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New Betfair CEO Breon Corcoran this morning outlined his strategy for the reinvigoration of the business, which included the company’s effective exit from all unregulated “grey” markets.
The territories from which Betfair has now pulled all marketing investments include Canada, Norway and Russia as well as several Asian and Latin American countries, and represented 16% of revenues.
“I think the defining strategic choice made by Betfair in recent years, with respect to regulation, was pursuing an international dot.com strategy rather than focusing on the UK”, explained the new Betfair chief in the company’s H1 earnings call this morning.
Corcoran, speaking in the wake of the company’s exits from Germany and Greece, argued Betfair had consequently “built such a dependence on grey markets”, that regulatory changes had been “as disruptive as landmines, an enormous distraction, an enormous shock throughout the business, when markets closed down one way or another.”
He said Betfair would now refocus investment on the fully regulated markets making up over 70% of its revenues, and the 5% with “reasonable visibility”, most notably Italy and Spain, where regulation is expected to progress favourably for Betfair over the next few years and enabling legislation for betting exchanges is on the statute books.
“We have already stopped marketing in jurisdictions with insufficient visibility. This decision was enacted at the end of October. Accordingly we expect this business to decline dramatically going forward. These markets include Norway, Canada, Russia, Ukraine, some Asian markets, some Latin American markets, and they were about 16% of revenues in the first half,” said the former Paddy Power COO.
The other pillars of Corcoran’s strategy included more focused investment aimed at helping the products and brand achieve greater resonance with the mass market; the sale of non-core assets including its LMAX financial product for £2.4m and its stake in social gaming company Kabam for $30m; identified annual cost savings of £20m; and a new organisational structure and recruitment of new talent.
Regarding the latter, Betfair has reorganised the business into units based on the exchange, sportsbook and gaming product groups, making external hires to the new roles of MD of Exchange and MD of Gaming, filled by John McElligot and Paul LaFontaine respectively. Current corporate development director Mark Brooker will become MD of Sportsbook. The company has also hired Mark Ody, formerly of Diageo, as brand director.
Betfair this morning unveiled a 5% rise in group revenue to £200.6m in the six months to the end of October, driven by a Euro 2012-fuelled 15% rise in football revenues. Games revenue however fell 2%, while poker continued to struggle, down 11%. Mobile revenue grew strongly again, up 108% to £18.1m. Earnings however dipped 2% to £42.3m, attributed to increased marketing investment. Pre-tax profit was 22% lower at £21m.
Article written by Stephen Carter
