Border crossing: CEO Johnny Aitken on how PointsBet US has sets its sights on Canada

PointsBet is described on its official website as Australia’s fastest-growing bookmaker. The company built its headquarters in Melbourne and is listed on the Australian Stock Exchange. Chief executive Sam Swanell is Australian, and the business took its first ever sports bet in Australia. Despite all this, the company was founded to capitalise on a very different kind of gambling goldrush – one happening nearly 10,000 miles away in the US.

PointsBet’s US CEO, Johnny Aitken, is also Australian. He admits that PointsBet was created in 2015 with the intention of making it big in America, but that his home country provided a valuable resource for the business to test its concepts at the same time as building a proprietary technology stack, conjuring up products with a focus on US sports like American football (NFL), baseball (MLB) and basketball (NBA).

Aitken and Swanell set up camp in America to establish a presence for PointsBet years before the repeal of PASPA, which obviously paved the way for legalised online sports betting to take off. This triggered a tidal wave of public listings, soaring share prices and multi-billion-dollar M&A activity that is still yet to take a breather.

“When the time came to head to the US, we had a ready-made business model to cut through from day one,” says Aitken, having honed their craft in Australia already. “We were quite fortuitous that the repealing of PASPA played out when it did because before that we got told we were too early and too eager.”

Aitken says that despite the initial pushback, he and Swanell were hellbent on carving out a reputation for the business, which at that time had fewer than 50 staff globally and had never even taken a fixed-odds sports bet. “We knew the ingredients of the business were there and that we had a very sound strategy,” he adds.

This strategy saw PointsBet make early inroads in the US, albeit after pitching itself as a spread betting operator. Once PASPA fell in May 2018, the company struck an important long-term deal two months later with the Meadowlands racetrack in New Jersey and with Tioga Downs in New York, pending favourable legislation. At the time, Meadowlands chairman Jeff Gural said he had been extremely impressed with PointsBet from their very first meeting.

Making up ground

A quick fast-forward saw PointsBet make its official US sports betting debut in New Jersey in 2019, a year in which it secured further market-access agreements in Iowa, Colorado and Illinois, alongside a landmark deal with Penn National Gaming for access in Ohio, Indiana, Missouri, West Virginia and Louisiana.

“Within three months of launching in New Jersey, with very minimal marketing spend, we had shot up to 5% market share,” says Aitken. “We have been able to really hold our ground in New Jersey and incrementally grow that market share, even with the fiercest of competition.” He adds: “We’re a young business and we move fast. We take calculated chances and the speed of PASPA being repealed certainly played into our favour.”

The strategy progressed in 2020 as the operator added fixed-odds horseracing and igaming market-access deals to its sports betting portfolio, while a comprehensive media strategy unfolded as PointsBet scored combinations with NBCUniversal, Channel 7 and La Liga, not to mention with sporting franchises like the Detroit Tigers, Indiana Pacers and Denver Nuggets.

For FY 2021, the operator spent $90.1m on US marketing as brand ambassadors including NBA legend Shaquille O’Neal, former NFL quarterback Drew Brees and Native American professional golfer Notah Begay III were added to the mix. This multi-channel formula saw PointsBet report gross win growth of 481% in the US to $95.8m, while net win also increased by 481% to $40.9m. For the 12 months ended 30 June 2021, the US business attracted 159,321 cash-active clients, a 661% increase on the prior 12 months. Sports betting turnover for the period soared by 458% to almost $1.8bn amid mounting losses, but every US operator is making a loss at present.

PointsBet has made no secret of its goal to reach 10% market share across the US, with New Jersey (7.8%) and Illinois (7.7%), according to the firm’s latest earnings, currently closest to that milestone. Eilers & Krejcik Gaming estimates an overall sports betting market share of 3.5% for the business over the last 12 months.

PointsBet is now operational in seven US states and its rapid trajectory over a short space of time has seen it become a darling of investors. However, it has not all been plain sailing as the firm discovered in August when it failed to obtain an Arizona licence after an application from tribal market-access partner Cliff Castle Casino Hotel was rejected.

Proof that nothing is guaranteed, it came as a timely reminder that the US sports betting market is still figuring itself out. To make matters worse, Cliff Castle had initially been told it secured a licence, only to find out it had been wrongly informed due to a clerical error. PointsBet has not given up hope on Arizona, though. Two of the state’s 20 permits are still up for grabs and there are still some credible tribes, sports organisations and teams looking for a partner. As the biggest operator to miss out by some distance, PointsBet is the belle of the ball but has no one to dance with.

“In the medium to long term, we will certainly be in the state,” Aitken tells EGR defiantly from the PointsBet US HQ in Denver. “But unfortunately, we just won’t be one of the early wave operators that goes live this year. This is America,” he adds. “We’ve been on the right side of the fence with those types of things but on this occasion, we were on the wrong side. But there are remaining licences available, and we should be an appealing partner.”

North of the border

The US state-by-state legislation model was bound to lead to some bureaucratic barriers for PointsBet, but a negative experience in Arizona has not deterred the company from pursuing similar province-by-province growth north of the border in Canada.

A laser-like focus on the US has now been expanded to encompass North America after single-event sports betting went live in Ontario as of 27 August, with further provinces expected to follow suit. Aitken fancies Canada as a $5bn opportunity if the majority of provinces go live and legal with online sports betting and igaming. That would take some time if it does happen and would also take an inevitable toll on PointsBet’s resources. The operator initially toyed with the idea of incorporating Canada into the US business by treating it as a further selection of US states before deciding that would more than likely lead to a worst-of-both-worlds scenario.

Aitken says: “We decided the US opportunity is so massive and so complex that we’d be doing it a real disservice if we were spending half of that time on Canada, and the same applies for Canada. Instead, we’re establishing a set executive team and we’re going to have an office in Toronto so they can live and breathe the Canadian opportunity.”

Buoyed by the success of its US strategy, PointsBet has adopted similarly aggressive tactics in Canada. It has gone big and early, as proven by a flurry of hot-shot appointments including Rogers Communications executive Scott Vanderwel as the first ever PointsBet Canada CEO. He will mirror Aitken’s role in Canada, and both will report into group CEO Swanell.

Nic Sulsky, long-time president of DFS operator Monkey Knife Fight (MKF), has become Vanderwel’s right-hand man as CCO, while Chantal Cipriano – a native Canadian and long-time Toronto resident – has joined PointsBet from payments firm Mazooma in a newly created VP of legal, compliance and people position. PointsBet is again targeting an overall market share of 10% in Canada.

PointsBet has set its sights firmly on achieving a 10% share of the US market

European hopes

Expansion efforts are not limited to the Americas, however. The firm shelled out $43m to acquire Dublin-based oddsmaker Banach Technology in March in preparation for a US in-play betting boom. Banach, which specialises in in-play products, previously established the quants division at Paddy Power, now part of a Flutter Entertainment portfolio including US market leader FanDuel.

EGR understands Banach Technology will now be called PointsBet Europe, providing access to the European talent pool. “We believe that in-play will be the most important sports betting feature in the US,” says Aitken. The operator’s core wagering platform was already proprietary and the addition of Banach puts PointsBet in an enviable position compared to many of its competitors – several of which are exploring expensive M&A options or are weighed down by complex integrations with previously acquired parties.

“We could have gone down the route of doing this organically but that would probably put us three-plus years away from having a product you’d feel comfortable putting in the hands of customers, whereas with Banach we can get there within the next 12 months,” says Aitken, insisting that the most important technical capabilities sometimes go under the radar, using uptime as an example.

“Some operators have really poor uptime and are often suspended so people can’t bet and can’t cash out,” says Aitken. “We all know betting customers – the one time you’re suspended is the time they were going to have the biggest bet of their life, and of course that bet was going to be a winner,” he jokes.

Predator or prey?

The US is rife with operators scrambling for proprietary technology as they look to save costs on long-term third-party contracts, with most spend going towards marketing and customer acquisition right now. DraftKings kicked off this trend after going public with SBTech, while Penn National Gaming has bought theScore, Bally’s has bought Bet.Works, and PointsBet has bought Banach. Could PointsBet be snapped up by an even bigger fish that has yet to make its move, and would shareholders be open to such a transaction?

“The company is built to last,” bristles Aitken. “We are not here to pump up the company and sell it. We’re making strategic decisions and investments for the long haul that should hopefully grow our market share over the next three, five or even 10 years. But it has been fascinating to observe some of the deals around us and how they are being postured on and justified. As time comes to pass, I think our Banach acquisition will prove one of the savvier deals in the space.”

The chief exec of PointsBet’s US arm would say that, but he may still have a point. A smidge over $40m could prove a snip for a team including tech rockstars like Rob Reck, especially when you consider Penn has spent £2bn to acquire a betting technology platform from theScore that hasn’t even been built yet. Admittedly, that deal came hand-in-hand with the largest sports media brand in Canada – an opportunity Aitken has already talked up – but the disparity in figures is plain to see.

“There’s no doubt we are an attractive opportunity to companies looking to fast forward their trajectory,” admits Aitken, but the acquisition of Banach means PointsBet is in no rush to do a deal because its in-play capabilities can drive scale. Aitken tells EGR: “Having that [in-play] feature allows you to win in terms of brand growth, CPA efficiency and improving the value of customers, but we also believe the cross-sell to online casino by nature of in-play betting is very well suited compared to cross-selling pre-game customers into igaming.”

Casino crossover

Determined to take charge of its bottom line, PointsBet is also investing in a proprietary igaming platform. This would put PointsBet in the same long-term position as market leaders FanDuel, DraftKings and BetMGM, as well as London-listed 888, which appears to have outmanoeuvred the rest of the market with the extremely modest £15m acquisition of BetBright (now Spectate) in 2019.

The US igaming opportunity is not to be sniffed at, and Aitken insists online casino could become PointsBet’s primary revenue driver on a 10-year timeline, pending state legislation. “I think the market is probably undervaluing what PointsBet can deliver in igaming, but we are very bullish about our future prospects,” he says. “Our destiny now rests in the hands of two of the best people you could find to run online gaming.”

Aitken is of course referring to Manjit Singh and Aaron O’Sullivan, who he describes as the igaming equivalent of legendary Chicago Bulls duo Michael Jordan and Scottie Pippen. Ex-Aristocrat CTO Singh has served as PointsBet’s president of global technology since 2019, while former bet365 head of games O’Sullivan came aboard as VP of online casino revenue in July. Heavy hitters keep on coming through the doors at PointsBet, and these aren’t individuals between jobs or out of work, they are some of the industry’s brightest players at some of its biggest companies.
Aitken clearly believes in PointsBet, but he has managed to get others to subscribe to this vision too, culminating in some top talent being persuaded to drive the firm forwards. “This company doesn’t have any of the red tape or internal politics that you sometimes see at bigger businesses,” says Aitken as our conversation draws to a close. “We’re here to win and we’re really hungry.”