19 May, 2021

Not so Different

Smarkets CEO and founder Jason Trost speaks to Tim Poole about the sports betting company’s history, as well as the concept of exchanges as a whole. According to Trost, though, the distinction between exchanges and sportsbooks should not be overstated

Tell us about the Smarkets journey from day one.

I studied computer science and my first job out of university was a stock trader. When I was a trader, someone showed me a website that lets you trade the Presidential Election. I was and still am a political junkie and thought ‘holy cow, it’s amazing that you can actually trade the outcome of an event.’ As a trader, I was trading stocks for companies which I had no idea what they did. I thought it was so cool trading an outcome of something you could watch on TV or have an opinion about. But even though I was a professional trader and had a degree in computer science, I couldn’t understand it very well. Then one of my best friends from university was living in London and told me about a company called Betfair Exchange.

He said they were doing the same thing for sports but their technology is really bad and their transaction costs are high; so why don’t we try and get into this space? That’s the founding story, really: both my co-founder and I were tech geeks – we weren’t sports bettors. I don’t even know if my co-founder really watched sports at all when we founded the company. So I think we have quite a unique founding story for the industry, where this company was founded with the idea of event trading, sports betting as financial technology, not sports betting as entertainment while they were watching the game. I think that ethos has set us apart from everyone else and I think it will service us well when we continue to take on the industry.


Would you say that reflects an outside point of view coming into sports betting?

Oh, yeah, I would say it’s a complete outside point of view. Neither my co-founder nor I had any sports betting experience, or much interest in sports betting. We came from a financial trading perspective – one of the main events people want to trade is sports, don’t get me wrong, but we view our mission as much larger than sports betting.


Looking at where your company is today, what are the goals and plans looking ahead?

Our goal is to fix betting. We think betting is broken, we think betting rips people off and we think betting technology is really bad. We’re on a mission to take the financial technology I just spoke about and fix this industry. The main thing that needs fixing is price: punters are getting ripped off pretty much every time they bet. Some realise it, some don’t – most don’t. The first thing to fix betting is to make pricing fair. The second thing is the technology is bland, hard-to-use and clunky. We’re also on a mission to streamline the experience so it’s much more pleasant, much less bonus-ey, much less shout-ey and a much clearer interface to use for sports betting.


And how do you broadcast this to players, without them perhaps seeing you as just another bookie claiming to be fair?

One of the easiest ways is odds comparison. In a lot of cases, we’re top 10 for click share on Oddschecker through our SBK sportsbook. We have an exchange at Smarkets but nobody really realises that a sportsbook is a very simple exchange. What we’ve done with SBK is built a sportsbook experience that sits above the exchange. SBK competes with your Bet365s, Sky Bets and Ladbrokes, and Smarkets Exchange is for professional punters, as well as people who want to leave Betfair Exchange and Betdaq etc. They key product we’re super excited about is SBK. In terms of getting the message out there, Oddschecker is one of the main ways we’re getting that out there right now.

Take the recent Grand National, bookmakers’ horseracing prices are a joke compared to our prices. Odds comparison is one of the best ways we’re pushing that message. We’re trying to experiment with different ways to do price comparison within our app, so we have this notion of price plus – which means if we detect that we have the best price compared to a suite of bookmakers, we put a little green triangle on there. We’re trying to improve on that feature.


How do you set a fair price, without higher margins, for it to be profitable enough in the long term?

We’re the only sports betting company in the world that’s vertically integrated: we have every component of a sports betting company that you’d want in-house. Even Bet365, they don’t have an exchange for example. We have all the main components in-house: technology, frontend, backend, trading, exchange, sportsbook. We’ve vertically integrated everything and used engineering to automate everything, and pass on those savings to the customer. So with that financial technology, we’ve been profitable the last seven years or so.


How would you rate the popularity of betting exchanges overall right now?

In terms of market share, I estimate exchanges are about 10% of the market in the UK – one in 10 bets can be considered an exchange bet. From my perspective, I think people don’t realise that whether you’re betting on the exchange or the sportsbook, it doesn’t matter – it’s the same bet. That’s part of the reason we’re so excited about SBK. We take all the pricing advantages of the exchange and put it into a sportsbook interface. Punters get all the benefits of the exchange without the complexity of the exchange. Whether the exchange concept is going to grow, from our perspective that’s not the issue anymore – because the punter can use any interface with us they want. I think that’s the future – this idea of exchanges being an apple and sportsbooks being an orange is the wrong one. To me an exchange is an apple and a sportsbook is a bad apple; sportsbooks are basically an exchange with one seller and you can’t negotiate on price.


So it’s not really about promoting the concept of the exchange for Smarkets?

With SBK, we want to show the world it doesn’t matter whether it’s an exchange or not. To us, it’s more about how you facilitate someone placing a trade – we don’t care what part of our site you use; we’re a vertically integrated company. From a consumer perspective, we’re not emphasising the exchange. Professional bettors should use our exchange but in general we’re trying to counter for the mass market by putting exchange prices on our sportsbook: in general, we absolutely crush Sky Bet’s prices. So we want to bring the hidden jewel of exchange pricing to the normal punter experience.


On that note, what did you make of Betfair Exchange’s high-profile advertising campaign with Clive Owen – which aimed to educated punters about exchanges?

You know it’s funny: you’re the only person I’ve ever heard talk about that. I thought it was crazy they got somebody that high profile on board. My message to Betfair would be fill your boots: Betfair should know this better than I do, they’ve been trying to do that for 10 years and it hasn’t worked. I think it’s a mistake to try and explain the exchange concept the way it is right now to a normal punter. The message just doesn’t resonate. They are, of course, free to do what they want but I don’t think the Clive Owen ad campaign is going to be a good one.

That said, long term, I think one of the big mistakes Betfair made with their exchange was it’s a very esoteric interface.

We wanted to capture market share from them, so our interface is similar; but I think what the industry really needs is more of a stock market interface. Once you start to see that, you’ll see the exchange market open up. The Betfair interface, and of course our own, is too esoteric and hard to understand. If you compare it to a traditional financial market, it’s hard to understand and there’s better ways to display that information – that’s one of the things we are working on in the background. But in general I think our growth and success is going to be coming from SBK, because most people don’t care about trading; they just want to bet on their team at the best price. That’s where the sportsbook experience excels.


Finally, what are your expectations for the Euros and is there anything you’ll do differently from a marketing standpoint?

We’re working on scaling up. SBK is a new product for us – we’re still very much in the development phase with it and we take customer feedback very seriously. So the Euros is another opportunity for us to give customers what they want and grow on our past success. There’s nothing specific we plan on launching for the Euros except making our product better and better, and building a sportsbook everyone wants to use.