Sports betting has proven to be a lucrative sector for ASX investors over the past 12-18 months.

The local bourse got a new entrant in the space on Friday with the IPO of Bluebet (ASX:BBT). Shares in the company closed at $1.78, marking a day-one gain of 56% after BBT raised $80m from investors at $1.14.

It joins fellow bookmaker Pointsbet (ASX:PBH), which is up more than 6x since its June 2019 listing and wager technology platform Betmakers (ASX:BET) which has climbed from around 5c to more than $1 over the same timeframe.

The sector has strong traction, and a key part of the narrative is the US where (state by state) gambling markets are opening up after the US Supreme Court legalised sports betting outside of Nevada in 2018.

Regulatory tailwinds for sports betting in the world’s biggest consumer market form an enticing backdrop for companies that can establish traction.

To assess the lay of the US land for Australian sports betting stocks, Stockhead caught up with Bluebet CEO Bill Richmond to get his thoughts on the market.

Sports betting ‘stateside’

While Bluebet is looking to build market share in its core Australian market, around $30m of its IPO funds will be allocated to a US expansion strategy.

Richmond said one area where Australian companies are looking to capitalise is in betting platform technology.

While the addition of US states greatly expands the addressable market, it’s also relatively immature compared to Australia which has the highest rate of per capita gambling spend globally.

“It sounds bizarre to say about the US but they’re short in technology expertise in this area,” Richmond says.

“Opening a betting platform takes a specific set of skills and we’ve got 20+ years’ experience in that area. So that’s a real focus and something we think we can offer the US market.”

In that sense, investors will probably need to take a long-term view. The four states that make up the vast majority of the US population – California, Texas, Florida and New York – haven’t implemented legal sports betting yet.

But for Richmond there’s an opportunity to prove out the model in smaller markets and get in position to benefit as the market matures.

Bluebet’s strategy is two-fold, starting with applications to run direct B2C betting services in smaller states such as Iowa and Virginia.

The broader goal though is to deploy its IP advantage through partnerships.

In early discussions, potential partners have indicated they “do want to see us have a functioning US operating system before they’d be prepared to do long term partnerships”, Richmond said.

“So going into these states is about showing what our product can look like. They are smaller markets with lower taxes and licensing costs so it’s more like a proof of concept.”

“And you don’t want to be in a huge centralised market because in those cases we’re going to be acquiring our own customers.”

Partnership approach

It is customer acquisition where Richmond says Australian companies will need to execute in order to penetrate the US market.

He cited the example of BetMGM, a joint venture between UK gambling company Entain and US hospitality giant MGM where Entain provides the platform and MGM provides the branding and distribution.

“Probably the key challenge for entering the US market is that cost of (customer) acquisition,” Richmond said.

In that sense, Aussie companies can use the IP developed in a more mature betting market to provide the technology.

“The strategy is to take our sportsbook-as-a-solution model, and talk to US companies with an established brand or customer base – whether that’s casino operators, sporting organisations or media companies,” he said.

“So we manage the really important parts of running a sportsbook. And they don’t have any touchpoint apart from leveraging their brands to bring in new clients.”


Apart from key partnership updates in the US market, what performance metrics should investors be focused on?

“Revenue growth always going to be the key,” Richmond said. And the main reason is that sports betting is capital-light as a business model.

“Our business is scalable. For example we doubled our growth in annualised terms last year – that’s from new signups and customer verification to people depositing funds and betting with us – but to meet that growth we only added two new staff,” he said.

“So it’s a fairly autonomous and easy process that doesn’t really require those fixed costs.”

Aside from top-line revenue, investors should focus on metrics that are indicative of customer loyalty.

In that sense, Richmond compared sports betting to BNPL plays such as Afterpay (ASX:APT) and Zip Co (ASX:Z1P).

“It’s not like utilities where you have one provider or mobile plans with two-year contracts,” Richmond says.

“Customers in this space may have 3/4 betting accounts and they move between them regularly. So it’s really important to make sure you develop customer loyalty which flows through to metrics we use.”

Brand engagement can be measured with indicators such as bets per active client per week, he said.

“Customer acquisition is important but once customers are in the door you’ve got to make sure they’re happy with product. Is the betting form in the right sport, are they getting enough info? You’ve got to have a high-quality product and offer that user experience.”

Near-term outlook

Along with its US focus, Richmond said Bluebet will also look to leverage the traction its developed in the Australian market.

In its IPO prospectus, Bluebet flagged total wagering turnover of around $390m for the 2021 financial year ended June 30, flowing through to net revenues of $36.2m and net profits before tax of $4.58m.

BBT generated those numbers based on a domestic market share of around 1.2%, which it hopes to push towards 5% over the medium term (3-5 years).

“Over the next 12 months we’ll be rolling out a new website and updated mobile app for the Australian market,” Richmond said, with marketing spend focused on the regional areas where the brand has gained traction.

“Then for the US over the next 6-9 months we’ll be focused on our tech platform, licensing, getting operational and then going out and selling our sportsbook solution as part of that.”