Pull no punches: Sergey Portnov on taking risks at Parimatch and the death of retail

It was Albert Einstein who said that opportunity lies in the middle of difficulty. This little nugget of wisdom from the German-born science professor could quite easily be the business mantra for Cyprus-based sports betting operator, Parimatch.

Parimatch, like so many operators in this industry, is a business in transition. While more familiar firms are having to change how they conduct business to meet ever-stricter compliance measures, Parimatch is being overhauled from the inside out by people who are willing to break the rules.

“In established markets the rules are clearly defined and you have to stick to them,” says 30-year-old Parimatch CEO Sergey Portnov. “There are not many manoeuvres you can make. In crisis places, however, the rules are written as you go. Sometimes, even you create the rules – sometimes you go off road, breaking everything to get to the finishing line – and then you pay the penalties.”

Crisis places, as Portnov calls them, are the nascent markets beyond Western Europe and the Nordics where online gambling regulation is not yet set in stone. Parimatch currently enjoys an 11% share of the Commonwealth of Independent States (CIS) region, where its four key markets of Russia, Kazakhstan, Ukraine and Belarus reside. The operator has been an established brand in the CIS region for nearly a quarter of a century, but the last 10 years has seen Parimatch transform into a digital powerhouse with its own proprietary technology and an increased focus on youth.

Parimatch CEO Sergey Portnov

Portnov leads a young management team with an average age of 30. He says that inspires crazy and risky decisions, because Parimatch is not hindered by corporate rules and that the freedom to do as they please has helped them to progress at a rapid rate.

Shopping around

In the past, Parimatch was a huge retail operator. The brand spanned more than 700 shops across the CIS region but these have since been trimmed down to 300 under Portnov’s rule. “We still have them as part of the legacy but we don’t view them as a revenue generator,” he says. “They are more just a pure branding and payment channel and when you really look at the retail portfolio, it is hardly worth its investment.”

Portnov has promised to close more retail outlets as Parimatch continues its digitalisation – unless, he says – the “new concept” of retail kicks in. Portnov imagines a Starbucks-style betting hybrid kitted out with games consoles where Generation Z’s can socialise in comfort, with betting only as an added extra. “Unless you can produce something somewhere in between Starbucks and William Hill so that younger demographics can enjoy it and hang out there, retail will die,” he says. “We are trying to come up with a new customer journey where we can bring people to retail and this new concept might even make gambling a secondary element. The first reason could be that it is a nice bar, or that it serves good food, or that it puts on amazing streaming of sports events,” he adds.

Portnov describes retail betting outlets in the UK as “filthy” and says the experience is much the same in the CIS region. He is unable to hide his contempt for the gambling industry’s outdated practices and everything he does is geared towards dragging Parimatch into the 21^st century. “For young guys like us, the mobile and digital world is much closer,” says Portnov, who studied an undergraduate degree in gambling and leisure studies at the University of Salford in Manchester.

The course is one of a kind in the UK – it takes traditional academic subjects– think psychology, economics and marketing – and teaches them through the veil of the gambling industry. How do all of these well-studied humanities apply in a gambling business environment? Portnov says lectures were regularly taught by executives from Betfair or bet365, while the owners of race courses and land-based casinos would drop in to set the class weekly assignments.

University challenge

Fresh out of university, Portnov arrived at Parimatch in 2011 to fill a marketing role. Working in an industry that could single-handedly power the popular Twitter account @StateOfLinkedIn (check it out if you haven’t already), his honesty is disarmingly refreshing: “When I joined I was a complete amateur, like a student of Parimatch,” says Portnov. “I was learning everything from scratch, making millions of mistakes and wasting all of their money,” he laughs. “It was a good journey. I wasn’t the CEO on day one of course, but only in the last three or four years have I received the real management power to press the big buttons and say ok, this is what we are going to do.”

Portnov says it has taken him five years to turn Parimatch into a digital-first operator. The breakdown of bets placed outside of retail is 70% on mobile and 30% on desktop, although that ratio is more like 50/50 in terms of revenue because the higher stakes come from desktop. Parimatch estimates the average customer stakes $5 on mobile, rising to $30 for desktop punters.

Parimatch made a name for itself in the UK in February 2019 by recruiting Conor McGregor as a brand ambassador following a full redesign of the operator’s website front-end. Despite sealing a huge deal with the Irish MMA star, we are unlikely to see the brand make inroads in the UK market. The ever-tightening grip of regulation combined with the Gambling Commission’s lengthy AML processes simply do not match Portnov’s strategy to go after immediate gains in short-term markets.

Asked whether Parimatch would consider launching in Europe’s more mature markets, Portnov says: “We are trying to convince ourselves not to do that,” before insisting that any Western launch would only occur through the acquisition of an already-established firm to save the company time on obtaining betting licences and building brand recognition. “That region is highly competitive and highly regulated,” he says. “We feel that we are disadvantaged because everything we know is how to operate in crisis areas and Europe is devoid of any crisis. There is no competitive advantage for us. We would prefer to focus on places like Africa and Latin America,” he adds, brazenly.

A UK launch is ruled out point blank – even aside from the multitude of reasons Parimatch might not be granted a licence. “No way,” says Portnov, insisting that taking market share from the country’s leading legacy operators would be a “physically impossible” task, as proven by 188BET’s March withdrawal from the market. “Time is the strongest market holder,” says Portnov. “Even if you introduced a better product, I still think that you’d fail. If people become accustomed to driving BMWs, what car do you need to introduce for them to move away? Mercedes, Ferrari and Rolls Royce might all be better, but people still might not move,” he adds. “It is a closed door for us. Existing clientele cannot be moved.”

Throw in the towel

Portnov spoke to EGR Intel before McGregor announced his decision to retire as an MMA fighter on Twitter at the end of March. “Hey guys quick announcement, I’ve decided to retire from the sport formally known as Mixed Martial Arts today,” read the tweet, which received 84,000 retweets and 351,000 likes. The young CEO was positively giddy about persuading McGregor to come onboard, blissfully unaware that the UFC star would hang up his gloves just two months after signing on the dotted line for Parimatch.

Will Conor McGregor make a dramatic comeback?

“Conor’s contract materialised only as a result of the UFC contract and these things cannot be looked at separately,” said Portnov, prior to McGregor’s retirement. “If there wasn’t UFC, Conor would never have looked at our brand. UFC came first which was a landmark deal for us. Conor carries the whole brand of UFC so we approached him and a deal eventually got struck. He is the face of MMA and it was absolutely amazing to know that we would be partners.”

But for Portnov there is a feeling that the objective has already been achieved, even if McGregor never sets foot in the Octagon again. “Customer sign-ups was secondary here,” says the Russian. “Firstly, we just wanted to kill indifference towards our brand. People have learned to filter out betting brands because they are just too noisy, and they carry no meaning. Conor, on the other hand, has given our brand a new angle. People started saying wow and it takes a lot for people to say wow these days – that effect cannot be bought, you have to earn it,” he adds.

A permanent retirement for McGregor looks unlikely, all things considered. He is already making noises about a return to UFC for a rematch with rival fighter Khabib Nurmagomedov and he threatened to retire once before in 2016 before coming back for the biggest fight of his career against boxing champion Floyd Mayweather. A dramatic comeback bout against Khabib, the greatest fighter in the CIS region, would be the most perfect marketing opportunity imaginable for Parimatch. Portnov probably went into shock upon learning of McGregor’s retirement – now he will be licking his lips.

Teenage kicks

All of this drama is helping Parimatch to position itself as the betting brand for young people. Their target audience is men aged 18-24, and Portnov predicts a difficult future for the likes of William Hill, old-fashioned brands that will be too late to adapt to esports betting and the latest trends. Portnov is only just the wrong side of 30 but he jokes that teenagers don’t take him seriously. “We do loads with esports but to them we still look like old guys wearing a baseball cap trying to be cool,” he says. “They can feel it is fake – they still laugh at us, but at least they continue playing with us because we are willing to invest in that demographic unlike say William Hill.”

Portnov has charged his marketing team with buying out every single static banner on popular esports websites as he believes that will attract players far more efficiently than spending a fortune on sponsoring Manchester United, for example. “Which bookmakers are prepared to swear?” he asks. “None! Someone needs to take that risk and be provocative because the youngsters would say bravo,” he adds.

EGR Intel contacted William Hill for this piece to see if they wanted to provide a response to Portnov’s accusation that the brand is simply too old to attract the next generation of sports bettors. Perhaps this was to strive for balance in the article, or perhaps it was in mischievous hope of starting a slanging match or a Twitter beef between the pair. “Heritage, expertise and trust are brand assets that have appeal across all age groups – we wish Parimatch the best of luck in trying to appeal to 18-24s,” came the response from Hills. Maybe Portnov is right. The time has come to ditch the vanilla and adopt the swear words.