On the 10th anniversary of Betfair’s ‘premium charge’, fixed odds bookmakers are competing on minimum bet guarantees within shark-infested waters. It all begs the question of whether winners really are welcome – or should be?
From severe restrictions to winners-sort-of- tolerated, maybe we’ve all shifted, or been corralled, into a tacit acceptance that the betting ecosystem has changed for good. Great news for the sharks maybe, but what does this mean for money flows and market structure? In the first of a two-part series, betting veteran, Kevin Dale, takes a look at the implications for us trawlermen…
There are plenty of analogies in gaming for our various customer types and perhaps the most popular are our aquatic friends: the sharks, fish and whales. As it’s trendy to be an ocean conservationist these days, we’ve netted them all into our own betting ‘ecosystem’ to describe how money changes hands in the sector.
Sharks are that small portion of our customers who either make a living out of gaming or who, at the very least, are consistent net winners, year on year. This doesn’t include players on a lucky streak but instead those genuinely bright, analytical or well-connected folk who simply have an edge. And their edge is bigger than the margins that we build into our products.
This edge can be based on a number of things: maybe they’ve built their own unique statistical databases or mathematical models with a better weighting of variables that are relevant to predicting sporting outcomes. Some are able to spot unique arbitrage opportunities between operators or between related markets. Others have faster data feeds or a novel approach to the new in-play markets. A few have even developed their own robots to trade sports markets on the exchanges. Professional gamblers Alan Woods and Bill Benter built their systems to industrial scale, recruiting dozens of data scientists and reportedly netting themselves upwards of $10m plus from the market – per month.
A slightly different school have cultivated their own sources for who’s in form or not and have intel that us operators simply don’t have access to. They might even be loosely connected to the events that we offer. Soft information can easily trump hard data when it comes to ascribing supremacy.
In poker, the sharks might have a unique combination of mental agility and experience, the ability to read opponents plus a big set of cojones. They park their emotions, choose their games and opponents wisely and can go all in, without chasing their losses. Others grind out a living across multiple low stakes tables or perfect their own bots to do it for them.
As for the fish, these are the vast shoals of customers who make the whole ecosystem viable. It is mostly their funds that feed us all. They range from the casual to the recreational bettor and come in all shapes and sizes.
Some bet for fun, others for the buzz or the bragging rights. Some are ‘noobs’ looking to master something new; others are well versed in their games, sports or betting. They tend to remember their big wins a little more readily than their big losses. They enjoy the competitiveness in sports and like to have ‘skin in the game’. They might love the form, the tips, the jargon, the ‘systems’ or the community. Some can string a few winning weeks together but they’re not consistent winners. There are plenty of wannabe sharks amongst them, but only a handful graduate.
Finally, we have the whales: we all want a few of these, or at least we used to. Whales are those customers who have a big plus figure in our ‘lifetime value’ reports. They wager so big though that we/they can be up or down plenty in a given month or quarter. Some of us even report our results with and without the impact of high-rollers (usually without, when the whale’s had a good run!). They’re typically wealthy people who like to stake big – and can afford it. We don’t include those who can’t: these would fall into the problem gambler category (poorly dolphins?) and should be treated as such. Confuse the two at your own peril these days…
Our favourite whales are probably those who play on our casino products because this proves that they’re not sharks in disguise. Stories of MIT students cleaning up on blackjack many years back still prick the imagination but changes to game rules, shuffle frequencies and deck sizes put paid to that. This notion of having an edge in the casino is still powerful; it’s just not supported by the maths.
Add to these the wealthy bettors who simply ‘like a punt’. They have some knowledge, but not too much, and they don’t tend to use price comparison sites. We know all this because we’ve analysed their bets in detail, e.g. the price they take vs the ‘starting price’. We know many of them personally and can vouch not only for their source of funds but also their whale-like characteristics. No strangers to a rebuy or three, they have the cash and ambition to win the odd poker tournament here or there. And even a blind whale can stumble across a bloom of plankton once in a while… As with the fish, the odd whale can also graduate to shark school – but it’s rare.
There are though a few operators nowadays who aren’t so keen on attracting the whales. Some don’t like the volatility of high rollers’ ups and downs –maybe a bit surprising for companies in the gaming industry… Others, and perhaps more understandably, find that the distinction between a high roller and a problem gambler is becoming ever more blurred. Most operators though (with the right responsible gambling, AML and KYC systems in place) are happy to take their business, not least because they drive up revenue per user metrics, justifying our high customer acquisition costs.
So… sharks, fish and whales all swimming in the same pool. But who’s feeding whom? This depends on the products that we operate.
For the traditional bookie, sharks are generally seen as the adversary. Bookmakers spend plenty of time identifying them and then restricting their bet sizes. A few bookies would allow a known shark a mouthful or two, but only to identify where their odds were out of line. As such, they can be a valuable source of intel or a cost of doing business. If they happen to be high profile players, the bookie might even allow them a nibble in return for some advocacy of their brand.
But mostly their business was to be avoided. In the old non-digital world, bookmakers would have to fend off the coordinated stooges placing cash bets across their retail estate. In the online era, the shark nets are a bit more sophisticated involving KYC, IP checks and automated flagging of high-risk players or selections.
Meanwhile, the player to player (P2P) poker sites, pools and exchanges give the sharks a warmish welcome: winners are not restricted because a fixed % on P2P volume is a low-risk business model. But these operators also know that sharks can overfish their waters. They’re perfectly capable of depleting fish wallets faster than our own rake, takeout or commission rates. Our fish, not the odds, are the bait.
Kevin Dale – Gaming Monitor
In Part 2 tomorrow we look at how both fixed odds and P2P operators are coping with two conflicting pressures here: a regulator assault on player restrictions whilst liberated sharks hit margins or thin out the shoals.