Home > Finance > LeoVegas thrives despite limiting World Cup ad spend

LeoVegas thrives despite limiting World Cup ad spend

| By iGB Editorial Team
Operator unveils record figures after bold marketing decision for Russia 2018

LeoVegas hailed its focus on technology and brave marketing decisions as it generated record profits in Q2.

The Stockholm-listed gambling operator said EBITDA more than doubled to €15m (£13.4m/$17.5m) in the three months through to June, with revenue soaring by 76% to €87.4m thanks to the impact of its Royal Panda and Rocket X acquisitions. The number of depositing customers was 309,987, an increase of 79% year-on-year. 

However, it was LeoVegas’ business strategy over the course of the quarter that really caught the eye, with the company opting to go against the received wisdom of splashing the cash on marketing to ensure a share of the FIFA World Cup bounty.

While marketing costs during the quarter totalled €30.5m – the highest level in absolute figures in LeoVegas’ history – they were considerably lower than expected in relation to revenue at less than 35%.

“We generated a record profit during the quarter, and the main explanation is lower marketing costs,” said LeoVegas CEO Gustaf Hagman (pictured).

“Our data-driven marketing model works in such a way that we invest only if we see a sufficiently high return in our marketing channels.

“During the FIFA World Cup, many gaming companies that work primarily with sports betting significantly increased their advertising budgets, and as a result the long-term customer value of our marketing was deemed to be uncertain.

“Our models indicated not to advertise in certain channels, and accordingly we quite simply refrained. This in turn resulted in slightly lower growth but at the same time significantly higher EBITDA.”

The company also highlighted the impact of its new front-end platform. It said the enhanced offering improved the game experience for customers while also enabling it to be more effective in product development.

The group added that it believes its decision to employ a number of technology partners will also reap dividends, with Kambi, Betconstruct, and SB Tech servicing LeoVegas, Rocket X and Bet UK.

LeoVegas said: “This gives us great flexibility to be able to offer the best experience and adapt our offering to local preferences. 

“Over time we see that it will be fully possible to use more providers for the same brand and thereby achieve the best possible sports betting experience for our customers.”

While analysts were positive about LeoVegas’ results, the company’s share price fell by around 14% this (Wednesday) morning, perhaps due to its lower-than-expected performance at the start of the third quarter.

However, LeoVegas said the operational decisions made during the second quarter had given it a “stable foundation to continue to improve”.

In a note from analysts Regulus Partners, the company was hailed for its unique outlook.

Regulus added: “In a market where many are convinced that saturation and maturity prevent successful newcomers, that marketing spend is the key to growth and that regulatory change is more about explaining than managing external forces, LeoVegas demonstrates that running a business well can still overturn all of these assumptions.”

Subscribe to the iGaming newsletter