See below for this month’s Waterhouse VC newsletter. We specialise in global publicly listed and private businesses related to wagering and gaming.

Since inception in August 2019, Waterhouse VC has achieved a gross total return of 1891% as at 30 June 2023, assuming the reinvestment of all distributions.

Checking the fiat odds

As outlined in our previous newsletters (for instance, July 2022), wagering affiliates mainly earn their revenue by directing bettors to bookmakers. The primary revenue models employed are revenue sharing and cost per acquisition (CPA). There exist several strategies for wagering affiliates to channel traffic towards bookmakers, such as creating sports-centric media content or contrasting various bookmakers' odds and promotions.

An example of one of the most well-known bookmaker comparison websites is Oddschecker. The platform compares odds and promotions from more than 25 UK bookmakers while also offering betting tips and insights.

*Comparing odds for the 4th Ashes test. Source: Oddschecker*

Affiliates like Oddschecker particularly thrive in emerging markets, like the US, where operators fight fiercely for customer acquisition. Both large and small operators spend up to $1,000 to acquire a customer, leveraging all available marketing channels, including affiliate marketing. The two largest US wagering operators spend over US$1 billion on marketing.

A number of affiliates have identified the potential in the US market, concentrating their organic growth and M&A activity in this region. In May 2021, Better Collective completed its US$240 million acquisition of The Action Network, a US-based affiliate offering odds comparison, various podcasts, and other types of media content.

*Comparing odds for Major League Baseball. Source: The Action Network*

In July 2021, Bruin Capital purchased Oddschecker from Flutter for a potential total of US$218 million (US$190 million upfront plus deferred considerations). With this acquisition, Bruin plans to enhance Oddschecker's services while supporting its foray into the lucrative US market.

“There are strong links between Oddschecker’s UK development and its opportunity in the US, where the marketplace is very fragmented, and discovery and customer acquisition experts will be highly sought after.” - George Pyne (Founder of Bruin Capital)

Furthermore, in November 2021, FansUnite acquired American Affiliate, a collection of US affiliate websites, for $58.2 million (equivalent to 9.7x EBITDA). At the time of the acquisition, American Affiliate had delivered 150,000 new depositing customers to US wagering operators, including DraftKings, FanDuel and BetMGM (iGaming Business).

Checking the crypto odds

While the US and other newly regulated markets present exciting opportunities for affiliates, we are particularly enthusiastic about the prospects for affiliates focused on directing bettors towards crypto wagering operators.

We last covered the broader opportunity in crypto wagering in May. According to GlobeNewswire, the global online wagering industry generated revenues of approximately US$58.2bn in 2021, with a projection of US$145.6bn by 2030. We foresee that the industry's future growth will primarily be driven by the widespread adoption of crypto wagering.

Similar to the US market dynamics, numerous crypto wagering operators are currently vying for market share. Consequently, affiliates are well-remunerated for delivering depositing bettors to crypto operators. Revenue shares offered to affiliates can be as high as 50%.

We believe that there is a particularly significant opportunity for a comparison website dedicated to crypto operators. This untapped opportunity will remain attractive as the crypto wagering industry matures.

Considering that OddsChecker was sold for US$218 million and generates 97% of its revenue from the UK, an odds comparison website operating in the substantially larger crypto wagering segment presents an immense opportunity. Furthermore, unlike crypto operators themselves, affiliates are typically valued at a significantly higher multiple of earnings. For example, Better Collective is currently valued at 12.5x EBITDA.

Betscanner

Betscanner's main service will be to compare odds from sporting events offered by crypto bookmakers. The data required for odds comparison will be obtained either via data scraping or through direct partnerships with the bookmakers, with a focus on improving live odds comparison, user experience, and e-sports.

When established, revenue sources will include operators paying monthly retainers to not only drive new traffic but also ensure that they retain existing users through market visibility. Marketing tactics will encompass SEO, Google Ads, influencer marketing, social media campaigns, and exclusive sign-up bonuses.

Betscanner is one of several exciting opportunities that Waterhouse VC is participating in.

Media

On 21st-22nd June, our Portfolio Manager, Peter Stevens, spoke at iGaming NEXT Valletta on the topic “State of play: Can the economic crisis yield unique opportunities?”. If you would like to watch the panel discussion, here is the link.

For wholesale investors interested in following wagering and gaming industry news and trends, please follow our updates on Twitter (@waterhousevc) or through our website at WaterhouseVC.com.

All the best,

Tom

DISCLAIMER AND IMPORTANT NOTES

Please note the above information in relation to OddsChecker, FanDuel, DraftKings, Better Collective, The Action Network, Bruin Capital, Flutter, FansUnite, American Affiliate and BetMGM is based on publicly available information in relation to the company and should not be considered nor construed as financial product advice. The above information in relation to Betscanner is based on information provided by the company and should not be considered nor construed as financial product advice. Waterhouse VC has an option deal and has signed an agreement with Betscanner. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.

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