Bet365 stands out among rivals for more than pay

The face most associated with Bet365 may be British Hollywood hardman Ray Winstone, who fronts the UK online gambling group’s brash TV advertisements.

But the brains — and the wealth — behind it belong to Denise Coates, the co-founder and chief executive, who, it was disclosed this week, was paid more than £220m for last year.

The payout, which ranks among the world’s highest executive awards, prompted criticism from those angry about rising pay and concerned about problem gambling among vulnerable people. It also turned heads among investors in the sector, who marvel at how the world’s biggest online gambling company, still family-owned, dominates its rivals from its vast office campus in Stoke-on-Trent.

“A lot of people look for the secret sauce with Bet365,” says Paul Leyland of Regulus Partners, a gambling industry analyst. “Focusing on the big picture misses the point. They are extremely good at product management and operations. Getting the details right but on a grand scale is a more important route to success.”

Privately held and majority owned by Ms Coates, Bet365 has no restrictions on how it pays its chief executive.

Ms Coates “is a very brainy person,” says Ralph Topping, a former chief executive at William Hill, one of Bet365’s UK-based competitors “and has one distinct advantage: [Bet365] is a family-run business, which means she does not have to answer to external investors.”

The high rates of remuneration at the company — as well as the £220m to its highest-paid director, believed to be Ms Coates, it awarded dividends worth £90m, according to regulatory filings published in Companies House this week — are also possible because of its continued growth.

In the year to March 25, Bet365’s revenues were £2.86bn, up 25 per cent from the same period a year earlier. Operating profits grew 31 per cent to £660.3m.

They have avoided paying silly prices to gain market share. They move into new geographic markets and start at zero, but in a few years dominate that market

Bet365 was established by Ms Coates in 2000, when she started to transform a small chain of betting shops in Stoke in central England owned by her father Peter, into an online betting giant.

She realised punters were avoiding shops and betting on mobile devices. Meanwhile, online gambling bans in other major countries, such as the US, China and India, had made Europe home to the world’s biggest companies for placing wagers via the internet.

Bet365 claims to have 35m customers, making it the world’s largest online gambling company. Global Betting and Gaming Consultants, an industry research group, says the global online gaming market is worth $43.1bn, with Bet365 having an 8 per cent share.

In the past three years, a wave of consolidation has shaken up the industry, with tie-ups between GVC and Ladbrokes, and Paddy Power and Betfair. These moves are designed to allow enlarged betting groups to better cope with new regulatory pressures and growing competition from online upstarts.

Conspicuously, Bet365 has not been involved in the dealmaking, despite amassing a £1bn war chest.

“What makes the Bet365 story more incredible is its growth has not come through acquisition,” says Warwick Bartlett, chief executive of GBGC.

“They have avoided paying silly prices to gain market share. They move into new geographic markets and start at zero, but in a few years dominate that market.”

The formula is similar everywhere. Hire a well-known actor, buy up ad breaks between live sports games, and plaster stadiums with its adrenalin-pumping messages. In Denmark, it uses Vikings TV star Travis Fimmel; in Australia, Hollywood action hero, Samuel L Jackson.

Mr Leyland says Bet365’s success is down to a combination of factors.

First, the company has invested heavily in technology, preferring to build its own online products rather than outsourcing development to third parties, the preferred route of other bookmakers.

Second, it innovates, and was among the first to introduce “in play” betting, where punters can get live odds to place bets during matches.

Finally, it has expanded aggressively across the world, including Southern Europe, Asia and Latin America, which were not considered mature online betting markets but have burgeoning middle classes with growing disposable incomes.

Bet365 does not provide a geographical breakdown of its operations or revenues. Analysts estimate three-quarters come from international sources.

The company’s rates of growth are consistent with other online gambling groups that have bet big on so-called “grey markets” — untaxed or unregulated areas — which offer high profit margins but come at the risk of governments shutting down access to customers at little notice.

Mr Topping says Bet365 probably operates in many grey markets: “They have more risk appetite than puritanical companies.” However, its expansion into many countries has helped to diversify its revenue streams and so reduce any regulatory risk.

He says there is “no chance” the company would ever float.

“There isn’t the transparency you need to go public. I don’t think there’s anything hokey going on, but there’s always been a cloak of secrecy about the company.”

That leaves the Coates family earning rich rewards but not the full value of the business.

“You couldn’t do a float, maybe some fund would buy it. But then, how do you replace a person like Denise Coates?”, adds Mr Topping.