EGR Power 50 2014: Top 3

03. AMAYA

(2013 position: 10)

The highest new entrant in this year’s Power 50 is the result of the largest takeover deal in the history of online gambling. Canadian B2B supplier Amaya Gaming Group shocked the industry by raising more than $4bn to fund a $4.9bn takeover of PokerStars and Full Tilt owner the Rational Group. And the deal also meant detailed financial information on Rational was finally available.

But Amaya’s position on the list is as much about potential as it is current financial scale. The firm ranked third on financial weighting alone, and also scored highly in all three additional categories. Its global reach is arguably unequalled with licences in eight European countries including Denmark, Spain, Italy and France, as well as a substantial player base in Russia, Asia, Australia and Latin America.

Questions will undoubtedly be raised over its grey market operations and its ability to transition not just from a very private to a very public entity but from a poker-only operator into a multi-vertical gaming company. PartyGaming created the world’s largest online casino by cross-selling to its poker database, and Amaya will be hoping both PokerStars and Full Tilt can pull off a similar trick.

There is also a huge opportunity in social gaming, with Zynga Poker seemingly on an inexorable slide and PokerStars devoting a considerable amount of resource to the vertical in recent months. In both gaming and social, Rational Group is making deliberately slow progress with the strategy of doing it once and doing it right long being the philosophy behind PokerStars’ success.

FINANCIALS

Rational Group revenues for FY 2013 were $1.1bn with operating profit up 34% to $430m due to a full year of Full Tilt revenues. Underlying growth was fairly fl at.

STRATEGY & IMPACT

Dominant position in poker with close to 60% of global market. It has huge, but unproven, potential in the gaming verticals but needs to be wary of alienating core customer base.

GEOGRAPHIC REACH

The operator has huge reach with a market-leading poker site in almost every regulated territory, as well as broad unregulated presence across the globe.

INFLUENCE & LEADERSHIP

An incredibly tough competitor in the poker vertical and one many operators are fearful of entering the gaming space. Huge financial firepower and brand strength.

02. WILLIAM HILL

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In a year filled with billion-dollar acquisitions and high-profile launches, its easy to underestimate the quiet efficiency that has underpinned a hugely successful 12 months for William Hill Online. Operating profit growth of 2% in 2013 in part masks the achievements made, with the operator now leading on mobile, growing in Italy and Spain and growing once more in gaming.

Full-year revenues for 2013 saw online post a £147.8m operating profit with 2.36 million active users in the period and 81% of revenues from regulated markets. William Hill Australia added a further £12m of operating profit and continues to grow at a rapid pace. The H1 2014 results were marred by a poor run of sporting results, but kept up the impressive growth story with net revenues up 12% to £261.1m.

While other operators excel in one or two areas, William Hill is performing strongly across the board. Its gaming division outstrips impressive sportsbook revenues, its mobile and online product suite is very strong, while acquisition marketing and CRM continue to impress. The operator has extended its lead in its core home market with huge revenues from the UK, but also successfully pushed on into Spain and Italy, as well as growing the Australian business.

It remains to be seen how the firm will cope with the loss of talismanic leader Ralph Topping, but early signs are more of the same from new boss James Henderson, and the Gibraltar-based online team led by Andrew Lee is looking a very adept operation. There is no shortage of talent throughout the organisation and it has helped it remain ahead of the chasing pack in a very competitive period.

William Hill is investing heavily in both technology and marketing to continue to drive growth, with huge efforts being made in revamping its platform both online and in mobile to take advantage of the new opportunities in the market. It’s also committed to further international expansion, although its short-term focus will remain on the UK, Spain, Italy, Australia and the US, and it would be no surprise to see it make bolt-on acquisitions if the right opportunity came along.

While recent results were fairly flat year on year, the 2% rise in operating profit during H1 should be looked at in the context of a significant drop in profits at Paddy Power during the same period and a big drop in sportsbook margin. The reality is William Hill continues to outperform the market and at a scale beyond almost everyone else in regulated Europe. It ranked highly for all four criteria and remains the operator to catch.

FINANCIALS

William Hill scored very highly for financials with operating profits of £147.8m for 2013 and £81.1m for H1 2014. Gaming revenues remain impressively high at £139.7m in H1 with strong growth in its casino business driven by its mobile offering.

STRATEGY & IMPACT

The operator is well-diversified in both product and reach with strong mobile and marketing capabilities and continued investment in both. Impressive senior management drives an efficient and effective operation with no shortage of growth ambition, despite operating at significant scale.

GEOGRAPHIC REACH

The UK remains by far the biggest market for William Hill, but Australia is growing quickly and efforts to push into Spain and Italy are bearing fruit with a strong brand presence in both markets. It also has a growing US business where mobile is performing well. Further international expansion is expected.

INFLUENCE & LEADERSHIP

It is operating at a scale in both gaming and sportsbook that rivals any operator in either sphere and is increasingly taking the lead on mobile. It is the biggest player in the UK market, but also an increasingly international operator that few can afford to ignore in any vertical.

01. BET365

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For a record fifth year running the top spot on this year’s Power 50 list goes to bet365. If the rankings were judged solely on financial might it would have won at a canter. The group’s operating profit for the year to March 2014 grew 81% to £320m, roughly £50m ahead of Rational Group profits for the year ending December 2013 and £170m ahead of William Hill. In fact, bet365’s annual profits were only £15m behind the entire William Hill group including its retail estate.

But the Power 50 has never been a measure solely of the most profitable companies in online gambling, and it is in the other criteria where bet365 also stands out. It is arguably the only operator with a truly global reach in all verticals and an operating model that causes admiration and frustration in equal measure among its peers. The entire online gambling sector is permanently looking over its shoulder at bet365, as its recent launch in the regulated Italian market proved.

Its strength as a sportsbook operator belies its status as one of the leading online gaming firms in the industry, with a huge casino operation that posted 17% growth in the previous 12 months. But make no mistake, its position in this list is due to its powerhouse sportsbook operation that stretches over most of the globe despite, until recently, being run entirely from its base in Stoke-on-Trent. The relocation of its operational hub to Gibraltar is a significant move, and its short-term impact on the business will be closely watched, but it is not one we expect to hinder the group’s progress.

The group is not without its controversies. Questions have been raised recently over its unregulated revenues by rival European operators, particularly in relation to its Asian-facing business. But both regulated and grey markets have always been a part of the bet365 operating model and arguably the latter is one some operators are beginning to reconsider their approach towards. And how this debate is resolved in future is too difficult to call at the present time.

The Power 50 has always been intended as a snapshot of the industry power structure and not a predictive model for future changes. In 2014, bet365 remains the operator that impacts on the widest cross-section of the business, operates at the largest scale and remains the most closely watched among its peers. With that in mind, it’s impossible to look past them for the number one spot for a record fifth year running.

FINANCIALS

Full-year numbers showed huge growth with operating profit up 81% to £320m for the 12 months ended March 2014 from revenues of £1.28bn. Active sportsbook customers increased by 39% to 2.9 million in the period, 1.7 million of which were new depositors.

STRATEGY & IMPACT

A dominant sportsbook player in nearly every market it enters with leading in-play and mobile platforms, it is also a powerful gaming operator. But acquisition is driven by sportsbook where its low-margin model is tough for rivals to compete with.

GEOGRAPHIC REACH

Top two-player throughout regulated and unregulated Europe as well as a significant operator in Asia and Latin America. It is the leading sports betting operator in Spain and recently launched in Italy. The Australian business is lossmaking, but growing.

INFLUENCE & LEADERSHIP

The firm is hugely private and unlikely to play a role in any M&A, but the scale and reach of operations make it a serious competitor for almost every operator on the list in every vertical in almost every major territory. Bet365 is arguably the one firm nobody can afford to ignore.