Neal Menashe, CEO of the newly public Super Group, says the global betting giant can leverage its single sports betting brand, Betway, to sidestep the massive customer acquisition costs caused by companies seeking to gain a foothold in the rapidly opening American market.
“People think it’s a gold rush,” said Menashe on a video call. “I never want to be a market leader [in spending] so we must carve a path. It’s no different than other markets…. There’s plenty of revenue to go around. It’s just how you make profit off that revenue.”
Super Group already generates a lot of revenue. The company saw first half 2021 net gaming revenue hit $769 million, up 69% against pre-pandemic 2019’s first half. The business made net profit in the period of €102.5 million (about $116 million).
Menashe, a 21-year veteran of the company who’s based in London, says a key advantage for the company is its sole sports betting brand (about half of revenue is from non-sports gambling under other brands). By comparison, large competitors have multiple brands. One, Flutter Entertainment, has nine, including mostly U.S.-centric FanDuel and PaddyPower in Ireland and the U.K.
Practically, that means that many Americans already knew of Betway even before the company started spending on the U.S. market. As an example, Super Group chairman Eric Grubman, also on the video call, pulled up a screen shot of the closing scene of the Ted Lasso season finale: It’s a lingering shot of the back of a soccer coach wearing a jacket with the Betway logo. “Every American fan saw that,” said Grubman. The episode was the ninth most-watched streaming show the week it aired, according to Nielsen. That probably equates to about 11 million households, based on Nielsen estimates of total minutes streamed.
Betway is also an official partner of 16 soccer clubs worldwide, including as the jersey presence for West Ham United of the English Premier League. “Let’s take Brazil,” said Grubman. “These guys aren’t even spending any money in Brazil, and they’re number two or three there. Why? Because it’s a soccer-mad country that watches great games from all over the world.” More recently Betway has added marketing deals with seven NBA teams and three NHL franchises.
“We built this business on return-on-marketing,” added Menashe. “This is a business that has invested in marketing for two decades and got a return in it.”
That also means Super Group consciously elected not to enter the New York sports betting market, which opened up to mobile sports-book operators at the start of January. The reason? New York levies a tax of 51% of gross gaming revenue.
“Gross gaming revenue is not your gross profit. You still got to take off promotional costs. On net gaming revenue, work it out, you could be paying 80%, 90% tax,” explained Menashe. “We’re just not interested in that because you just can’t make money.” Generally speaking, “your tax rate should be 20% to 25% of net gaming revenue, and your marketing should be around 25% to 30%. You can’t market forever at 100% of your turnover.”
Super Group went public last Friday after closing its merger with the Grubman-led SPAC Sports Entertainment Acquisition Company. The deal went through despite a lengthy bear market for sports betting stocks and 55% of the Sports Entertainment shareholders presenting their shares for redemptions. Redemptions are when SPAC shareholders can opt to receive IPO per share capital in trust rather than equity in the new business (they can vote separately to approve the merger). Remarkably, that level of redemptions for Super Group is actually a lesser percentage than the average SPAC recently, according to data compiled by research firm SPAC Alpha in November.
Shares of Super Group (ticker: SGHC) have been trading in the $8 range since they began trading on the New York Stock Exchange on Friday, giving the business a market cap of nearly $4.6 billion.
Investors, said Grubman, “need to know that sports betting is an integrated entertainment experience and always has been. The fundamental customer of igaming—meaning casino—is fundamentally different, and is enjoying a different type of entertainment, than the fundamental customer in sports gaming.” Super Group’s lengthy global experience and the technology it has built to identify bettors and convert them to Betway will be just as effective stateside as it’s been elsewhere, he added. “What’s different in the U.S. is that it’s new, and it’s going state by state. But what’s different about the U.S. customer? Nothing.”