BlueBet takes a punt on betr

Last Thursday BlueBet officially announced the transformational merger with betr.

If you’re a punter you’ve likely heard of Bluebet & betr, but here’s what you probably don’t know: Back in 2022 betr’s future was riding on the outcome of the Melbourne Cup, a win by the favourite would surely send the company bankrupt, fortunately a $19 roughie took out the cup and the rest is history.

How did betr go from the face of collapse to merging with BlueBet to challenge the industry giants TAB & Sportsbet?

Here’s the story:

The Very Beginning

To understand the story of betr we first need to understand the story of Matt Tripp, the founder of betr. The story of Tripp begins in 2005, when he bought Sportsbet for $250,000.

Sportsbet is an absolute powerhouse in the Australian gambling market, pioneering online gambling to eventually capture a 48% share of the market, but back in 2005 it was on the verge of bankruptcy.

To turn the company around Tripp focussed on:

• Investing in technology: using advanced algorithms allowed handling a huge volume of bets at lightning speed

• Clever marketing: providing punters with money-back specials and “justice” refunds, where you’d get your money back in extremely unlucky circumstances, kept them coming back for more

• Taking advantage of legislation changes: a High Court ruling in 2008 allowed bookies to now advertise interstate, SportsBet’s marketing surged, targeting all major cities

In 2009 Tripp sold 51% of his stake for $200 million and two years later sold the remaining 39% stake for $133 million - not bad for a $250,000 investment.

Founding betr

It’s 2011 and Tripp has sold his stake in Sportsbet but it would be another 11 years before betr entered the scene. In the meantime Tripp had time to buy & sell off another betting agency.

After selling Sportsbet, Tripp took to the bench, having signed a three year non-compete clause. In 2014 the non-compete was over & Tripp was back to acquire BetEasy for less than $10 million.

By the end of 2014 Tripp had already sold a majority stake to Crown Resorts but it wouldn’t be until 2019 for Tripp to part ways, selling off the remaining 20% ownership in a $250 million deal.

Finally October 2022 comes around and betr is founded.

The game plan was simple:

• Capitalise on Newscorps reach as an initial investor through advertising on Herald Sun, Daily Telegraph and Foxtel

• Provide unparalleled offers, like allowing punters to bet on any horse in the Melbourne cup with 100-1 odds*

*up to a max bet of $10

Whilst the investor relationship with Newscop was short-lived, lasting less than a year, the early promotions drove heards of users to download the app. With 341,000 open accounts as at April 2024, a year & a half from betr founding, it is clear this strategy had great success.

Growth at all costs

betr has had rapid growth but it was costly.

In November 2022 the Melbourne Cup was set to take place and betr used the 100-1 odds to lure in new users. However the marketing stunt begun to get away from them, 300,000 new users signed up and the favourite was heavily backed. Had the favourite won betr stood to lose $50 million.

Tripp did what he could to reduce the potential loss, hedging by betting on the horse on other platforms and offering punters $150 cash-out in bonus bets. It was a terrible deal in comparison to potentially winning $1,000 from a $10 outlay on a short-priced favourite.

Like many Cup favourites, Deauville Legend faded as they came down the long Flemington straight and betr avoided heavy losses.

Despite the narrow miss betr went on to lose $40 million when the Penrith Panthers took out their third consecutive NRL Premiership in 2023, a record payout.

betr was also fined a record $210,000 for advertising “inducements such as offers of enhanced odds or bonus bets to entice people to open a betting account”. A drop in the bucket compared to the promotional losses.

Here’s the Deal

Merger Details

BlueBet has entered into a binding Asset Sale Agreement to acquire betr through a 100% share swap, with betr shareholders to hold 57% of the Combined Business.

As part of this transaction BlueBet have also announced they will be undertaking a two tranche placement to raise $20 million with $12 million to go towards growth initiatives and the remaining $8 million towards transaction & synergy realisation costs.

BlueBet noted the following as the strategic rationale for the merger:

• betr’s large customer database with c.341k open accounts and 112k active customers vs BlueBets’s active 67k customers

• Migrating betr’s customers onto BlueBet’s technology platform will drive further customer engagement, retention and monetisation

• Estimated cost synergies of $14 million annually

The combined business will push towards profitability by the first half of 2025 with further M&A activity part of the growth plan.

Investor Reactions

The market’s response is positive however, the merger was far from a well kept secret, which has led to an uptick over many months.

I think the better tech platform is key to customer retention - personally I will only use one betting app unless there is strong promotion running elsewhere, which will lead me to take advantage of the promotion only to switch back to the better app once it’s finished. Can BlueBet’s platform match Sportsbet’s?