Edition 13: Microbetting: The Teenage Sex of the Betting World?
Everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.
Good morning and happy Monday, welcome to Edition 13 of The Handle!
This week, we are going to dive into the wild west of microbetting. Microbetting is a brand new, shiny object for all the major operators in the sports betting world. Everyone wants to be at the forefront of it and is willing to spend handsomely to ensure a good market position. At the same time, microbetting has yet to fully take off for consumers and is not the same neatly defined market that traditional sports betting is. With that, let’s start with the basics.
What is microbetting?
Microbetting at its core is a method of continuous wagering on very discrete, quick to realize outcomes. For example, companies will offer odds on single play outcomes in an NFL game, like “How many total yards will the next play gain” with a mutually exclusive and comprehensively exhaustive (MECE) set of menu options. Due to the rapid nature of realization and offering, these lines have to be offered with fully automatic pricing. There simply isn’t time for humans to accurately offer lines on each given play. The line between live betting and microbetting has always been a bit blurry, but the hype around the buzzword is currently undeniable with the flood of recent investment and partnership announcements. Traditional operators have taken notice, with Draftkings integrating B2B microbetting product Simplebet’s tech into their Sportsbook for Week 1 of NFL season in 7 states.
Why is microbetting making such a big impact?
The logic, at least as presented by providers, is that people will love having the opportunity to make bets on small exciting outcomes that can be realized instantly. JP Morgan analysis argues that robust live betting options, including microbetting, are part of what drives the massive upside within the betting market. Ostensibly, some of the hype derives from the popularity of the closest thing to microbets we have right now. For example, there is constant buzz around “Will a run be scored in the first inning” in major league baseball, as well as the fervor of media around “Who will score the first touchdown” bets on primetime NFL games.
Who are the big players?
In short, it is the usual suspects who plan to offer microbetting. The big names such as Fanduel, Draftkings, etc. have expressed interest and excitement in microbetting. Most of the offerings will come through B2B providers, meaning it won’t be a trader at Draftkings who originates the line, rather it will be a third party that sells its offerings to one, or many of the operators, a la Kambi in traditional wagering. PointsBet acquired Banach in March 2021 for $43 Million, a technology provider which emphasizes its ability to offer markets on “events to happen in the next minute”. Also, Simplebet has made waves with its offerings, recently agreeing to deals with Draftkings and Intralot to provide for microbetting. Simplebet also announced a $30 million series C raise led by Jake Paul’s Anti Fund, who likened the trend toward microbetting to the paradigm shift of content consumption shifting from movies and TV shows toward TikTok and Youtube. They strongly believe that users have short attention spans and microbetting can revolutionize not only sports betting but also gaming. Theoretically, Deck Prism as well would be in a position to offer microbetting services with its simulation based platform, although we have yet to officially hear them make any announcement. With Underdog Fantasy’s acquisition of Goat Gaming on Wednesday, they’re planning to launch a live betting game built around micro-markets as well according to Brad Allen.
What does The Handle think of all this microbetting buzz?
We are excited, but as usual, not as optimistic as the rosey projections may suggest. We are concerned that microbetting may cannibalize other betting options, rather than growing the total amount wagered. In the long term, bettors have a designated bankroll (of which eventually they will likely lose most of it). These bankrolls should be consistent over time, otherwise serious problem gaming risks emerge. As a result, unless bankroll depletion happens faster (meaning the books make the money sooner), microbetting potentially cannibalizes a bankroll.
Of course, there will be some who argue that getting people to expand their bankrolls to take advantage of microbetting is not necessarily a bad thing, but we are reluctant to endorse such a position at The Handle for obvious reasons.
On the more optimistic side, some could argue that microbetting is more engaging than traditional betting and will drive new users to sports betting, increasing the size of the pie for operators and the total bankroll in play for wagering. For certain sports like baseball which have seen viewership and excitement around the game faltering in recent years, microbetting could revolutionize viewership if embraced properly and allow fans to sweat every other pitch. This could very well be proven true in the coming years, but it feels like a tall ask to convince someone to make a wager for real money on whether the next play will be a first down when they aren’t willing to make a bet on who will win the game. From a psychological perspective, sports bettors often wager based on impulse and emotion rather than quantitatively finding edges and inefficiencies in the market. With microbetting, if the aforementioned B2B odds-providers can figure out the best way to serve the market there could be significant profit opportunities as well due to impulse microbetting.
In short, we think cannibalization is an interesting question that only time will tell the answer to. We think bankrolls are fungible and relatively inelastic, meaning that money that would have been used for other wagers will instead be used for microbetting, rather than bettors expanding their bankrolls.
So where does that leave us?
We love new options to bet on. We love exciting product innovation. That means we are excited about the prospects for microbetting in the coming years, and will certainly be taking advantage of each offering and figuring out who has managed to integrate it well into their platforms. At the same time, we don’t think it will necessarily be a game changer for an industry whose growth rate is already sky high and where each individual bettor is constrained by their bankroll. We’ll be keeping an eye on whether or not we were right and looking forward to the weeks ahead.
Miscellaneous Recent Consumption
Press
An inside look at Sportradar’s upcoming IPO and estimated $8 billion valuation from Legal Sports Report here.
Sports Betting Operators To Spend Up To $1 Billion On Football Ads. Front Office Sports has more here.
Underdog Fantasy acquired sports betting platform Goat Gaming for a push into sports betting. Legal Sports Report with more here. As Chris Krafcik pointed out, a continuation of the built-to-be-acquired theme of tech stacks.
Fubo Sportsbook has announced a partnership with the New York Jets to launch a sports betting lounge at MetLife Stadium. Pat Evans with Legal Sports Report has more here.
A deep dive of the long-awaited audit of the DC sportsbook lottery from Brad Allen of Legal Sports Report here.
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