The calm before the sportsbook storm

When bet365 went two-up on Paddy Power’s latest football offer it came as something of a surprise in a sector that has been sleeping a little in recent months. Resource intensive merger integrations and substantial in-house technology projects has put the brakes on a sports betting vertical that looked at one point to be accelerating out of control. But there are more than a few signs this is simply the calm before the storm.

Paddy Power’s season-long offer has seen punters paid out if their team goes 2-0 up at any point in the game, and has won some industry praise for its ability to quickly recycle winning cash at a relatively minor margin hit. Some analysts even suggest the offer could be a net positive if targeted at the correct customer cohort. So it’s not huge shock to see bet365 experiment with its own version.

We can reasonably assume if bet365 decides to extend its trial offer we will see the 2-0 offer become ubiquitous in the sportsbook sector and punters’ expectations raised yet further in what the minimum level is. It’s the type of product enhancement that plays into the big firms’ hands, creating a more complex and feature-rich environment that squeezes out smaller operators who can’t always keep up the pace.

This is most obvious in another area of innovation we’ve seen over the course of this football season. The limited roll-out of the early payout offer by Stoke’s finest won a few headlines, but arguably the biggest move has been the widespread adoption of the Sky Bet request-a-bet model. This really is starting to change the game.

New odds please

The user-generated markets spawned by request-a-bet were initially seen as a novelty for Sky Bet’s recreational audience, but have quickly become a key part of the social media proposition for every major operator. And anecdotally we’re hearing they are a strong contributor to revenue with the product playing into the hands of the entertainment-driven approach to betting. It’s hard to intuitively work out if you’re getting value on a bet that includes Hazard scoring from outside the area, three players being booked and the crossbar being hit, even if the answer from a customer perspective is a firm ‘no’.

Paddy Power was the first to copy Sky Bet with #WhatOddsPaddy, but BetVictor quickly followed suit with #PriceItUp and William Hill has recently been pushing its #YourOdds product fairly hard on both Twitter and the mobile app. It’s arguably the biggest thing to happen to the sector since cash-out and it’s interesting that it was Sky Bet, one of the few firms currently in charge of its own destiny, that led the charge on this one. And even more so that Ladbrokes and Coral are yet to follow.

At the moment the big players have bigger fish to fry. Paddy Power Betfair CEO Breon Corcoran told analysts the betting giant had something of a backlog of new features and product enhancements stacked up waiting for platform integrations to be completed. And the implication of this is those firms currently elbow-deep in merger integrations are going to find the pace of innovation in the sector hard to keep up with and could easily slip behind the new normal. But exactly what this new normal is going to be by the end of the year is another question entirely.

The lack of a major summer tournament and the relatively slow pace of change so far this year has presented the industry with something of a paused period. William Hill has been fighting a rear-guard battle with its own tech stack, Paddy Power Betfair and Ladbrokes Coral are in the midst of major integration projects and some of the newer entrants have not found things quite as easy as they might have hoped. So there is a sense of the calm before the storm about the sector right now.

Calm before the storm

The recent results season saw similar messaging from Ladbrokes Coral and Paddy Power Betfair, with Ladbrokes Coral CEO Jim Mullen admitting they had a “slight product deficiency” at the present time. Breon Corcoran, Paddy Power Betfair CEO, told analysts they had deprioritised new product launches in the short-term with every resource possible placed on the migration of Paddy Power onto the Betfair platform. But make no mistake both firms will have plenty in the pipeline.

What will be interesting to watch is how much both firms look to use product and features to extend the differentiation within their two core brands. Could we begin to see new products that appeal directly to value-based and entertainment-based players and what impact will this have on the single-brand competition? Will they be able to remain all things to all people or will there need to be more of a refinement in brand and product proposition?

Corcoran also noted the increasingly competitive environment around price and how that is changing how they operate. He referred to Paddy Power’s offer of eight places on the Masters golf tournament as evidence of this. Corcoran commented he expected them to be a stand-out offer in the market but in the end both Sky Bet and bet365 matched them in what was undoubtedly a loss leading promotion. This type of aggressive pricing will be another key factor to watch going into the new football season. Who will blink first?

“There seems to be some sort of state of flux in the market,” Corcoran said, and he’s right. There is a sense the sportsbook vertical is at a turning point and while nobody really wants to rush headlong down a path of ever decreasing margins equally nobody seems prepared to back off and take the short-term top-line hit. Ever bigger price enhancements and aggressive pricing is a fight it would be a surprise to see anyone back away from during the second half of the year.

To the victors…

It’s not just the sportsbook giants who are waiting for the next big push, with Amaya CEO Rafi Ashkenazi noting they would ramp up marketing in August with a new mobile launch for its so far underperforming BetStars brand. The potential marketing firepower and technology resources Amaya can throw behind this shouldn’t be underestimated, despite its weak early performance. And we shouldn’t ignore the likes of 888, Leo Vegas, Unibet and Betsson who all want a slice of the UK sports betting pie for themselves.

But we’ve seen already in the UK in particular that simply throwing money at the problem doesn’t always bring solutions with it. The consumer is becoming increasingly sophisticated and expectations around UX have been raised significantly. The two-up offer is an interesting trend pushing players towards more recycling and increasing the importance of the more reliable margins of in-play. And it wouldn’t be surprising to see future products looking to push the cross-sell angle more too.

The industry may be taking a pause to gather its breath, but there is every reason to expect the pace to pick up considerably as we head into the autumn. Who has the legs for the race will quickly become clear, but it would be a brave man that laid odds on the finishing positions.