“If we go right back, I’m a keen punter.” Sam Swanell’s association with our industry is simple. He’s not sure where it came from – it wasn’t his family – but the PointsBet CEO always loved to bet. Even when he worked outside gaming during his early career, Swanell owned shares in horses and held a keen interest in racing. So perhaps it should come as little surprise that he now runs one of Australia’s biggest gambling operators. In 2015, as entrepreneurs are wont to do, Swanell went from working for the famous Waterhouse family to “earning peanuts” when he co-founded PointsBet. Sitting down with Gambling Insider, the executive tells the story of his career and the six-year journey that has shaped PointsBet to date.
A conscious decision
Swanell was not always a betting industry guru. At the start of his career, the Australian’s love of betting was restricted to an interest rather than a livelihood. He worked in financial services for a number of years, having completed a commerce degree at Monash University, until the “conscious decision” was made to spend his “finite weekend hours” on the racecourse. He tells Gambling Insider: “I did work on the weekends for an on-course bookmaker. I wasn’t necessarily thinking of where that could lead, but it was a conscious decision as I wasn’t necessarily thrilled with financial services. That’s where I learned the skills of a bookmaker in that traditional environment.”
Eventually, this experience helped Swanell attain his first full-time job in betting: National Sales Manager at Tote Tasmania, which held a regional monopoly before the Australian market opened up to European operators in 2008. The role, for Swanell, was an eye-opener – in that it confirmed his disillusionment with financial services and how much more he enjoyed aligning work with his passion for gambling. He comments: “I’ve always enjoyed betting, playing cards or betting on the horses, doing the form and handicapping. At Tote Tasmania, effectively I was head of all revenue channels, reporting to the CEO. It was chalk and cheese [from financial services].”
“My big break”
From world-class sportsmen to professional construction workers, many careers are defined by a big break. For some, that golden opportunity may never arrive. But for Swanell, that’s what his “very senior role” at Tote Tasmania presented. Previously, Swanell had worked at companies such as Macquarie Bank and AXA Australia – these were no small firms. And yet, despite managing 100 people or so within these organisations, Swanell felt “very low down” in terms of the influence he held.
He explains: “That first role I got in this industry – now it’s a smaller business but straight away I’m dealing with exciting subject matter. I’ve got large responsibilities; it’s given me the opportunity to mix with executive-level peers. So that was really the opportunity; that was my big break. From there, I commuted to Tasmania from Victoria – it was a one-hour flight but I did that for three years.” After huge success at Tote Tasmania, Swanell was offered the opportunity to start a sportsbook for the Waterhouse family in Australia. A famous Australian name was about to embark upon a new chapter – with Swanell at the heart of it – as TomWaterhouse.com was born. One big break had led to another.
Employee number one
The Waterhouses were bookmakers for over 120 years but Tom now wanted to transition his business to online aftertaking the on-course scene “by storm.” The sportsbook grew to become a “very high-profile business,” with all the functions of that business reporting to Swanell. Swanell himself then reported directly to the Waterhouse family, At the sportsbook for four years, taking it from zero to a peak of 200 members of staff, which he describes as “huge” for his personal experience. Swanell was “employee number one.” The organisation grew rapidly and even controversially: “The Waterhouse brand was everywhere and we did some innovative things in terms of integrations and the like that got up a few people's noses.”
Swanell is visibly regretful as he explains what happened to the brand next. In 2013, William Hill purchased TomWaterhouse.com – a decision that would have made Waterhouse and co particularly rueful in May 2018, when PASPA was overturned to legalise sports betting outside Nevada in the US. “The team wished that business hadn’t been sold, we would have been well positioned to look at opportunities in the US,” Swanell adds.
“The reason it got sold,” he recalls, “is that from a technology perspective, the business grew rapidly but we were having trouble with scalability of the platform and product velocity. We were using a good little local B2B provider, but the business was growing too fast for that provider. At that time, we looked around the world for other B2B platforms and did due diligence on a couple. We just couldn’t find anything I could say to the Waterhouse family was going to future-proof our business and really meet our needs for the next five to 10 years.”
The very foundation
Despite the TomWaterhouse.com journey ending, Swanell was about to leave his biggest stamp on the industry. Indeed, he wouldn’t be sitting for this interview if that wasn’t the case. Looking ahead, Swanell took the positives of both Tote Tasmania and TomWaterhouse.com forward. When it came to the formation of PointsBet in 2015, Swanell is adamant the experience he gained at both companies provided the “very foundation of the business.”
Here, Swanell is keen to emphasise the contribution of his two fellow Co-Founders – especially when it comes to the concept of points betting itself. Andrew Fahey is now Australia CMO, and his brother Nick is now Australia CCO; Andrew also worked with Swanell at TomWaterhouse.com. The initial concept about a niche spread betting model was down to Andrew, as Swanell helped with capital and Nick held the accounting fort. “The concept really grew quicker than we expected,” the CEO admits. “We did look to America with points betting but I think a lot of things needed to go right for a business like PointsBet. It’s really important to note that Andrew and Nick were there from day one, then Johnny Aitken came on board in 2018. The very first strategy and presentation, capital-raising documents we did were about proprietary technology, focus on US sports and using points betting as a point of difference.”
Returning to our earlier discussion about industry interest, Swanell holds the belief his enjoyment of betting and eye for bookmaking all play a vital role in the success of PointsBet to date. When the company started, it was a case of entering the mature Australian market with limited resources. The operator accepted its first wagers in 2017 and by December 2019 the Australian trading business was EBITDA positive. What was the magic recipe? “I think it really does come down to understanding the market, understanding the consumer and finding a niche.”
According to Swanell, PointsBet’s trajectory in the US – where it has an American subsidiary (PointsBet USA) – was similar. He says: “When we entered New Jersey, Johnny Aitken and the team were able to earn some decent market share very quickly, even though we were still very under-scale from a team size and our product. We pride ourselves on understanding what the client wants. Every business wants to understand the customer and hear what their customers are saying – but I think the difference with PointsBet is that the people in the initial executive roles all understood bettors and our market very, very well.”
Go, Johnny, go!
Given the importance of the US market to PointsBet, the presence of the aforementioned Johnny Aitken cannot be underplayed for Swanell. Aitken is PointsBet USA CEO and previously spoke to Gaming America for the US CEO Special. A fellow alumni of TomWaterhouse.com, Swanell was keen to bring Aitken on board having known both his personality and capabilities from their prior experience together.
“I’m the Group CEO and the others report to me – Johnny’s role is to execute in the US,” Swanell states. “Early on, he couldn’t do that without a lot of help from Australia because all the resources were there initially. He was our first employee for the USA. But now that he’s built up a great team around him, they’re executing our strategy on the ground. Johnny and I have a lot in common, as you will know from talking to him; we both love betting, he knows risk management trading. He’s built up from that and broadened his horizons.”
Like Swanell, Aitken was well aware of the risks involved in starting a new business. Clearly, his trading experience assured him this was a calculated risk, because starting anew meant “accepting when you start something you will get paid a fraction of what you’ve earned elsewhere. You go back to earning peanuts when you start off and that’s the risk you take.” This is an honest assessment of the scarier side of entrepreneurship – the side you hear less about when billionaire bosses are delivering Ted Talks on their rise to prominence.
One Swanell story in particular sums Aitken up. He tells Gambling Insider: “It takes a certain personality and mindset to take that risk but you’re excited by the challenge of that start-up environment. He comes in, having to take a haircut on remuneration in return for some upside in the form of options. I pitched in New Jersey and PASPA was repealed while I was in New York. I was meant to fly home but ended up staying in America for 3-4 months. So I basically said to Johnny ‘okay mate, this is happening.’ He packed up his life and young family, with one child at that stage, and was in America four weeks later. That’s the sort of flexibility and ‘up for the challenge’ attitude he brought to the place.”
A single-platform approach
PointsBet today has developed into a well-known brand in both Australia and North America, with eventual designs on becoming a global presence. For now, of course, there is enough work to do in existing markets – especially North America. The breakdown of PointsBet’s current business is a 50-50 balance between America and Australia. Naturally, it started ‘Down Under’ but, pretty soon into the company’s history, PointsBet had won market access in New Jersey. That meant the company’s 70-80 staff in Australia being joined by new recruits in the US.
“One thing we tried to do, perhaps a bit differently to others, is have a one-global platform, one-team approach,” Swanell affirms. “That’s easily illustrated when it comes to things like trading. We don’t have anyone working a ‘graveyard shift.’ We have daylight trading hours in America and Australia, and we’ve got an office in Dublin. Even now, we’ve got 250 people in America, 250 people in Australia, a team in Dublin, a team in Canada, a team in India and a team in Indonesia. So we’ve got 700-750 people worldwide.”
In Swanell’s eyes, this single-platform approach sets PointsBet apart from the “Flutters and Entains of this world,” who have grown quite plainly through acquisition. “They might have multiple brands,” Swanell posits, “but they’re also multiple platforms.” When PointsBet trades across 7-8 different states, by comparison, the operator does so on one system – and aims to continue doing so if it surpasses 30 states (including Canadian regions). “When we trade the Super Bowl, we do it once. We have people trading Australia harness racing and English greyhound racing,” he remarks, with distinct pride in his voice.
Mad about you
At the heart of PointsBet’s offering is a niche product. Swanell has already discussed finding this niche and, with the clue in the name, his brand’s speciality is points betting. Similar to operators like Sporting Index and SpreadEx, points betting centres on a greater reward for a greater margin of victory – and vice versa. Unlike traditional sports betting, where a wager on an over/under total either wins or loses, if a US player were to bet $20 on the over – for instance – and the total ended up at 205, the player would win 5x $20 ($100). If the total ended at 210, that bettor would win 10 $20($200). With this multiplier effect, the opposite is equally true, so a points total of 190 would lose the player 10x $20 ($200).
Swanell has already discussed the concept’s popularity. And, in fact, the wider popularity of US sports in Australia was another key tenet behind PointsBet’s early growth. US sports lend themselves very well to points betting, but similarly to an Australian audience. As early as 2015, NBA became the biggest betting sport in Australia, ahead of Australian Rules Football and Australian Rugby League. A favourable time zone is one factor, and so too are big personalities like LeBron James and Michael Jordan. Australians are mad about US sports.
“This is one of the reasons we were able to get to profitability. We built a lot of our quants models and algorithms based on US sports,” Swanell says. “It was great for our Australian business but put us in a strong position to launch in the US – that’s been a strength from day one. The US and Australian teams, based on that, are in some ways interchangeable. Marketing requires a different approach but, when we hire an engineer, it can be the same requirement across all our offices.”
The Australian market
Of course, the bread and butter of PointsBet’s business from day one, and which still forms 50% of core operations, is Australia. It is a market that has evolved, despite almost weekly advertising fines and, more recently, even more frequent fines for land-based giant Crown Resorts. “We have Flutter here, Entain, bet365, PointsBet, Tabcorp,” he reflects. “It’s a very advanced and competitive market – 2008 was when the Europeans came into the marketplace. We’ve had some consolidation since then. Ladbrokes have a couple of brands under Entain, too. So it’s a very big market and racing’s a big part of it. There are some advertising restrictions around live sport – the theory there being to protect young people watching live sport. It’s not too bad.”
One challenge the PointsBet CEO does acknowledge is state-by-state regulatory differences – which can be considered somewhat contradictory given the fact one regional licence grants you market access to all Australian states at once. This means keeping up to date with six or seven different sets of rules, with New South Wales notably having seen its regulator fine every operator in the market at one point or another.
An even bigger problem, which might come as a shock to anyone who casually places in-play bets online in the UK or US, is that online in-play betting is illegal in Australia. Swanell explains that you either have to bet in a shop or pick up the phone to place a bet, “which is absolutely ridiculous – because the play’s changed by the time you’ve reached a call centre.” It, too, is a “free hit” for offshore operators offering online in-play. Similarly, the Australian market does not allow online casino.
The local consumer
Despite only offering pre-match sports and race betting, however, the online Australian market generates around $5bn in revenue net per year. Swanell considers this an “unbelievable” feat – which is centred on building a product customised for the local consumer. It is something Swanell also recognises has been achieved by the UK market. But, crucially, not by the US market to date. He says: “When I look at the US, with a population 13x the size of Australia, I think most of the estimates about the potential of the market are actually under-valued. Goldman Sachs has the highest estimate of about $50bn a year in gross gaming revenue.
“America has pre-match, in-play sports betting, iGaming and racing. So why wouldn’t that market meet its full potential? I think it will; the sports are perfectly suited to in-play sports betting. Our Australian business, which has been profitable since 2019, has achieved that despite the fact most of our focus has been on North America. Australia’s success has sort of been in spite of the fact it hasn’t received a lot of love. Now that we’ve got the resources I spoke about earlier, we can make sure all jurisdictions get enough resource to deliver what they need to.”
It is obvious why that US opportunity excites Swanell – and it is obvious he is not alone here. PointsBet was set up with the US constantly in mind. He looks back: “When PASPA was repealed, it almost happened too quickly for us. But Australia opened up in 2008 and it’s now been 13+ years. California and Texas probably aren’t going to open up until 2023. So if you think 13 years after that, the market will continue growing until 2036. So while we’re very, very bullish on the opportunity in the US, it’s not going to happen overnight. That needs to be kept in mind.”
“The most remarkable part”
The challenge for PointsBet now is to keep up the early pace it has set. The operator took its first fixed-odds sports bet in March 2018 and is now one of the “material players” in the US market, competing with the likes of BetMGM, Caesars Entertainment, FanDuel, Flutter and DraftKings. Swanell believes “one wrong step” would have been it for PointsBet. “We didn’t have the luxury of making one mistake,” he concludes, as he reflects on the ‘right’ steps PointsBet has made. “Doing the deal to become an official sports betting partner of NBC was a real achievement at the time. Building our own iGaming platform – and becoming one of the six official sports betting partners of the NFL – and the final proof point, being one of nine operators that have successfully obtained a New York licence.”
Having started “under scale,” Swanell is confident PointsBet is now better equipped to compete, even if its fledgling reputation is arguably dwarfed by some of the aforementioned brands. With $500-600m in the bank, and a product the CEO believes is one of America’s finest, Swanell says PointsBet can mix it with the best in the business. “It’s a very competitive market in North America, it’s not going to be easy,” he admits, “but the fact we’ve been able to get the company to this point – that was probably the most remarkable part.”
Future aspirations and inorganic plays
The goal now is for PointsBet to be a holder of 10% sports betting market share in every state it is in, then cross-selling players into iGaming (where perhaps a 7% market share is more realistic). For Swanell, this is a “very achievable target,” although he accepts this will not be done purely organically. “There will be some inorganic plays to be made,” he states. “We purchased a business out of Ireland called Banach Technology [in March 2021, for $43m]. That really accelerated us in the area of in-play, so there are definitely more opportunities out there to help us scale through M&A activity.”
As our interview draws to a close, Swanell reiterates that, for the next two years or so, Australia and North America remain PointsBet’s main focus. But South America, Asia and Europe are territories Swanell feels can be breached efficiently in future – due to PointsBet’s single-platform approach. Whatever follows, however, there are no qualms in Swanell’s mind that his decision to co-found PointsBet has been absolutely vindicated. “For someone like me,” he closes, “to go from founding to being in the ASX200 – meaning we’re one of the biggest companies in Australia – it’s such an interesting an exciting journey, no doubt about it.”