Point to prove: How PointsBet plans to dominate the US market through in-play betting

PointsBet hit the headlines last week when Susquehanna Investment Group (SIG) agreed a A$94m deal to become the Australia-headquartered operator’s largest private shareholder. Behind the scenes, a central lynchpin of the deal is an agreement between PointsBet and SIG group company Nellie Analytics, aimed at further augmenting PointsBet’s sportsbook offering in and around the areas of in-play betting and improved odds. Below, PointsBet USA CEO Johnny Aitken explains more about the agreement and how this can develop into a market-leading proposition. EGR North America: Can you provide a little more detail on the background behind the transaction. How long have you been in negotiations before a deal was struck? Johnny Aitken (JA): This deal has been almost four years in the making, dating back to 2018 and the repeal of PASPA, to the first time when states outside of Nevada were able to legislate and legalize sports betting. This is based on PointsBet coming over to the US from Australia and positioning our business to attack that immense once-in-a-lifetime opportunity. We were introduced to Susquehanna and specifically Doug Yass, who runs Nellie Analytics and is the son of Susquehanna Investment Group founder Jeff Yass, at G2E in 2018. Pretty much from the first meeting there was a symbiotic connection; they are creating models, creating opinions on sporting outcomes and, where they see value, backing their opinion and betting on those outcomes. From a PointsBet perspective, and especially myself and our group CEO Sam [Swanell], we come from a bookmaking background and have played both the role of bettor and now the role of bookie, so there was a connection. We speak the same language. We’ve always maintained a dialogue with Susquehanna but obviously over the last six months those discussions have intensified and grown in significance as their interest has increased. Susquehanna has a desire to invest in the sports betting opportunity and wanted to pick someone who had the best chance of creating value on their investment. They believe, as we do, that there’s an opportunity in the US sports betting space for someone to own sports betting excellence, someone that understands bookmaking, has a clear vision, and has their own technology because they’re the closest to the customer and know how to deliver sports betting excellence day to day. At present, an argument can be made that some of the operators in the market are more slanted towards being marketing companies, while others are more casino oriented. So, PointsBet has an opportunity to really define and own that part of the market around sports betting excellence. We still have to conclude our negotiations and formalize our deal, but for me, it’s been an easy process that’s been four years in the making.

EGR North America: Can you tell me a little bit more about the work that will go on in the exploratory period between you and Nellie Analytics? JA: Our mission in North America is to deliver the best in-play betting experience; the experience where you are up the longest, you have the least amount of market suspensions, are quickest to accept a bet, have no delays, and you’re supporting that with a wide-ranging product full of things like livestreaming and visualizations. The first intentful step we made on the pathway to achieving this mission was to acquire Banach [Technology] last year. Banach is an Ireland-based company founded by ex-Paddy Power employees, quants, engineers, and product managers who all built a business firmly pointed at the in-play sports betting opportunity. If you look at Europe as a benchmark, let’s say that 75% of betting activity is in-play versus just 25% for standard bets. We can eclipse that in the US thanks to the nature and design of sports betting being more conducive to betting activity, especially given the amount of coaching and advertising breaks. Combining forces with Nellie Analytics and bringing what they have to the table further quickens our pathway to having the most efficient pricing in the market. The more accurate your pricing is, the more confidence you have at times to lean in and offer better odds and competition because you can still eke out a meaningful margin in doing so. It increases your ability to take bigger bets, i.e., liability limits that give a more consistent experience to customers that then are being limited or cut back, something which you probably will eventually become known for and can have other benefits. We’ve a huge partnership with NBC. NBC love content, such as big bets taken in the lead up to Sunday Night Football, which we can then use as the megaphone on Football Night in America. The primary focus for Nellie Analytics coming into the PointsBet business is really to continue to fast forward our trajectory to having efficient pricing not only across basketball and American football, but sports like golf, the college sports, baseball, and ice hockey. Again, if we can have the most efficient pricing in the market, not only does that allow you at times to improve your operating margins, improve the limits that you take bets against, which improves your handle and trajectory around revenue, but it allows you, most importantly, to drive the best customer experience. If you have efficient pricing, you can stay up the longest and you can take bets quicker. We believe those two core factors in particular will be the battleground between operators that win or lose the sports betting experience. EGR North America: What for you is the ultimate objective with this partnership? How will progress be measured? JA: The ultimate objective here is to get to that finish line as quickly as possible, where we have the absolute best in-play betting experience in North America. That’s a combination of efficient pricing, being up the longest, and quickest to accept, and supporting that with breadth and depth of product, continuing to invest, and introducing in-play player props like lightning in-play betting. Further supporting that with livestreaming visualizations makes the experience so immersive and differentiated, that when in-play bettors think about placing a bet, they simply have to choose PointsBet because the experience is second to none. Nellie Analytics is the next tailored part for us to achieve that objective in short order. EGR North America: Nellie Analytics is essentially a betting syndicate with a trading arm; any concerns about this from a US regulatory perspective? JA: I don’t want to comment too much on that. However, I will say that the teams will stay somewhat separated. We will be using them in a consultancy, advisory fashion for their pricing models and how they can make PointsBet’s current pricing models better, more accurate, and efficient, which again unlocks those improvements in customer experience and other aspects such as trading margins. EGR North America: In what ways will PointsBet’s Banach Technology business interact with Nellie Analytics as part of this partnership? JA: Well, for one thing, we probably shouldn’t call them Banach anymore as they are now PointsBet employees. They’ll interact very closely again; for me it’s a sort of doubling down on our core tenets, to winning the in-play market, having the smartest quants in the game etc. Banach have a very intelligent, proven team of quantitative analysts and Nellie brings even more weight to this process. Say, for example, if we’re only looking at two sports at a time, having Nellie means we can broaden the number of sports we’re able to examine and broaden our testing, regressive testing, and pricing models. One of the coincidences of the transaction is that they have an office location in Dublin, which is close to the former Banach offices there, so those teams are by proximity close to each other and will work closely on our work in the US market. Over the first six to nine months, we’ll really start to rev up the engine on how they can turbocharge areas that we were already looking at and invested in but allow us to get to the finish line earlier. EGR North America: With this transaction, SIG becomes the largest single shareholder in PointsBet USA with a 12% stake. Do you have any concerns that SIG will eventually acquire more of a stake and look to spin the US division out from the main PointsBet business? JA: I can’t and I won’t comment on that type of speculation. All I’d say is that there, of course, is heightened interest from Susquehanna Investment Group in the sports betting space here in North America. They believe, for instance, there is a right to win for an operator that has excellence in sports betting and is known for that, and they believe PointsBet to be the operator to achieve it. We’ve been very methodical about the decision surrounding equity allocation and how that matched with Susquehanna’s desire to get involved and overnight become our largest shareholder. We’ll see how that plays out in the coming months and years. Jeffrey, in particular is very invested. He’s been invested in every meeting we’ve had with the Susquehanna group, and will continue to be so, but I don’t want to put the horse before the cart. We’ll see how the coming months and years play out. Again, having such a strong partner in our corner that equally would potentially be there to invest further capital provides great surety internally and indeed externally. It tells people that PointsBet not only has a right to win the market but has a right to be at the table even as far in the future as 2030 when, I believe, the North American sports betting and online gambling opportunity will get really interesting as you factor in the additions of Texas and California, for instance, as well as those states who will take on igaming in the future. EGR North America: PointsBet is active in 10 US states but, in comparison to other operators, has a relatively small market share of the US market. In what ways are you working to increase this share? JA: We’ve seen a lot of companies in the sports betting market chasing market share, chasing a share of handle, and handle and market share is something that I could go out and get overnight if I wanted. It would be at a break even or loss-making basis. If we were playing the game from a vanity aspect and trying to gain handle share we could do that, but that isn’t our business approach. We’re here to add value for our shareholders, find a sustainable business model, be standing and super competitive not just in 2025 but in 2030 and onwards, when the opportunity continues to escalate and becomes very immense. We’re really making decisions that are based on a pathway to profitability, making sure every dollar we invest against the North American opportunity, be it in marketing, technology or people, has an outweighed and outsized return. Conversely, we’ve seen competitors try to cement their position in the market or make up for lost time through M&A, and we’ve seen a large amount of irrational marketing spend. I know first-hand that a lot of competitors are willing to spend and not have the CPA to LTV equation working, i.e. their outgoings are not going to match their incomings, but they are doing that for other reasons. We’re not here to play that game, we’re here to find a business model that works, find that sustainability, and still be here 10 years down the line. The opportunity will be a lot different at that point in time, with more states being live and more with online casino, but the average consumer in 2025 or 2030 is also going to be very different to how they are now. It’s not going to be a consumer that’s a beginner to online sports betting, it’s going to be a more mature advanced consumer, a consumer that isn’t just picking a company to sign up or to bet with because they know that brand from DFS, advertising, or experience, or because they are offering them very aggressive sign-up offers. They are selecting an operator because of their excellence in product and in-play betting. That’s when a company like PointsBet is really going to shine. Of course, we work to maintain our market share but the focus for us isn’t primarily to drive handle market share, we want to drive revenue and find a pathway to profitability. That remains the focus of the business. EGR North America: How important is in-play betting to PointsBet’s US strategy and ultimately its success in the US? JA: It’s the core of our strategy, but I’d say it’s the core of the North American betting opportunity. As I said earlier, in Europe around 75% of the action now is in-play, with the lesser amount being pre-game and the majority of this action is in soccer. When you compare that to the US, the sports are so much more well designed for interactivity; just the standard nature of games where there’s coaching, advertising breaks, etc. The growth of in-play betting as a percentage of our overall activity when it first came to America was in the 30% range, while last year it was in the 50% range. This year it’s been escalating up into the low to mid-60% range. I do see the US eclipsing Europe in short order for the amount of activity on a percentage basis that’s placed on in-play and the consumer and equally the most engaged and valuable consumer being those drivers of that employee growth. I see this elastic-band effect happening in the next one to two years, where, if you don’t have your own technology, you’re not heavily invested in in-play betting, and you don’t have your own trading team to manage any in-play betting experience, then you will find it very hard to continue to attract the right sort of valuable users. You’ll find it very hard to retain the right valuable super users without being over the top with promotion. We not only believe that, but that’s also the core part of our strategy and our right to win in the market; when we combine technology, team experience, and distribution primarily through NBC that gives us that right to win. EGR North America: Is this something you’ll look to expand into, say, Ontario if it proves successful? JA: We function as a global business, so when we make enhancements to our in-play product or we make enhancements to our pricing efficiency, every global jurisdiction, like Canada and Australia, reap the benefits of that. While the main opportunity around in-play is in North America because of the way that you can place a bet directly through the app, in Australia you actually have to make a telephone call to a call center to place an in-play bet, which lowers the appeal and the experience of placing in-play wagers over the longer term. EGR North America: In-play formed a major part of PointsBet’s US Masters betting offering; what learnings did you take from this period and how do you plan to apply them to other sporting events? JA: We’re still learning to be honest, in every day and with every event. During the Masters, we made a very concerted effort to lead the market for the number of in-play markets available. We achieved the same with the Super Bowl in certain markets by leading with product messaging and not promotional-led messaging. We saw a lot of volume but more importantly the value and client quality attracted through those different types of value propositions. There’s no doubt we’ll continue to lean in on more product-led messaging over time as opposed to promotional-led messaging because, not only will they have the best product, but secondly the consumer is going to pick product over promotion, and equally our competition can continue to offer promotions to the size of what (to date) they’ve been currently offered at. We’re very interested to make a large investment around lightning bets, known as micro markets in Europe, so outcomes where you’re placing a bet, and outcomes which will be known within five minutes. I think baseball is a very interesting sport in that regard, where you could frame up a betting proposition for every batter to hit a home run and get on first, second, third base, be struck out etc. Baseball is a long game with nine innings and opens up the potential for a lot of these micro markets where you could get skin in the game whenever you join the broadcast or make it to the stadium. NFL is another interesting one where we’ll very much invest in products, such as next drive. Will the next drive result in a touchdown or a field goal for instance, something which you could apply that to golf as well. Golf is obviously ripe for innovation; turning a golf tournament from just having a $20 or $40 bet on the outright winner (and seeing that play out over four days) to micro betting on a shot-to-shot basis. There’s certainly interest in these markets, and we can work with our partners such as PGA TOUR and NBC Golf Channel to bring them to life. We’re constantly thinking about things, and I don’t think the blueprint for anyone including PointsBet is settled yet. We’re still very much in a test-and-learn mode, getting insights and implementing them across areas like marketing and technology on a day-to-day basis. We believe by investing in in-play, and we’re seeing this through a lot of customer studies, it is the in-play sports bettor that is the closest when it comes to customers who have a desire and appeal to also play online casino. In-play bettors are the most engaged bettors, that spend the longest periods of time on the app and want to get some bang for their buck. We do see a correlation there in that the better we make our in-play sports betting product, the more we grow. Having an engaged in-play sports betting audience is equally good to bear a lot of fruit for our online casino performance, and it’s something we see as a continued upside in terms of delivering a great experience and additional revenues. EGR North America: PointsBet is consistently linked with M&A, largely because of the trend among US operators to bring sports betting technology in-house, something which the firm already has. Does this constant speculation bother you as a CEO? JA: No, it doesn’t. I’ve worked in gaming pretty much my entire adult life and we are in an industry where there is a lot of discussions at any one time and a lot of these focus on consolidation. What I will say is that from day one, we have remained focused on executing a long-term strategy. We’re here to exist and be strongly competitive, not only today, but in 2025 and in 2030. We want to be managing the business, we want to be the control sticks. For both myself and our group CEO Sam Swanell, this is our life, and this is our industry. We haven’t backed into this from a legal profession or marketing profession, we’ve grown up obsessed with sports success, obsessed with racing, both with a deep passion for those two things through betting. It is our careers, and we want to be here to see that through and the opportunity through, so I don’t find it distracting. But equally we are in an industry, as we’ve seen in Europe and Australia, where there are always discussions, where there are always rumors, and over time there is consolidation. We’ll see how that plays out in the US and in North America over the coming years.