Q&A Jason Trost, CEO, Smarkets
As Smarkets repositions itself to target professional punters, its CEO and co-founder sits down with eGR to discuss how the betting exchange firm fits into the wider egaming environment
eGaming Review (eGR): How has Smarkets looked to differentiate itself within the egaming market?
Jason Trost (JT): What I think sets Smarkets apart from other betting operators is that we are a financial technology company first – we don’t really view ourselves as a gambling company or an entertainment company. To me Smarkets takes financial principles and applies them to betting.
Most people here are from the internet space, we have one guy from Bloomberg, we have the first employee from last.fm, we have some guys from Yahoo and we have a wealth of tech experience on the team.
When you look at companies I feel the DNA is really important, and when you look at the fact it was founded by people who are tech geeks and financial people that really forms the heart of the company. For most betting companies are either terrestrial bookmakers who felt they needed an online presence, or they are professional gamblers who wanted to create their own company. But we came at it from a financial trading software perspective.
eGR: Do you think you are missing out on anything by not having people with egaming experience?
JT: I think it makes it harder for us to get to the traditional market place as players there are used to more of an entertainment product. But our target market is sophisticated traders, and they know what they are looking for so they’ll find us anyway. We get most of our customers right now by word of mouth.
Basically we’re taking the industry from an entertainment based industry and trying to turn sports into an asset class. Still, at the end of the day the industry is powered by people who are placing entertainment bets, but just like you can buy stocks for fun there are also large number of people who buy stocks to make money. I think the sports betting industry is the same thing, there are people who bet on Manchester United because they think they are undervalued and there are people who bet on them because that’s their favourite team.
eGR: What challenges are provided by there being one dominant player in the exchange sector?
JT: Very few people see it this way, but basically a bookmaker is a simple betting exchange so I personally don’t differentiate between bookmaker x and betting exchange y. For me they’re very much the same model, except a bookmaker is a very simple version of it, so at the end of the day the user doesn’t care if they’re using a bookmaker or a betting exchange, they just want the best price available.
Because of the way the models work, betting exchanges seem to be better places for that. I have huge respect for what Betfair and Betdaq have done in the industry, but I feel there’s definitely room for someone to provide something new in the industry such as a transparent low cost platform. Taking a platform financial first approach is something I don’t think our competitors are doing, be they bookmakers or betting exchanges.
Right now betting is considered in the context of having a flutter on the grand national or going into a betting shop and doing a ‘pick six’, but what people don’t realise is underneath all that there are hundreds of millions if not billions of dollars bet and there needs to be a serious platform available for that money, which is where we come into play.
eGR: What has surprised you most about the egaming industry
JT: I studied computer science at university, then became a stock trader, and I set up Smarkets after that. With my computer science background and trading experience I noticed the technology around sports trading was very primitive compared to the financial industry. I thought it made no sense, why shouldn’t there be these sophisticated financial trading tools available for sports trading?
However the most interesting thing to me is how opaque the industry is. There are billions of dollars bet every day and no one really knows where that money’s coming from and where it’s going. I think it’s largely because there’s not really a good platform for all this stuff, and bookmakers will shut your account if you’re too profitable and other exchanges charge you too many fees.
This means a lot of punters have been forced to use brokers and do over the counter trading. They adopt a slew of different coping mechanisms so they can get their bet on. What I would love to do with this industry is make it more fair and more transparent.