Alarm bells, a technology revolution and travelling back in time. How are these connected?
Find out below in Gambling Insider’s exclusive interview with Co-founder and CEO of FSB Tech, David McDowell.
Looking back to when you co-founded FSB Tech in 2007, did you expect to be where you are today?
I would say starting a company usually takes twice as long as you expect, maybe a bit longer. We’ve done seven rounds of funding over 11 years, which basically means my job as a CEO is mostly going out and raising money. That’s difficult because you’re not putting time into growing the business. There are so many things along the way such as "if we just could have closed that deal, we could have accelerated our growth." But, looking back, I don’t know that I would have made many decisions differently. Part of what we were trying to do in building a really highly automated sports betting system that’s driven by live data feeds was wait for a whole industry to be created around data feeds, because they just weren’t there back in 2007.
We used Opta’s most detailed in-play data feed but the reality was it was 30-40 seconds delay. We came up with really innovative player ratings and doubled the number of page impressions in some of the Metro’s fantasy football, proving live data presented to the customer would drive engagement. But the data feeds just weren’t available and a lot of what we had to do was wait for them so we could build the sportsbook we have today.
If you could travel back in time to 2007, what’s the one piece of advice you would give yourself?
That’s a tough one. I think there are so many challenges with starting something up and I think doing things on a relatively small budget is always a challenge as things take longer, because you don’t have the capital to attract the right people or invest into the team. So, really, just raising more capital faster would be the biggest piece of advice. But, again, raising more capital before the data feeds were even ready to build it wouldn’t have been effective; if I raise too much capital and can’t deploy it effectively, I’m creating too much dilution for myself. That said, it’s always better to err on the side of raising more money than less and, going back, it would have been much nicer to have more cash on the table.
In 2009, we were in a position where the global economy basically went into meltdown and I think that changed a lot of the way bookmakers looked at putting new content on their sites. They stopped integrating things so we had a little bit of bad luck there. Of the hundreds of things we could have changed, probably the most important thing was getting more capital in. Right now, our biggest competitors are very well capitalised. Quite often, it’s because they’ve taken money out of black markets or they were spun out of a large bookmaking organisation. It’s difficult to come up from nothing and catch up with something like that on a technology-first proposition.
You recently signed a deal to supply a sportsbook for the Football Pools. What was the thinking behind this deal and are there any more new clients in the pipeline?
Yes, we’ve got clients that are signed and one’s hopefully going live in the next couple of weeks. What’s great about the Football Pools is they bring an audience and one of the UK’s most recognisable brands. It’s going to be very interesting to see how putting casino games and fixed-odds betting in front of a pools audience plays out. What we’re doing as a company is we’ve spent a lot of time getting the operations, technology and product to the point where we can attract larger, existing operators who want to move away from legacy technology to our platform. We’ll be able to help the Football Pools expand the content they’ll put in front of their audience.
You run multiple brands in several countries – with just 12 full-time trading staff. Why do most suppliers require more staff and how are you able to use fewer traders?
Sports betting is going through a technology revolution which is probably a decade behind, but very parallel to, the financial services industry. You used to have pits of traders yelling, sending hand signals and doing things manually. That is not too dissimilar to a lot of large bookmakers today who still have hundreds of traders manually changing prices and typing ‘Manchester United’ every Friday. Using data feeds to drive algorithmic pricing models, with traders not setting up events or compiling odds, mean our football models are 100% automated. We have someone who is managing risk, looking at players, trying to spot anyone who’s breaking the rules. Yet the number of bookmakers out there who have Bet365 and Betfair up, just manually copying odds – if you’ve got cheap labour, you can get up and running without paying for data feeds.
We’ve always taken the view that getting official data feeds will give us a better-quality product. I know one of our competitors was recently found taking late bets on greyhounds because they didn’t know the dogs were all the way around the first corner of the track. Because they were manually typing odds and copying things off other websites, without the official data feeds, they didn’t have any idea they were taking late bets. Anytime somebody’s got a team of several hundred traders, to the uninformed it looks like a big, impressive operation. To anybody who understands what actually happens in a trading room, they should look at those organisations and recognise they are using very old technology that isn’t keeping up with the times. There should be alarm bells rather than comfort.
Do you think this problem will always exist or will the industry completely move away from this model?
I think it’s not just the sports betting industry. We’ve seen in industries all across the globe that companies stuck on legacy do fine for a while then get to the point where everybody else has gone past them. It’s tough to know, if you’re doing well and making profits, if those profits are as good as they could be. If you look at everybody in the UK, one of the most competitive sports betting markets on the planet, there are some large operators with fantastic brand recognition because of their retail presence. They’re almost all on legacy platforms. It’s difficult: there’s a high cost of switching. But, when you look at their performance against Bet365, who took the decision to control their own technology, these guys have been left in the dust.
A lot of our early customers have been independent bookmakers with 10-50 shops and we’ve given them an online and mobile presence. That allows the small independents a product that competes with some of the big, tier-one operators. Those stuck on legacy technology are helping a whole new class of bookmakers nip at their heels. At the same time, some of the others like Bet365 are pulling away. If I was stuck on legacy technology, I’d be very scared right now.
You recently discussed a “nobody got fired for hiring IBM” mentality. How much is that hurting sports betting?
It’s helping legacy suppliers, because they can say ‘look at all these people using my platform.’ The challenge is, if you’re a new buyer of sports betting systems, how do you weigh the risks? People often ask the wrong questions. They’re asking ‘how many live events do you trade?’ But that’s more a function of what live data feeds you buy and how we’re choosing to manage a service for that company. If you look at legacy suppliers, they’ve got great customer success stories and huge amounts of volume going through their systems. If you look at a company like ours, the challenge is we’re still a small company. There’s a risk that we haven’t run a William Hill site – I get that.
This is the challenge of taking the company from zero to competing at world-class levels. You can’t go out and prove you’ve got volume without proving you’ve got volume. It’s kind of chasing your tail in some respects. In 2016, we won some business from an existing African operator and went to handling 200,000 bets a day, overnight. Stories like that show you: actually, modern technology is better, more efficient and more scalable. We run things in ways you just can’t do with legacy technology.
There are two very different business models. One I believe is a very outdated model of a legacy platform where you buy your software license, it takes 18 months to build and launch, and, if you’ve got any changes, get in line. It was a great model for the 1990s and 2000s. Now, sports betting as a fully managed service has really hit the mainstream. People see the benefits and I think it’s a great business model for media companies and casinos. But anyone who’s going to be a tier-one operator needs control of their own platform, which you don’t get from a fully managed service. That’s why I keep on talking about the efficiency of our platform. Anyone who wants to control their own teams and systems, they don’t have to hire 150 traders.
What are your plans for the US market?
We’ve submitted our application for the New Jersey license. Clearly, we’re not one of the frontrunners. I haven’t been in a position where I wanted to push all my chips on the table and say "just go into America." Quite frankly, we’ve got an absolutely booming Africa business. We’ve just been approved in Manila to take retail bets in physical shops. We’re in a period of a lot of excitement and expansion for sports betting on different continents.
We’ve looked at what it takes to roll out to casinos in Asia and America. But America’s still going to be highly fragmented. State-by-state legislation means it’s going to be incredibly expensive. It’s an opportunity which is incredibly exciting. The first couple of months of New Jersey are showing really positive numbers. In 2013, when casino games came out, the numbers were quite lacklustre. Here, with sports betting, the initial numbers are phenomenal. I think that’s going to get the ball rolling but we’re still going to see a three-to-five-year rollout.
What does the future hold for FSB Tech?
We’ve been growing at a phenomenal rate. We were running one sportsbook in the beginning of 2015. Three years later, we’re operating 32 brands on four different continents. We’ve just spent the last 18 months making sure our operational infrastructure is in place and scalable. I’ve no doubt we’ve got the most efficient sports betting platform in the market today. If you’re a casino that needs an omni-channel solution, we’ve got a phenomenal product. We’ve taken our time making sure the company is ready to take on the business.
If you’re a multi-state operator in the US, we can set up 10 different platforms in 10 different states, allowing you to have centralised control at a phenomenally different total operating cost than if you’re on a legacy system or managed service. I think that’s where the future is heading, more of a shared business model between a B2B supplier and operator. We can provide the platform, help with trading, help negotiate fees with data feed suppliers but then hand over the keys and let your traders take care of it. It’s a much healthier relationship than the antagonistic one where you pay every time you want a change made.
We’re now at a point where our sales pipeline is absolutely exploding; we’re talking to much larger companies. The future is going to be fantastic. Our challenge is trying to make sure we don’t get overly greedy and bring on more customers than we can handle.