Built for the long run: Inside Marathonbet's low-margin business model

It’s impossible to overstate how little is actually known about Marathonbet. In contacting a variety of analysts, consultants and industry executives for this article, the typical response was “I know very little about them, I’ll be curious to see what you can find out.”

“The Russians are a tough nut to crack, but it’s an efficient group,” said one consultant. That essentially sums up public knowledge of the business; it has Russian roots and operates on very low margins. “They like to think of themselves as the Pinnacle of Eastern Europe,” the consultant said.

They don’t actually, as Marathonbet CEO Natalia Zavodnik tells EGR Intel: “No-one has compared us with Pinnacle before because it’s a different market and different strategy, so I don’t think it’s a fair comparison.” As already noted, nobody knows much of anything.

The owner is said to be a Russian entrepreneur who got into betting shops and terminals around the Gorbachev era. Russia is still believed to be the biggest money-maker for the company, but it’s also being deliberately de-emphasised, with those revenues used to helped expansion into regulated markets around Europe. According to one source familiar with the company, the owner is involved with the business and has made it a point of emphasis to build a reliable, credible company.

“When dealing with customers, this meant fast payments and making sure the customers always had their money and always giving them the best odds. From a B2B perspective, it’s always paying on time. They’re very well known in Russia for having a good reputation. That’s why they are able to go into regulated markets, because it’s a credible operation and a lot of that comes from the owner. It’s paying the right suppliers and not dealing with companies that rip off feeds. Everything is truly legitimate and that’s the way they want to go about their business.”

Marathonbet sponsored Doncaster Racecourse’s November Handicap in 2018

The owner’s hands-on approach also rules out an involvement in the M&A merry-go-round in the near term. “Our owner takes pride in what we are doing and achieving, and he’s very involved in the business,” Zavodnik says. “So we will keep working as an independent bookmaker. We enjoy the flexibility of decision-making compared to other big conglomerates which appear everywhere. There are definitely advantages which hopefully help us develop quicker.”

One of a kind

There appear to also be some unique flavours to the business. One trader from a rival firm says Marathonbet used to have a “crazy” live trading system in the UK office, where the best performing traders on a leaderboard got to trade the bigger games.

“You could have the junior trading the Champions League just because some wagons had done their money on a few of his games in a row,” the source says.

One former employee also describes a “Russian flavour” to the firm. He says: “The Russian way is that if people do well, they get to know about it but I assure you, you also get to know about it if you’re not doing so well.”

Zavodnik, for her part, is keen to play down the Russia part of the business and focus on the expansion of the Marathonbet brand in places like the UK, Italy and Spain. “Our plan is to build the international business,” she tells EGR.

“Our focus is not in Russia and our dotcom website is licensed in Curaçao. We do historically get customers from that part of the world, but people are free to access services where they want. It’s not prohibited for Russian clients to access dotcom but that’s not our focus. It’s on Europe and now Latin America and Africa. Dot.ru is not part of the main group.”

The sharp edge

The UK is obviously one of those priorities, where Marathonbet has been present for some 15 years, and hasn’t been shy about going after market share. A sponsorship deal with Fulham was worth some £5m annually and has been followed by deals with Manchester United and now Manchester City, whose digital assets were of particular interest.

The Pinnacle comparisons are also not without merit, with Marathonbet offering the most competitively priced odds in 37 of the 38 weeks of the 2017/2018 Premier League season. The strategy appears to be working, with Marathonbet’s Premier League clickshare via Oddschecker climbing more than 300% from 3% in 2017 to 9.6% in 2018.

At last summer’s World Cup too, Marathonbet had the lowest margins and the largest clickshare among UK bookmakers, suggesting shrewd punters at least are using the product. The problem, of course, is just how profitable it is to run those margins in the UK where the customers are among the smartest in the world.

The operator signed a football sponsorship deal in Spain, with Man City sister club Girona

One former employee tells EGR the company was “buried” by tens of thousands of match bettors when it first started bonusing in the UK. “It cost the company a hell of a lot of money,” the source says. It’s symptomatic of a wider issue where running a low-margin bookie in the UK simply isn’t that profitable unless you can do it on a massive scale.

“The UK is a very tricky market and they weren’t doing particularly well last year,” says the former employee. “It’s partially because products like horseracing and cricket are difficult for the Russians to trade. Football is fine but they’re exposed to savvy punters who use Marathonbet like another Betfair, a place to hedge bets and trade on thin margins. I think they need to overhaul the website in order to really take off.”

Zavodnik however is bullish on the UK, and dismissive of any trading concerns. “We have a pooled trading book so our traders don’t mind where the money and customers are coming from,” she says. “The shrewd UK customers are outweighed by customers from other countries and it only improves our ability to take action on the other end,” she says.

When asked about UK profitability, she adds: “We don’t expect a particular profitability from each market, but we are looking at the profitability across the group. Traders don’t mind where customers and money come from, they just look at the figures.”

She adds that isolating the UK, the low-margin model is “working well”, saying: “There’s always room for improvement and this year will see a better use of the media mix to build upon some positive work in 2018.”

The firm’s trading strategy means they have traders in offices all over Europe and Zavodnik rejects the suggestion that Marathonbet struggles with UK-specific sports. “Cricket is not more difficult than tennis for instance, and horseracing? No, it’s not difficult,” she says. “I’ve never heard that horseracing is causing us any particular problems.”

Function over form

She also dismisses the idea the Marathonbet front-end needs upgrading to be successful in more mature markets. “I can’t say we have had much negative feedback from customers on the product,” she says. “I hear quite the opposite in fact, that you can see lots of information straightaway. So yes, it looks different to lots of products in the market but for some customers it’s the preferred way. We developed the software in-house or had it customised for us, and there’s no third-party platform.”

That proprietary technology and independent ownership means the firm can be more agile and risk-taking than some of its listed contemporaries. The operator developed its own rewards scheme with Sonic-style coins, for instance, and has in the past launched concepts like ADVANCEBET which let customers use potential winnings from outstanding wagers to place new bets.

The downside of owning its own technology is perhaps seen in the product, which could be described as dated. The firm overhauled its UK front-end in 2017 but soon switched back to the old site amid several issues. “Everything the odds compilers and traders are using was built internally and it’s a very complex task to build a unified platform connecting web and mobile and then lay a new front-end on it,” says the former employee. “I think that’s still the plan but it has to be done gradually and granularly because they have so much volume.”

Regardless, Marathonbet has undoubtedly secured a healthy chunk of the UK market thanks to its prices – around 5% of clicks on football through Oddschecker and 8% to 9% of tennis – and has the financial firepower to keep pushing the brand further.

“Football is still ‘king’ and our model does see us be very competitive on a week-by-week basis,” says Zavodnik. “Oddschecker data backs this up with betslip clicks increasing – we still outperform some of the ‘tier-one’ brands and we want to do more to improve our ranking further. As with all brands, retention remains a priority and we are working hard to improve our CRM model – it’s ever changing and thankfully we do have a loyal base but we could be doing more.”

Odds compiler Matthew Trenhaile says the firm is well set-up in the UK, describing its SEO and affiliate model as “expert”.

“Bookmakers with very low margins can still make good money if they have sufficient recreational bettors, a good amount of multiples, a good amount of live bets where the margins are higher, and proactive aggressive risk management,” he adds.

Marathonbet ticks just about every one of those boxes and its UK success should not be underestimated.

Switching lanes?

As for more immediate profitability, Pinnacle again showed one potential route forward with its recent pivot towards the B2B space in a bid to make the most of its odds compiling and pricing IP. It’s something Marathonbet considered, according to Zavodnik, but ultimately passed on due to certain restrictions from its data provider that meant Marathonbet could only use the feeds to trade under its own brand.

“Our core product is sportsbook. Casino is an add-on because other firms offer it and you need to be a one-stop shop”

“We are still looking at joint ventures or franchises though,” Zavodnik adds. “It depends on the jurisdictions we are trying to get into, but whatever we do it has to be using our own brand.”
The firm also differs from many contemporaries in its approach to casino which it sees as a hygiene factor and a need-to-have rather than a product to be pushed on its sports bettors.

“Our core product is sportsbook,” says Zavodnik. “Casino is an add-on because other firms offer it and you need to be a one-stop shop, but it’s not something we’ve developed ourselves. We have several profit share deals with providers, so it’s less profitable for the group compared with sportsbook.”

Going continental

The UK of course is not Marathonbet’s only target in its bid to increase regulated revenues. The operator has also signed football sponsorships in Spain, with Man City sister club Girona, and Italy, with Lazio. The firm’s prospects in the two countries reflect the markets themselves to an extent, with Italian political point scoring putting the dampeners on growth prospects. The looming ad ban has many predicting that newcomers might as well pack up shop and go home, with retail giants set to hoover up customers. Zavodnik, however, has no plans to abandon Italy any time soon.
“The tax increase and ad ban will make it difficult, but the situation is not very stable and may change again, as in fact it already has” she admits.

When the so-called Dignity Decree was initially created, sponsorships were treated differently and it appeared that sponsorship deals were to stop on 1 January. However, in early January, the Italian communications regulator said sponsorships would also be allowed to run until July when the full ad ban comes into force. Zavodnik holds out hope that similar concessions may be made by the government as the ban looms, with pressure from football leagues, TV channels and operators alike.

“It’s not a stable country in terms of the politics,” she adds. That’s not to say the firm is relying on a sudden U-turn. “But we will find a way,” Zavodnik says. “There’s always a way. People do appreciate the low margins in Italy, there are customers for this side of the business.”

There is a more stable future in Spain however, snap election aside, where anecdotal evidence suggests Marathonbet is doing very well indeed.

“They were just growing month-on-month very consistently,” the former employee says. “Spanish punters really liked the prices because there wasn’t really the same competition on the sportsbook side as in the UK for example. The market was mature enough to where punters understood what that meant.”

Zavodnik echoes that view, saying that the firm plans to increase its marketing budget in the market, because it has “definitely shown an appetite for our offering”.

Marathonbet has also applied for a Danish licence and hopes to receive approval in H1 2019 before going live ahead of the next football season. The group’s plans are not limited to regulated markets, and the firm is committing investment to several grey markets, specifically in Latin America and Africa, where Nigeria stands out.

A sponsorship deal to help the firm make waves in Latin America is also close to being announced. But what about the US, where so many sportsbook operators and providers are readying themselves to launch? That’s not on the immediate roadmap, according to Zavodnik, who says: “There are more exciting places to target than the US, and markets that will be much easier to offer our services. The situation is very complicated at the moment.”

So what next for Marathonbet? Aside from the new markets, the firm is planning to launch a redefined brand proposition in Q2 2019 across all regions.

“The football sponsorships have given us a way to ‘say hello’ to consumers,” explains Zavodnik. “We are now working on having deeper conversations in what we stand for and talk about our USP’s and what makes us different from competitors.” Some of that will be about promoting the low margins more prominently but also on three brand pillars of being Upbeat, Insightful and Trusted.

Ultimately, Marathonbet has made itself the low-margin bookmaker of choice in several regulated European markets, with the UK and Spain chief among them. Whether it can grow these markets to be highly profitable in and of themselves is still to be determined but with a healthy marketing budget and a well-regarded trading and tech team, the prospects look bright.