Episode 49: Is Data Too Expensive?

[Music] Hello and welcome to episode 49 of Zero Ledity, the podcast from IRISM Cridercheck Gaming. I'm your host, Brian Allen and we are presented today by Optic Outs, the Trading Tool Build for Operators Who Prioritize Speed and Market Cub Breach. My guest today is Tomash Devenishik. Please please direct me if I've said that. I'm a pronouncing that too much. Well then mate, I could talk well. He is the founder of Chiro Gaming Micro, IRISM Crider, we're going to talk some microbes and general industry stuff. So Tomash, I didn't want to ask you about data quickly first because simple web for example in the US weren't happy. We had the data costs from the you know paying for official data fees and the likes of Genius or Radar and tried to come up with ways to work around that and obviously that annoyed certain people who were charging for those rights. So it is a massive cost and I've heard you speak about before you know that sort of third in a paying draw this data feed. So what's your approach here like is it ultimately you have to suck it up and pay it or say your way's around it, use lesser data feed also what's your solution. Our approach is we understand the ecosystem we think it's a reasonable fact of life to have data providers who collect good data and then distribute it and shouldn't get paid for it. Where we struggle is when particular data providers want to become more than 100% of our costs. Right so if like if I'm selling you something you're an operator and I'm selling you something for a dollar the data provider is saying well I'm going to charge your dollar 50 for it and that makes the business model impossible of course. But then if you look at that data provider they might be selling their own version of what you're selling for like 20 cents. Without also doesn't make sense. Right so I think most of them are actually quite good and I don't want to name names specifically but like we out very good relationships with most of them where we've gotten to a reasonable position of like you know we sell something you're an input into what we sell we would like to pay you and you know there's a reasonable kind of portion of our cost that's allocated to that and then with others we're in a different place and you know the when you have the entire ecosystem because it's not just suppliers like us but it's also the operators who are quite unhappy about how you're conducting business. That's probably a red flag you know because if it was just a supplier side okay it could be understandable but when you have a coalition that is against you I think the coalition most of the time will win and that's probably the alternative is to just kind of become part of a coalition but again I ultimately think that on a long enough time horizon things settle in a natural state right so I think we have a bit of an unnatural state right now with how the data business is conducted but over time I think it will settle so I think the long term risk is lower and the short term pain is probably higher and it's part of part of life you know you know not everything is going to be smooth and we're ready but yeah I'm it some of these leverage those like if you own official NBA data as an example people me but I think you know this is tough but you kind of have to get that as an operator and so you know he's an uphill battle trying not to pay for that I would imagine. Yeah and again that's a pain in the short term and I think long term the things have to settle right like things have to settle it's a more natural state that that's just like I think that's true of everything you know like on the long enough time horizon merit and product wins and so I don't see how in 10 years time we're still having this problem again like a bunch of operators coming together as saying we're just going to create our own data collection and like open source this whole thing and everybody can just use it you know because like to some extent data if you look at the like if you can create some analogies data is a commodity especially the base level stuff right like sure if you're driving innovation around like putting AI cameras or other things inside the arenas and you're collecting something truly better like Opta is a good example of this Opta has fantastic soccer data they charge a bit of a premium for it but it's well worth you know and all the top tier operators who have a significant soccer content makes I think are very happy to subscribe to that feed because it just creates a better experience right and it's it's possible because it's you know there's some proprietary stuff there that makes that feed better right it's not just people sitting and watching low latency streams and punching things in and doing so inaccurately and blah blah blah so I do think that people should get paid for like good products that are based on proprietary technology and approaches and maybe even exclusively and exclusivity rights but if the product is average and as it's possible to get it in other ways then over time you're gonna have to see some kind of normalization because that's happening everything else you know like that's happened movies or music and all of that other stuff right like technology just enables disruption and I think fast-forward 10 years from now again I don't think that's an issue. This episode is brought to you by Optic Ods. Optic Ods is a trading tool built for operators who prioritize speed and market coverage. They provide a real-time Ods API, same-game polyensites and an Ods screen that empowers your team to go from reactive to proactive. Leverage real-time data and proven trading tools crafted by industry experts. Find Optic Ods at SPC Lisbon or G2Vegas or if you can't wait book a demo today at opticod.com and mention code EKG for an exclusive discount for zero latency listeners. Let's talk a simple bit valuation very quickly so the deal with the sale to draw things was 195 million or up to 195 million if we know and announce in targets but I believe around like 45 million in cash upfront and obviously that up to number is still somewhere below the the valuation they last raised money at which is 300 million plus so what do you take from that valuation? Does it give you use like some concern about the upside? I don't think it concerns me like we they raised a lot of money right and they raised a lot of money at some pretty high valuations. We raised eight million bucks to date at far lower valuations so I think there's a lot of room to like if we sold tomorrow 4195 and it was whatever the numbers that you said I think plan messengers would be happy but that's not the plan. The plan is a to be a lot less concentrated right I think based on groomers draft kings was a very big portion of the simple bet revenue straight. The global distribution that we've built between everything that's sort of signed is being integrated is already integrated we're on track to do 2,000 brands global and a lot of those brands will be small which is okay some of them will be bigger but the concentration is probably going to be like 20% max from one single source and I think the other kind of key thing which we touched on in the beginning was if you look at the US the micro product has had about three years to mature right decay large I think in 2021 with simple bet and so where they are today is very different from where they were three years right and it's probably you're seeing me this way so I'll go like that it's much much higher of a share of in play and kind of share of wallet and all that stuff today than it was three years globally we are where we were 2021 in the US right like we just launched most of our we have about 150 brands live today all of that launched in May or June of this year so it's only been four months and everyone else they don't have it right like like you take any country, take, I don't know, check Republic or something. - Well, there is no micro-product today. So it's gonna take a little bit of time, there'll be a bit of a adoption curve that's gonna happen over, hopefully, shorter than three years globally. And so our plan is to sustain that adoption over the next couple of years globally and be a very meaningful player and I'm the niable player, let's put it that way in the global ecosystem. And then I think our prospects look far better than simple bets, prospects, not that in my opinion it was a bad outcome. Like I know some guys from there and I think they're quite happy about it. Certainly if you were an investor that put money into the last round, you're probably not that happy, but that's not for me to pontificate on. So yes, we think that the outcome given a global maturity in a couple of years given a very large entrenchment around the global market, it's pretty bright. And then this LLM simulation approach, I think is also something that we're quite bullish on, especially now given the patent news because it allows us to potentially over time leverage that same distribution to get into other areas of the content mix. 'Cause today we've built a really good name and product on the micros side and so you can almost look at it as a wedge into the industry, but over time, and even today we're already hearing it from some of our partners who say, "Hey, can you help us on this "and can you help us on that?" Because when you're pricing the smallest moments of the game, depending on your pricing approach, you can actually use that as a collection of pieces from which you can build bigger propositions, whether it's a player prop or something else. So I'm quite happy with their number and I think in our opinion, that number is some type of a variable within a bigger formula that will be cure-us-porture. - Yep, makes sense. - Right, couple more for you to ask and all that you go. What one just quickly on the US, like presumably you expected to come to much bigger part of your business in this environment now, but how much do you see that change in the last couple of months? - Tremendously. I mean, everybody knew since May, for the most part, the timing of the announcements and the changes is like certainly in the next month, you'll see us with a fairly big household name in the US and that'll be the first of the dominoes. But there's a lot of other dominoes that are in the mix and the, there is no immediate impetus for most of those guys to switch today because I think the B2B business of simple better still around and is servicing all those customers. But obviously over the next, like by next NFL season, it's gonna be a very different landscape in the US and I think given what we're doing right now, I think here will be a major player in that space. But again, I can't comment right now publicly because a lot of that stuff is not down or not signed, but like we are mid-integrations with some of the US partners right now. So. - And the last thing we're gonna ask you about was I've heard you talk before about microbes as a kind of almost like a slot mechanic or a casino mechanic as a way to sort of keep people engaged and you know, not get 20% as them like SGPs might be doing, but a way to keep people in the game, keep them messing around with you, keep them engaged, keep them on your site. And I suppose you would say, you know, certainly either as our projections for a online casino legislation is slow but we, you know, we see like half a state, half a new state a year for the next five years or so. So you would think perhaps that a casino of star sporting mechanic is valuable to operators. - Yeah, in more ways than one. So I think traditionally, if you think about it, what's the kind of the player journey? It's come in, make a few bets, whether it's a parlay or a pregame, and then the natural inclination used to be to drive you to casino, right? Like just give you something to do and that would be casino especially globally, right? Where it's possible and available. Like that's the mix, I think that many operators have told us is the sweet spot for them. And why is that so? It's because you make these almost lottery type bets, but then in order for you to stick around and be a customer long term, you need something else for engaging. Something that keeps you connected to that brand, right? And casino played a good role with that. What we've heard from operators specifically is both ones that we work with and ones that we're trying to work with is that the micro's, and in game, in general, is an outlet for that user to continue their engagement with the brand, right? So you can come in and play, you're watching the game, you're betting on whether it's a player proper or micro's or whatever. And that allows you to like stick around longer and what that creates on a long enough time horizon is much greater LTV. Because if you're just gonna monetize people through Parlaes, they're churned. We were, I was at EGR in LA a couple of weeks and Fandall was on the panel with me and I think they sort of confirmed that as well. But I mean, I think it's quite self-explanatory, right? Like if you're gonna just offer Parlaes to people, you're gonna, those people are gonna churn. And so the micro's product is about an 8% whole product, and we did this analysis where we looked at the distribution if we've been all the handle by the whole percentage of the users, you see this incredible spike in the zero to 10% and then a quick drop and kind of this very aggressive natural distribution around the zero to 10. And so you'll have people who are winning up to 10 and that's the next category, right? And then people who are losing 10 to 20, but that drops very quickly. And so most of the handle is in that zero to 10% range. And that's good, because it is very casino-like and slots-like of an experience. And it's also, I think exemplified by the number of bets that people are making. We would see sometimes 50, 60 bets from a user in a baseball game, because they're just betting the next bitch, betting the next bitch. That's pretty much a casino-like experience to that user, right? It's like very short, repeatable instance, gratification type product. And so yeah, I think it helps not just on the bottom line, because if you have a company that knows how to price these things, if you have a vendor that knows how to price, how to trade it, how to kind of do that whole end-to-end process, you're making 8% on a, you know, seven to nine, the shifts obviously fluctuates. But you're also gaining a lot of longevity out of those users, because they really do like it. Just to freeze that another way for people who haven't seen the graph, or seeing you making the graph with your hands there. Like the majority of users are losing at zero to 10%. - It's big. - Exactly. Right, Tomash, that's everything I've written down to ask about. Is there anything else I should be asking you about? - No, I think that's, you know, that's pretty much it. That's the state of affairs. Happy to be on the far-firingly, been an avid listener. And so I'm glad you guys invited me. It's just one of the ones I haven't been on. So thank you for that, mate. - No, good to have you. - Wonderful. - Right, thank you for joining me and our listeners. Thank you for listening. If you would like to hear more from Eilers, our research, our monthly reports on sports, basically online casino, sports policy, please drop me a line on LinkedIn and I'll point you in the right direction. (upbeat music)