Waterhouse VC: Crypto wagering - Crypto gambling

In his latest analysis, Tom Waterhouse of Waterhouse VC explores the burgeoning crypto wagering sector, highlighting strategies that enable crypto operators to differentiate themselves in a highly competitive landscape.

“Innovation is the ability to see change as an opportunity, not a threat.” – Steve Jobs

The gambling industry has consistently thrived on innovation, particularly in areas such as user experience (UX), marketing, and payment solutions. Leading online crypto operators like Sportsbet.io and Stake.com have established a user experience comparable to traditional fiat platforms such as FanDuel and DraftKings. These operators are not only achieving remarkable growth, but they are also setting new benchmarks in both marketing methodologies and payment processing.

To illustrate, as of May 2022, Sportsbet.io recorded an impressive monthly turnover of $2.7 billion, a figure that has likely increased. In context, Australia’s largest operator, in 2023, reported an average monthly turnover of $1 billion and holds approximately 45% of the market share in the country.

Innovative Marketing Strategies: The Power of Influencers

At the forefront of crypto wagering marketing are major players like Stake, which have effectively utilized celebrity partnerships—Drake being one notable example. In contrast, up-and-coming operators like Shuffle.com are embracing a more grassroots approach by collaborating with micro-influencers who boast dedicated followings of 1,000 to 10,000 engaged fans.

Micro-influencers offer a cost-effective solution, often overlooked by traditional operators. These influencers cultivate genuine interactions within their communities, fostering deep engagement. For instance, an influencer with 10,000 devoted followers may generate a significantly higher return on investment than one with a million followers who are less actively involved.

Example: The success of Drake in the realm of online casino streaming illustrates the broad appeal and reach that come from high-profile endorsements.

Disruptive Innovations: Shuffle in the Limelight

Founded in 2023, Shuffle is rapidly redefining the landscape of crypto wagering through innovative marketing and user retention strategies. The company has already facilitated over $6 billion in bets, a remarkable feat achieved under the leadership of Noah Dummett, a young entrepreneur with a wealth of experience in the crypto space gained from his tenure at leading exchanges like Bitmex.

Dummett envisions Shuffle becoming the global leader in crypto wagering, driven by a youthful, dynamic team currently consisting of 55 employees averaging just 24 years of age. Their ambitious goal is to double the workforce within the next 18 months.

Prominent figures like Ishan Haque are leveraging influencer marketing and community-focused initiatives by tapping into live streaming, betting group chats, and active crypto communities. Shuffle’s turnover has surged tenfold in less than a year, underlining the efficacy of their model.

The Hollywood Approach: Strategic Partnerships

Following in the footsteps of giants like Stake, Shuffle aims to secure high-profile brand ambassadors and endorsements in upcoming announcements, including partnerships with top-tier sports teams and mainstream celebrities. Initially, smaller operators must focus on crafting marketing deals that promise a significant return on advertising investment.

Key performance indicators for both small and large scale partnerships include:

Conversion rates from viewer engagement to sign-ups
Rate of first-time deposits from sign-ups
Retention duration of depositing customers

By analyzing these metrics, operators can set realistic expectations for larger deals, which often pose valuation challenges.

Illustrative Example: The partnership between Alfa Romeo and Stake.com emphasizes the potential reach and brand visibility available through strategic sponsorships.

Customer Retention: The Key to Long-Term Success

After securing influencer partnerships, maintaining ongoing customer engagement can be a challenge. To enhance retention, operators should implement strategies like personalized promotions, active community engagement, and ongoing promotional events throughout the influencer partnership lifecycle.

Haque attributes Shuffle’s initial successes to their swift adaptation to product feedback. He emphasizes that marketing strategies are rendered ineffective without an engaging product.

Shuffle’s platform features a custom-built user interface and proprietary games designed for optimal speed and user satisfaction. Notably, they have introduced "Advanced Dice" for seamless auto-betting across various games, significantly enhancing user experience.

Furthermore, Shuffle’s casino offerings boast industry-leading return-to-player rates, with house games at 99% and slots at 97%.

At Waterhouse VC, we assert that delivering a comprehensive suite of premier wagering products is essential for success. This is why our investment focus leans towards B2B suppliers rather than B2C operators; in this fiercely competitive sector, B2B partnerships are pivotal for creating product differentiation and superior user experiences.

Entering the Crypto Wagering Market: A Step-by-Step Guide

New entrants, both in B2B and B2C arenas, stand the best chance of success by zeroing in on a niche market that lacks a clear leader. For Shuffle, this meant strategically targeting Japan, a region previously underserved by crypto wagering operators.

When marketing to diverse regions, comprehensive understanding of localization, cultural dynamics, and acquisition channels is crucial. Instead, newcomers might benefit from concentrating efforts on a single market, employing native talent for support, aligning branding with local culture, and developing content that resonates with local audiences. This strategy is particularly relevant for emerging regulated markets like Brazil.

The growth trajectories of companies like Shuffle, Stake, and Sportsbet.io demonstrate that a differentiated product offering, innovative marketing approach, and exceptional user experience can accelerate revenue growth within the increasingly competitive gambling landscape.

I discussed insights regarding the U.S. competitive environment in a recent Ausbiz interview, touching on the implications of rising taxation and regulation in the evolving U.S. wagering market, which may strain smaller operators’ competitiveness.

For wholesale investors keen on staying updated about developments and trends in the wagering and gaming sectors, please follow our updates on Twitter (@waterhousevc) or visit our website at WaterhouseVC.com.

DISCLAIMER AND IMPORTANT NOTES

The information regarding Shuffle.com, Sportsbet.io, Bitmex, YouTube, Stake, FanDuel, Flutter Entertainment Plc, and DraftKings is sourced from publicly available data and should not be interpreted as financial advice. The fund has a position in Flutter Entertainment Plc. The provided material is general and does not constitute investment advice. Readers should seek professional guidance tailored to their specific circumstances.

This material is not for distribution in the United States. Any offers to sell or solicitations to buy securities in the United States are not permitted under current laws.

Note: Past performance may not be indicative of future outcomes, and no guarantee of financial performance or capital return is provided.

Governing Law: This document is governed by the laws of New South Wales, Australia.