Why automation will drive sportsbook profitability

Thomas Holland, product director at Genius Sports, outlines how new automation and machine learning are enabling predictive liability-driven pricing on a transformative scale.

What’s the goal of risk management? For traders, the aim is to maximise long-term profitability. Yet, in today’s world of 24/7 content and commonly outsourced pricing, many operators and their suppliers are left utilising risk management to simply restrict losses through limit setting and player profiling.

This is because, with pricing and liabilities now managed separately, operators don’t have the control or agility they need to adjust pricing dynamically based on customer betting activity.

When you consider the average European sportsbook trades hundreds of fixtures on a weekday and more than double that on a Saturday, manually reviewing activity on each fixture, market and selection to optimise pricing would prove highly expensive. It would also require, for most businesses, an unrealistic level of resource.

But the goal of maximising profitability still remains. So the question becomes: how can traders better align liabilities, pricing and customer management in order to increase profits? Thanks to new forms of automation and machine learning, this is totally possible.

Balanced, efficient trading

The idea that pricing and liabilities are linked is nothing new. Before the explosion of around-the-clock sportsbook content, this was common practice. However, the sheer scale required to do this on thousands of daily events has shifted the focus towards customer management.

When you can’t act on the liabilities across your sportsbook – which now includes betbuilder products with complex liabilities – you’re losing out on possible margins on each individual fixture and market-type. This leaves profits untapped.

The good news is that automation is removing this barrier. New technologies enable not just liability-driven odds changes but predictive, liability-driven decisions. These decisions are correlated across all related market types and outcomes.

What does this mean? By understanding how much money is bet on each related market and taking into account your current and previous liabilities and live probabilities, automated solutions drive dynamic margin adjustments on each bet selection at scale. This maximises profit.

The gains across your entire content and market offering will be significant. To date, the lack of ability to do this has forced many traders to reject bets and limit customers rather than taking them on to maximise revenues.

This is leaving huge amounts of money on the table. Good bets are rejected and customers who receive a bad experience seek higher limits elsewhere.

By removing the gap between prices set by third-party odds providers, your liabilities and how you want to manage customers, automation delivers a more profitable sportsbook.

Upgrade your betting experience

When rolling out our automated risk management tools to our existing risk management clients, we saw gross profit margins consistently increase upwards of 10% for small-to-medium sized operators.

Proactive, correlated liability-driven risk management also benefits your brand experience, helping drive retention, turnover and differentiation. When pricing and liabilities are connected and automated, traders can reduce bet rejections and suspensions with confidence.

This is because they know their risk is managed in a highly efficient, predictive and profitable way.

With all betting activity automatically factored in, operators will now allow their customers to place bets on any market type; there is no need to restrict or limit. Selections with a high volume of bets and negative liabilities will have higher margins applied. Meanwhile, less popular outcomes will have more attractive odds and attract more turnover.

The technology needed to do this is not trivial and is one of the reasons that we believe that manual trading to achieve the same goal is not possible at scale. Updating liabilities and prices correctly based on every bet, match state change and trading parameter change in real time can only be successful with automation.

More effective resourcing

New automated tools and capabilities enable you to utilise your customer data more effectively.

Your betting activity is unique to your sportsbook and tells you exactly what your customers are likely to bet on – and how to maximise your revenues, through odds adjustments.

Additionally, automated, predictive liability-driven pricing tools reduce manual workload. This avoids human error, saves costs and frees up resources for higher skilled functions. Automatic, efficient risk management also minimises the need for time-consuming and often reactive customer management.

The rise of 24/7 sportsbook content has been a huge step forward in the last decade, driving engagement and turnover for operators. Thanks to automation, risk management is now ready to step forward and keep pace.

Sports betting is an unpredictable business, but new automation and technologies are driving greater consistency, stability and predictability than ever before. The result is even bigger profits on your good days and lower losses on the not-so-good ones.

Original Article