Pulse
Sports Betting 10STAR
10star: Pricing and Risk Management key functions
The last year has seen a growing focus on pricing and risk management as a subject of conversation within the sports betting industry. Given the strength of headwinds that operators now face, their importance is only
likely to increase. Simon Trim, strategic consultant to market-makers and risk management specialists 10star, talks to G3 about how data-driven strategies should be shaping the industry.
What is the biggest trading challenge that you think operators face day-to-day, that they might not be giving enough attention to?
Put simply, risk management. Many sportsbooks do not possess the tools or information to know and react to what their book exposure is, which is a situation that has evolved through the "internet age" of sports betting.
A shift from pre-match to in-play precipitated a raft of additional market types made possible through pricing automation software, generating exposure for operators that is impossible to manage appropriately in the traditional, manual fashion. For many operators however, in-play was a new product vertical generating incremental revenue from customers who were generally less price sensitive. Rather than try and manage this additional exposure - which requires complex automated risk management - many sportsbooks chose to offer in-play pricing as generic content, pushed to a soft customer base through promos and free bets, concentrating their risk management efforts on restricting all but the most "recreational" customers. Te issues with this are now coming home to roost.
In a world of vastly increased cost of operations and against a backdrop of tighter regulation, sportsbooks are reliant on pushing poorly priced but high-margin products such as SGPs and don't possess the capability to differentiate from all the other lookalike sportsbooks. Te problems with this are two-fold. Firstly, whilst SGPs are boosting profits in the short term, they are also leaving many sportsbooks as sitting ducks of a catastrophic payout due to the large, unknown liabilities they are running up on an outcome that will eventually land - but they have no means of mitigating because they don't have visibility of them.
P106 WIRE / PULSE / INSIGHT / REPORTS
Tis focus on pricing, trading and risk management as specialist functions is core to the ethos of 10star and is how we are able to generate higher profits for our industry partners than other existing B2B solutions.
Data-driven strategies are shaping the future of the industry. What is 10star's approach?
Simon Trim Strategic Advisor 10star
Secondly, the poor value that these bets create for customers means that recreational players burn through their disposable betting income more quickly and churn more readily. For any regulated market there are a finite number of potential users and as these churn it leaves operators fighting over fewer customers but with no means to differentiate their product.
Automated risk management can solve all of these problems by managing liabilities correctly, producing better prices for sportsbooks - that are also in-tune with more efficient marketing efforts - and allowing them to differentiate from the competition by having the confidence in laying a price that allows them to be different.
Te saying ‘data is the new oil’ was first coined around 20 years ago, reflecting the fact that data would be the new wealth creator for industry in the 21st century in much the same way that oil had been since the mid 19th century.
However, there's also a parallel in how value is created, because in their raw forms, neither oil nor data are worth as much in their unrefined states. For operators, how they extract and monetise data that they possess is becoming increasingly important. It's estimated that the volume of data in the world will double every two years, meaning that operators are increasingly going to require powerful tooling to understand what the data they possess is telling them and how they should react.
At 10star, we have a deep history of using data for both real-time pricing and trading decisions and historical analytics. We've combined these skill sets together to release a first-of-a-kind
The saying ‘data is the new oil’ was first coined around 20 years ago, reflecting the fact that data would be
the new wealth creator for industry in the 21st century in much the same way that oil had been since the mid
19th century. However, there's also a parallel in how value is created, because in their raw forms, neither oil nor data are worth as much in their unrefined states.
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