What's It Worth?

Christopher Costigan, www.sports911.com

With talk of possible new mergers between sportsbooks in the coming weeks and months, it becomes much clearer why a company will want: a) an exclusive post up clientele and: b) a near exclusive "square" customer base.

Credit shops, while some will argue are less a pain than your typical post up business, do not appreciate each year compared with your well run post up business (those which require player funds on deposit as opposed to collecting and settling up via agents).  There are other tangibles that come into play with the credit shop, some of which are out of the hands of any potential buyer. 

Bodog.com, which has really only been in business as a self-standing entity since 2000, is already valued well over $50 million, whereas some of its longer established credit heavy cousins would be lucky to take in $5 million (not too shabby but credit dilutes a sportsbook's worth when on the sales block). 

The original Betmaker.com, the epitome of a true post up shop, sold for $20 million in 2000.  Its reincarnation, which has been marketed poorly over the years, is valued at $4 million. 

Skybook.com was purchased by the Rio International Group in 2000 for a mere $1 million and ended up worth only a quarter of that amount after two of the original partners decided to open up new shops with the existing client base.  Skybook stood as a major credit shop force at the time.  Ironically, the Skybook arm of Rio focuses almost exclusively on post up business and is therefore worth much more than the original million dollars invested.

Post Time Sports was purchased for a mere $1 million by World Wide Tele Sports in 1999.  An original offer of $3 million by a somewhat shady "pump and dump" group had been turned down by Post Time's founders after much legal wrangling.  Post Time represented a small post up only business that probably sold out much too soon.  Today, Post Time would be worth substantially more considering they were among the first to enter the offshore betting industry back in 1996 and they weren't always shy about marketing the product.  Post Time also enjoyed solid retention due to their top notch customer service. Today Post Time is WWTS's red headed step child. 

Sometimes companies become too big for their own good and no enterprise can afford the asking price.  BetonSports, Sportingbet and even Bodog.com are practically out of range. 

Companies must be able to demonstrate an ability and willingness to bring in new customers on a regular basis.  Marketing is essential in this industry.  Sportsbooks that fail to market show little value in the long run because nobody wants to purchase a company that offers a recycled customer list, not to mention the fact that aggressive competitors will eventually dilute that list. 

BetonSports is worth so much money because they spend huge on marketing in areas other companies dare to tread (i.e. Maxim, New York City billboards and the like). 

Sports911.com considers search engines among the most viable marketing options with its fresh "square" targetted audience.  Ever wonder why Sports Interaction and Sportsbook911.com have exploded in growth over the past year?  It is almost entirely due to search engine exposure and these companies will be the first to admit this fact.

Domain names alone are still worth a tremendous amount of money on thier own accord.  Sportsbook.com, Sportsbetting.com, WallStreet.com are worth a million dollars even without a customer base (on that note, Smoke.com was just sold for over a million dollars).  Add the all "square" clientele and we're talking about a pretty hefty sum of cash here.  The internet, after leveling off the last few years, has once again shown signs of major rebounding (witness Google). 

More and more operators over the next few months are looking to get out because they realize the competition is way too tough these days.  But businesses are worth very little if they fail to invest properly.  Concerns over "seeded" accounts and wayward investments (i.e. properties that have nothing to do with the business) have left some companies contemplating fire sales. 

Here are the components that add value to a sports betting operation's overall business:

1) Customer list - Not just the amount of names but the quality of names, where they come from and can they be verified.  It is no longer enough to provide a massive customer database and assume top value.  Truth be told, nearly all online sportsbooks have had their "highly guarded" (sarcasm here folks) customer list compromised and passed around the industry.  "Active" customers with "quality" action minus "undesirable" clientele will no doubt add to an establishment's value.  Retention is the name of the game though and always will be. 

2) Branding - While the Bodog.com name might not be worth much in the world of trendy domains, this company has done a great job of transforming itself into a viable brand.  Sportsbook.com and Sportsbetting.com are well branded by default.  BetonSports may lag behind others when it comes to the online market, but their brand is still among the most recognized thanks to aggressive print marketing (not a small feat considering they were known only as "NASA" three years ago).  And it still helps to have a short domain such as WSEX.com even though that name might not enjoy the same punch it did years ago.

3) Marketing - In order to make money, one needs to spend money.  The well established sportsbooks will argue they don't have to market as much since their business relies so heavily on "word of mouth".  This type of mindset will only allow their competition to expand twofold.  The best offshore betting firms are run by marketers.  The talented bookmakers serve to take such a business to the next level.  Again, Bodog.com serves as the perfect example.  They were first and foremost a marketing juggernaut that positioned themselves down the road to reel in a talented bookmaker. 

4) Retained Value - When we look at offshore sportsbooks, there are companies where the value (even it it's a perceived value) will be contingent upon those involved.  Olympic serves as a perfect example.  That company is still worth a substantial amount of coin even without its current owner, Spiro, at the helm, but in order to bring in the big bucks he would have to agree to stay on at least in a consulting capacity for a set time period.  There are few in this industry who possess such linesmaking prowess.  To Spiro's credit, he has brought on additional strong talent in the lines department over the past few years.

5) Lack of Unwanted Baggage - Again, seeded accounts, massive debt diminishes value tremendously.  Unfortunately, such liabilities can seriously dilute an otherwise solvent company's worth.

Originally published on June 2, 2004 (8:10 pm EST)