Sportsbook Idea #1

sbetcashThe current crop of corporate bookmakers like to think of themselves as innovative and “on the pulse” of young gamblers. Nothing can be further from the truth. The only reason they continue to get more and more customers is because we love to bet, and in a heavily regulated market, there are only so many places we can do that. Many of the big corporates actually have “ideas” guys and teams that are working 24/7 on new ways to entice people and extract money from them. For all the money they spend, the so called most innovative thing they have come up with in the past year is an ATM card that allows you to withdraw winnings quicker. The Ladbrokes group came up with this so called “Ground-breaking” new idea last year and Sportsbet followed suit in November. The amusing thing is that over 10 years ago the online casinos had already figured this out.

The Sports betting market is ripe for a tech driven start-up to really challenge these incumbents and take a massive market share. What we have at the moment is a bunch of marketing companies that assume they are doing an awesome job because they continue to get more and more customers. They have found that all you need to do is entice people with free money, keep offering them more free money and offers until they become hooked on betting. They then simply ban any users they think will cost them money in the long term. This is a sound strategy in the early days when you have 0% – 50% of the market. Eventually you will have the vast majority of people who were going to sign up and you have to make as much money from them as possible. The issue is, these people have grown accustomed to only betting when a bonus of some sort is offered. That’s when these marketers (to call them bookmakers is an insult to bookmaking) are left with no other avenue but innovation.

From the numbers I have seen, there is about 3-5 years more growth in store for these so called bookies. That really is not all that long and if they can not provide some innovation before that time, than we will see a large number of these guys go bankrupt/merge/be bought out.

IHand drawing light bulb like to think of myself as a bit of an “ideas” guy. I have a list of about 50 ideas related just to sports betting. Jonno (from Sportpunter.com) and I were talking on our recent Superbowl trip about life in general, potential business ideas and the normal crap two mates talk about when they have had a few too many beers. We both came to the conclusion that we were deliriously happy with the lives we have now and would never want to start up a big business. Running a large company takes away time from the things we truly value (family, friends, doing whatever the hell we want). We are blessed to be able to work from home and only put in as many hours as we want each week. We are by no means “retired”, but do live a lifestyle that from the outside seems to be that way. I may go months without really doing any work, and than I might be inspired by an idea and spend 100 hours a week working my arse off.

Ideas are pretty worthless really. The execution of an idea is where any profit is made. You could have the greatest idea in the world but if you never do anything about it, it will always be worth jack shit. So I have decided to give all my ideas away. Any bookmaker can use any of these ideas to create even more profit for their shareholders. If a bookmaker wants to hire me as a consultant, I would be happy to share some of my better ideas with them. Every few months I will put a new idea on the blog. I’m starting with a very basic idea as I wouldn’t want to give away my best stuff too soon.

Idea #1: The Birthday/Christmas Bet

It’s your birthday and you are expecting the same old stuff. Some alcohol, a gift card or a lotto ticket and some scratchies. Let’s talk about that last present.

Lotto and Scratchies

NSWlottoWithout fail I will get one of these packs for my Birthday and Christmas. It’s usually a $50 giftpack with a mix of lotto tickets and a few scratchies. It entertains you for all of 30 seconds.

What are the true odds of these “gifts”? After some research, I found that the Prize funds for Lotto and scratchies are 60% of the total money taken. So if the state lotto prints $1,000,000 worth of a $1 scratchie, there will be $600,000 worth of prizes and they take $400,000 for themselves. For every $1 you spend on these you can expect to lose 40c. So that $50 gift pack will return about $30 on average. The “Prize fund” also includes free tickets, which means the real value is even less.

We can compare that to the Australian bookmakers and the cost of a simple bet. Most Aussie books have odds of $1.90 for a 50/50 chance. That means you can expect to lose 10c for every $1 invested. A $50 bet will return $45 on average.

The difference is that you will only be able to almost double your money with the Sports bet, but the max prize for that $1 scratchie is between $10,000 – $25,000.  I can’t be bothered to dive into the maths too much, but you could create a multibet with between 14 and 15 $1.90 selections that would pay close to $10,000 if they all won. How often would you win this mega multibet? Once every 16,000 goes. Now that might sound like a horrendous chance of winning, but when we look at the same chance of winning the $10,000 with a scratchie , it starts to look awesome. The chance of winning the top prize of $10,000 on a $1 scratchie is a whopping 1 in 700,000. You are 43.75 times more likely to win that $10,000 by betting the multi. There are a few things we need to take into account here. The multi bet is a simple win or lose proposition, whereas the scratchie also offers many other smaller prizes. You could also add in larger priced selections in your multi and lower the selections needed to win and increase the chance of hitting it.

All this maths is just to show that the lotto does not even compare to the chances of sports betting.

So what’s the idea already?

I’m sure you have already figured it out. The idea is that instead of buying your mate or dad a lottery ticket for his next birthday, instead you get him a sports multi. The odds are heaps better and the fun can last much longer. It will be the bookies job to make it as painless as possible to place these gift bets.

How it would work.

You log into your own account and can either:

  1. Create the multibet yourself OR
  2. Choose the Gift amount, type of sports, type of bets, and a few other variables.

If you choose number 2 then a randomly generated multibet is created from your variables. You can choose to have just 1 multi or have a boxed multi (where there are lots of smaller multis included in the big multi bet).

You then input the name, address and email of the recipient and can have the bet either sent to them via email or in the post (It would come with a nice birthday card as well). The ability to share the bet on social media would also be available.

If the bet wins, your friend just needs to open an account with the bookmaker using a code and the funds will already be in his account. If he already has an account, he just needs to add the code in his my account section and the funds will be added.

Why this would be massive for Sportsbooks.

There are so many reasons this is a great idea for sportsbooks to implement. Bookies push multi bets for one reason, they make them a massive amount of profit. The more selections in a multi, the more profit the bookies make. There are a heap of other reasons to create this product.

  1. Brand new revenue stream: I’m not sure the amount spent on lotto as gifts each year, but I would assume it is in the Billions. This would take a percentage of that market. It would also make it more likely for mates to give each other gifts each year.
  2. New accounts: This will drive more new accounts, as winners will need to create a new account to receive the funds. You would also pay the person who gave the gift the refer a friend bonus, making it even more likely they would purchase the gift.
  3. More multi bettors: You now have a customer who thinks winning multi bets are common place and has what they will see as free money. They are highly likely to bet and lose this money, and highly likely to not only reciprocate the gift, but also buy others a gift multi.
  4. Free database of potential new clients: Even if the bet losses, you now have the contact details of a potential customer who was referred by a friend. You can offer them a second chance draw, or a sign up bonus to turn them into a customer.
  5. Media opportunities: You can already see the headlines now. “Mate gifts mate $100,000”.
  6. Word of mouth: This gift will be the one all the friends talk about on the night out, they will all follow along and see how it is going. This would build brand recognition and make it more likely that they would create an account.

These are just the benefits off the top of my head. While it would be a very niche product, it is a one off cost to create it and would lower the cost of acquisition (CAC). The first bookie to implement it gets the first mover advantage and all the free press.

So that’s idea number 1 for the bookies. Over the next year you will see many more ideas. Sportsbooks need to act like start-ups and test as many new ideas as possible to see which one sticks. You only need 1 new idea out of every 100 to work to make a very healthy profit. Hopefully by Christmas time, I will be able to buy my friends a bet.

What do you think about the idea? Would you use it? Do you have any great ideas for the bookies? Let me know in the comments below.

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  • Rob

    Great idea Steve, I am sure that the bookies would sell sell millions of these. Personally I wouldn’t buy one on principle from our current crop of corporate apologies for bookmakers because I know how underhanded and greedy they are, but if it was someone like Pinnacle then I would probably buy quite a few every year.

  • Luke

    Um, what? Firstly, a coinflip at odds of $1.90 will return $47.50 on average for every $50 bet, not $45. Secondly, combining -EV bets in a multi increases the house edge. A 14-leg multi at $1.90 will return $7990, and have a 1-in-16384 chance of winning, for an expected return of just 48.8 cents in the dollar: worse than lotto. It’s hard to believe that someone who struggles with the very basics of betting maths could be a long-term winner.

  • Hi Luke,

    I made the maths as basic as possible. Yes it isn’t perfect but that is not the point of the article. I love how a very small subset of people need to find one thing wrong and try to bring people down. I’ve never said I’m a maths genius, my genius is knowing how to structure a portfolio, find best odds… blah blah

    In saying that, I said a multi of between 14-15 (so please learn to read and comprehend a little better). I also apologise for rounding to a full number (Dear god, how could I).

    Read it again Luke, as you are missing a few things which make you look pretty dumb if I was to explain them to a maths only type person like yourself.

  • Hey Rob,
    Thanks. I doubt any of the Australian crop would try anything new anyway. They believe that what they are doing now is working, and in a sense it is, as their numbers are all going up. But as several recent bookies have shown, if you have a big marketing budget, you can bring in a quick 100,000 customers.
    We will see if any of them actually want to be innovative, or are just happy taking money from the mugs.

  • Luke

    Steve,

    I admit it, I am a pedant. I take offence when misinformation is spread, especially in regards to betting. What you call “rounding” is clearly an error: you incorrectly stated that the expected loss on a 50/50 chance at $1.90 odds is 10c in the dollar.

    My main point is that the product you have outlined offers poor value for the customer compared to a lottery.

    Your article suggests that the opposite is true.

  • Try reading it again, come at it from a different angle. The maths is there for simplicity. Who is only going to bet line bets? could a lot fewer bets also allow a payout of $10,000? Many other ways to make it much more profitable than a lottery ticket.. keep thinking….

    I’ve found pure maths based punters are rarely long term profitable gamblers. That maths aspect is important, but can be easily outsourced as I have done. Maths is like the exercise when trying to lose weight. Makes up maybe 20% of the overall result. The other 85% (see what i did there…) is from Diet, or in sports betting it is from creating the right bank, getting the best odds, recording everything, being able to deal with losing runs, so on.

  • Galfondini

    With all due respect Steve, this time I think you are way off the mark. Sure it is a bit pedantic from Luke, but he has a point. Your math is off and the math isn´t even all that hard. If you are going to use an example you should make sure that said example is correct. What you should have done in my opinion is taken a little while longer, done the calculations correctly, or asked the community for help, and then presented your article.

    As for math oriented punters, you make it sound like it is a disadvantage having a good grasp of math, quite frankly I don´t give your anecdotal evidence much heed as I have noticed quite the opposite.

    If mathematically minded punters fail at betting it hardly is due to their math skills, but rather to a lack of the other skill sets required to be a succesful punter. It needs to be said that a mathematical skill set in itself doesn´t neccesarily translate into being able to build a model with predictive value for sports betting. But for those who do posses this skill, it can hardly be seen as a negative trait? As you say, this part of betting can be outsourced, but it is hardly an disadvantage of having the math skills by your self, mainly because you need only to rely on your self and you can always make sure to bet at times that are convenient to you.

  • Arguments starting with “all due respect” are rarely meant in that fashion. The maths is of very little importance for the idea. If I believed it was the backbone of the idea, I would have made sure it was 100% accurate, like I did when I asked for readers to write about the Tom Waterhouse Melbourne Cup bet. I’m not here to cater for the 5 people who care if the maths is right or wrong. In my opinion, close enough is good enough in this article.

    Now if I was being paid for this article instead of giving it away for free for everyone’s enjoyment than you might have a point. Articles take a long time to write, edit and get out there. I do not see many others taking the time to do what I am trying to do. But I do see a very select few people who like to criticise without ever putting any of their ideas or thoughts out there.

    The idea is the article. If you are after some strong maths, this site is definitely not where you should be looking.

    I’m not saying it is a disadvantage, I believe a very basic grasp (like I have) is all that is needed. Whereas it seems many of the maths nuts believe it is the only thing that is needed. We are in agreement on most things in your last paragraph. It’s not a disadvantage if you are good at maths, I even said it adds that 20%, but the point is that it takes a hell of a lot more than maths skills to be a profitable gambler. We all believe our unique skill set is the number 1 factor, and I see it with maths guys more than anyone else.

    I have been able to train non maths people to become better gamblers, but very rarely can change a maths based guys point of view. From my actual experience in training many people, the ones with an open mind and no prior knowledge are the ones who end up succeeding.

    I am a generalist, only adequate at a large number of things. But I feel my unique combination of skills has lead me to be one of the few who continue to make a profit in a very tough arena.

    The article is simply about Innovation in bookmaking.

  • Alastair Mobery

    I was expecting more, to be quite honest this is a pretty meh idea. If people arent buying the TAB vouchers already for gifts they are not going to bother with this, and lets be honest the TAB voucher is much more practical anyway than having to sign up to a company online and verify it to retrieve your cash.

  • Ben

    I’ve been buying mates multis on their birthday for years. Would only ever do it at the TAB though as if they win they get their cash straight away. Something too about having that physical ticket …

    *If* I was to do something like this, here’s what I’d do:
    – Make it a “who wants to be millionaire” type of offering
    – Offer $2 odds on all $1.9x bets
    – Min multi of 20 bets (so can win $1,048,576)
    – Bets can be be placed any time over 12 months
    – Bets can be placed one at a time

    Most would lose in the first few bets (statistically), but then you’d get those one or two people who get to 10 bets, 11 bets, etc. You’d get PR and social buzz galore.

    As a Sportsbook you’d insure yourself in case the $M popped, and whoolah you’ve just bought yourself some of the cheapest CAC and PR around.

    I’d also consider doing this as a physical card you could give out. Maybe even *you* get to give one out for free on *your* birthday …

  • Brilliant Ben, These are the comments I wanted, talking about the idea and how it could be improved.

    I love the millionaire idea. Adds that bigger PR chance, and much more fun. I also like that bets being placed one at a time.

    A think a physical card is a must as well.

  • Ben

    Love this discussion topic by the way.

    I’ve worked in tech startup scene locally for years now, and just quit to start my own late last year building a mobile video and eComm platform.

    Got a side project to build a sports mobile app that’s finally built for the punters. I think I emailed you about potentially collaborating but never heard back (which is fine – know you’re busy. I’m a Dad also and juggling a mental todo list).

    On the Sportsbook side, one idea a mate and I keep talking about over beers is to set up a “customer owned” Sportsbook where every member over time would own a piece of it. Just like bankmecu on the banking side. It would be a non-profit with all profit reinvested in growth. It could also differentiate by actually not being evil, and helping to fund social/enviro/community projects as part of it’s constitution.

    Punters are going to punt right? Who wouldn’t choose someone other than those Paddy Power type fkers to bet with if they could?

    Now all I need is a spare $20M lying around and friends in government and I’m off 😉

    Finally, I thought of setting up a “sportsbook innovation” company some time ago that would not only create ideas for sportsbooks but also execute them. But I couldn’t stomach the thought of working with the devil.

  • Ben, send me another email. I normally reply to everyone, and more so if they are talking about ideas. I was either very very busy, or it went to spam. Sorry

    A customer backed Sportsbook would be great, but as you say, need a huge initial investment and so many legal issues.

    I have no issue working with Sportsbooks. They are the ones with the money and customers. It would be the only way to get a lot of my ideas of the ground. While I’m not a fan of how they run their business, it wouldn’t stop me creating something that was beneficial to them, me and the punter.

  • Ben

    Covers forums “streak survivor” has a mini version of this, see: http://contests.covers.com/sportscontests/Survivor/prizes.aspx

    They don’t allow any bets with odds less than $1.77. Prizes are terrible vs odds, but hey people can enter for free.

    Less than a month ago a guy was going for the $100K and 25 wins in a row, http://www.covers.com/articles/articles.aspx?theArt=405757

    I’ll let people google to find out how it ended up.

  • Ben

    Sure thing, will send again now. It could be actually I did it as part of your survey form about the app now I think about it.

    Customer backed Sportsbook not as crazy as it may seem, I’ve thought of ways of building it from as low as $500K-1M capital initially (excluding legal and regulatory costs). If you could put some serious tech startup innovation behind it anything is possible.

    re: sportsbooks, I hear ya, and they are not all assholes. But having been limited by Sportsbet, Centrebet et al, and treated like dirt, I’m not too inclined to do anything to support them.

    If anything I’d run a system where you never work for one sportsbook, and they have to bid for your services each time, with escalating prices.

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  • Anthony

    I get the point and the idea, and the whole reason Steve wrote the article was to kick off an idea…..to grow it…to morph it…..into something better….not to have it shot down with opinions…..all the naysayers…..what are your idea’s? So clever with math, yet so dreadfully inept at using that knowledge to be creative and grow ideas yourselves?

    None of you could be top punters…….you don’t have the risk/reward maths worked out. The risk of growing someone elses idea with your own ideas and being nice about it is ZERO, and the reward is always POSITIVE. The risk of alienating yourselves by posting negative opinions is LARGER than ZERO and the reward is NEGATIVE. Silly people. The support for Steve by other members have has already proven my math to be correct.

  • Nox Nox

    How do we contact you Steve?

  • There’s a contact me button on the bottom right. It can take up to a week for me to reply though.

  • Nox Nox

    Doesn’t show on my screen