Bet365: from Stoke-on-Trent car park to betting behemoth

When Denise Coates bought the website domain name Bet365 from ebay for £19,000 in 2001, it was just her and a handful of employees working from a makeshift office in a Stoke-on-Trent car park.

The private company, still majority owned by Ms Coates, is now a gambling behemoth. According to accounts published this week, it made just under £3bn of revenues in 2018 and awarded its founder a £323m pay packet — the highest of any executive in the UK.

The online gambling company, which almost went bust after the first dotcom bubble burst, has increased revenues by double digits every year since 2006.

“If Bet365 was a car company everyone would be jumping up and down saying what a great British asset it is,” said Warwick Bartlett, chief executive of Global Betting and Gaming Consultants who knew Ms Coates when she first set up the business.

But there are signs that challenges are emerging. The latest accounts showed a notable slowdown in revenue growth, from 26 per cent in 2017 to 9.7 per cent last year. Bet365’s share of the UK online betting market fell from 25.4 per cent to 20 per cent. It said that although the number of active customers was up 23 per cent, marketing spend had again increased.

The slowdown reflects a tougher UK market. Following a regulatory crackdown, Bet365 said it had invested more in technology to stop problem gamblers — something that had cost it both customers and capital.

“When [responsible gambling] is taken seriously it can have serious revenue headwinds,” said Paul Leyland, an analyst at Regulus Partners. “The UK may be a ‘one off’ in terms of the scale and timing of impact within these results, but tightening regulation is a recurring and international theme.”

Across established markets in Europe and Australia, gambling in shops and online has also come under increasing pressure. Italy banned all advertising of gambling this year, while the tax rate for operators in Denmark increased from 20 to 28 per cent.

Bet365 has largely managed to survive the harsher regulations, outperforming its industry peers. This year, as publicly listed gambling companies William Hill and GVC, the owner of Ladbrokes Coral, announced they were shutting 1,600 shops, Bet365, which operates solely online, took on an additional 600 employees.

They go where others don’t go. I don’t know how they do it and they do it very quietly but there is a general view that they make a lot of their profits in the Far East

Unlike its rivals, the company has grown organically, avoiding acquisitions and putting money into marketing instead.

One source close to Bet365’s operations described it as the “Amazon” of betting, due to its sheer choice of bets and fast customer service. It is known to shut down the accounts of punters that pose too much risk and, like Amazon, regularly undercuts competitors on price.

People close to the group said it had also pushed into unregulated markets, particularly in Asia, which are avoided by its publicly listed peers.

“They go where others don’t go. I don’t know how they do it and they do it very quietly but there is a general view that they make a lot of their profits in the Far East,” said one senior gambling industry executive.

Bet365 said it was licensed in 15 territories but did not comment on which countries it is active in.

The company has lobbied for sports betting to be made legal in Brazil, which looks likely to pass a law in 2020, and signed a partnership with an Argentine bingo hall this year with a view to accessing the online market in Buenos Aires. The Netherlands and Ukraine are also considering legalising gambling on sport.

Growth has also come from in-play betting, where punters can gamble on anything from the length of a kick to who will score the next goal during football matches, a sophisticated service that Ms Coates pioneered in the early 2000s.

The speed at which these bets can be placed means the volumes far outweigh the low margins. In-play betting makes up 79 per cent of Bet365’s sports betting revenues.

However the reliance on the product means the company has underperformed in markets, such as Australia, where it is not allowed.

Analysts have questioned whether Bet365 can replicate the success it has found in the UK and Europe in the US, which, following the repeal of a law banning states from allowing sports betting in May last year, has the potential to become one of the largest betting markets in the world.

Daniel Stone, head of data content at Gambling Compliance said the US would be a challenge for Bet365 which had “little to no brand equity there” and seemed “to have been less aggressive than peers in pursuing partnerships to gain access to state markets”.

Mr Stone added that in the long term, Bet365’s size may also be against it: “They needed to bring in £30m of revenue for each percentage point of growth this year — such scale makes it hard to maintain the kind of momentum they’ve shown over most of the decade.”

After many years of rapid growth, Ms Coates’ record-breaking pay packet might have hit its peak.

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