Paddy Power spreads bet on social, mobile and retail

Stuart Lauchlan Profile picture for user slauchlan September 1, 2013
Summary:
Paddy Power has betting shops in the high street, on your mobile phone, coming to your tablet and targeting your Facebook account - all in the name of a multi-channel strategy.

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Patrick Kennedy

Formed back in 1988 Paddy Power has become one of the best known names in the Irish and UK betting industry. It's also a shining example of an omni-channel market strategy paying dividends with online and offline interests combining to great effect.

At the moment online gambling is on the rise, says CEO Patrick Kennedy, pointing to a 38% growth in regular betters in the last two years.

He argues that the reason for the online business growing so fast to become 75% of the firm's total profitability is simple enough:

"New consumers are disproportionately online consumers. More retail customers are also becoming multi-channel."

Kennedy also cites Paddy Power's investment in mobile offerings as giving the firm an online lead, growing the number of mobile games on from 28 at the very start of the year to 68 by the end of June.

"Eighty-five percent of mobile phones now sold in United Kingdom are smartphones and we see tablets as the next big opportunity. There were less than 10 million tablet users last year in the United Kingdom, by 2015, that figure will have grown to 20 million.

"Almost two-thirds of our online Sportsbook customers now transact with us via Mobile and 45% of our first half online revenues came from mobile, that's more than double the rate of our quoted competitors.

"Mobile gaming is interesting. Gaining share wallet of customers with a mobile or a tablet preference, that penetration is lower than with customers who have a desktop preference, because the screen size, in particular in mobile, will be always a challenge, but that penetration is growing year-on-year and helps fund new product releases."

Expansionist thinking

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It's the same story in other global markets, he affirms, such as Australia with the highest tablet penetration in the world and the second highest smartphone penetration in the world, and Italy, the largest gambling market in Europe.

The latter is a good example of Paddy Power's digitally enabled expansion strategy in action with an initial emphasis on e-gaming and a prospective product rollout with Bingo, poker, and tablet optimized casino to come, as well as Mobile streaming and virtual products. Kennedy notes:

"Overall e-commerce growth rate in Italy are the highest in Western Europe. It has the second highest penetration of tablets in the world, behind Australia.

"The vision we had for Italy, which was of a disruptive innovative, engaging, online-only brand, is working and our market share has grown consistently since launch. We estimate that our online Sportsbook market share was in excess of 90% in each of the last three months.

"As in other markets, we have built positions of leadership in Mobile and in social. Mobile accounted for 40% of our Sportsbook stake in June in Italy, and that compared to an estimated industry average of up to 20%. We therefore believe that we have close to 20% of the Italian mobile sports betting market."

Not bad for a pitch that was only launched a year ago.

Social ambitions

Elsewhere, Kennedy wants to see Paddy Power build the same type of leadership in social media that it claims for its mobile offerings. He presents a rather startling statistic:

"Every man over the age of 18 on Facebook in the UK is connected to at least one Paddy Power fan. So we have the capacity to target those 15 million through a friend of theirs, and we also have strong reach through friends and fans in both Australia, and indeed already in Italy.

"We now have over 1.7 million Facebook fans and Twitter followers. That's more than double the level of our nearest international industry competitor. We also have much more engaging content.

"This is not just another channel to hard sell a message. It's said that selling on Google is like selling in a department store; but selling on Facebook is like going to sell at a drinks party. So you need your fans to be much more engaged, and I think that's a key point of distinction for Paddy Power."

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Importantly, Kennedy estimates that half of the firms fans in the UK are Paddy Power online customers, which in turn lends itself to greater online marketing efficiency. Online marketing spend at Paddy Power represents 20% of online revenues compared to an average of 29% for its major UK competitors.

Late last month, Paddy Power launched a beta of Paddy Power In-Play, billed as the first real money sports betting product in the world on Facebook. The app is intended to add social engagement to online betting, enabling customers to bet on a wide variety of sporting events via Facebook, whilst also giving them visibility of and the opportunity to engage with other users.

Getting the Facebook proposition correct is important, argues Kennedy:

"For operators who get this right, the Facebook platform of course is a huge opportunity. Every month Americans alone spend over 100,000 collective man years on Facebook, for better or for worse. We see it as an acquisition channel for the brand. We could target to fans of other betting brands for example, and we also see it as a means of growing our share of wallet of our existing online customers."

Back in the real world

All of this online activity combines with an increasing retail offline presence on the high street, not always welcomed by critics who complain of the temptation more gambling outlets in poorer areas, a charge rejected by Paddy Power. Kennedy explains:

"Retail is a very attractive market. It is very substantial, very resilient and it can be grown, as we have done by ongoing product innovation such as virtual products and self-service betting terminals.

"We are investing heavily to enhance our position in the number of new shops and also in the quality of our shops. We now have shops in over 90 towns and cities in the United Kingdom. Our new shops this year have included our first in Newcastle and our first in Wales, in Swansea, and we opened -- with another one to follow in Cardiff, in October."

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Online and offline converge to create new opportunities, with Kennedy citing the fact that 50% of regular online gamblers still visit betting shops every month.

"Third party research indicates that because of our e-commerce expertise, and because of the strength of our brand the loyalty of our customer base, we have an online kicker in the areas where we have shops, that's more than double the kicker that competitive shops deliver."

He adds:

"We have looked at our online penetration. We have studied this carefully right across the United Kingdom, and then we have looked at the penetration that we have in the economical radius around our shops.

"Consistently we see that we have a disproportionately high share around where we have shops, and consistently we see that we have a disproportionately high share relative to our competitors, right around where they have shops."

In the end, it's a potent combination of multi-channel outreach that serves to enhance the overall brand and create customer loyalty. Kennedy's summation:

"When somebody does actually get attracted to the Paddy Power brand, I think we can work well.

"I think Paddy Power customers love Paddy Power disproportionately. When you're a Paddy Power loyalist, if you go to a Paddy Power shop, you are much more likely to go Paddy Power online than retail customers of our competitors are to go to their online websites. I think there is a difference."

 Verdict

You wouldn't bet against further success.

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