third party

In fact, the ecosystem of supply is one that keeps growing. “There are more niche third-party suppliers in 2020 than ever before, and we are definitely making the most of that,” says Daniel Graetzer, CEO and founder at Carousel Group. “We use a variety of third-party SAAS providers to enhance our product suite including personalisation, compliance, business intelligence, KYC and payments,” he adds. “However we control the integration and user experience so the customer experience is seamless.” The decisions that need to be taken on what to develop in-house and what to push out to third parties are the same whether at top-tier operators or further down the ladder. Steven Salz, founder and CEO of tech-led esports betting operator Rivalry, says the company comprises of “builders by default” with a background in software and gaming. Yet, even while they have been busy designing and producing “everything on the front-end” from onboarding to betslips through to site navigation, look and feel to wallets, the company didn’t feel the need to “reinvent the wheel”. “The key outsourced items would be our third-party odds providers we use, KYC providers, given our regulatory requirements, and payment providers,” he adds. The essential point here is that all these decisions come down, as Graetzer puts it, to the “holy trinity of project management: time, cost and quality”. “Developing software is far from easy, despite how far development techniques, frameworks and methodologies have come in recent years,” he adds. It can also be a lonely path. “It is definitely more insular,” suggests Evans. “The ideas only come from within your business. Our platforms are kept relevant by virtue of the customers that are using it and effectively it has been built, over time, by all the tier-one operators that use it because that is who we service. Of course, we try and add a sprinkle of innovation on the top.”