Data is the new oil

Nearly 20 years ago, the mathematician Clive Humby coined the phrase “data is the new oil”.  For the industry and economy, data was to become the new wealth creator in the same way that oil has enabled new technologies and products since the mid-19th century.

For the sportsbook industry, this comment was well ahead of its time. In 2006, the in-play offering that is ubiquitously driven today by real-time game state data largely didn’t exist. Most operators at the time offered little betting action after the start of an event, even on football. Some didn’t offer in-play at all. 

Fast forward to 2024 and you could be forgiven for thinking that sports betting operators – and more pertinently the supply chain that feeds them – are fully utilising the data that is available to them.

The perception exists that the age of the internet and the use of data has facilitated growth and wealth creation within the sports betting industry that would have been impossible two decades ago. 

The reality is that this isn’t entirely true. In those markets that were regulated in 2006, once the substitutional effect of pre-match to in-play turnover is considered – alongside the shift from retail to online – the “growth” of sports betting is arguably not much greater than the general growth in overall GDP during the same time.

In that light, data hasn’t driven betting industry growth at all.

Who will be the next industry winners?

For today’s leading operators, this hasn’t presented a problem. The likes of Flutter and Bet365 have consistently been at the forefront of emerging trends and as a result have succeeded in becoming the largest sportsbooks of the modern age, usurping the likes of Ladbrokes and William Hill, who used to dominate in a world of horse racing and betting shops.

But while sports data may not have driven industry growth in the way that is often perceived, it is likely that how operators utilise different forms of data in the future will determine who the next generation of industry winners are.

Future value growth for sportsbooks lies with a better use and interpretation of the customer data they already possess.

Going back to the analogy with oil. It is true that this black gold has driven growth and innovation around the world – but in its unrefined state it is virtually worthless. This is where the most interesting parallel with data exists.

Basing prices on real-time exposure

Ninety per cent of the world’s data has been created in the last two years and operators are now sitting on a huge wealth of potential value given to them through the information provided via the betting activity of their customer base.

However, to date, the tools that are available to sportsbooks to mine this information, refine it, understand it and objectively use it to drive increased profits are rudimentary at best, meaning that most of its value goes untapped. 

The industry currently uses in-play models that can’t incorporate or react to the pace of data evolution. Historically, these same models have enabled operators to make great strides in the arena of supplying additional content.

But the way that they are built means they are not capable of automatically managing risk in real time based on aspects such as book liability, customer skill or other immediate market information.

There is a way forward for operators and that is to incorporate how their prices change based on their real-time exposure. Objective, data-led decision making will power an improvement in the bottom line and for that the sports betting industry should look at the financial industry as an exemplar.

Putting the algorithm to work

Powerful algorithms can be used to make automated decisions based on information extracted in real-time from the wagers that operators receive, as well as a range of additional underlying data sources.

By overcoming the limitations of their current models, operators can optimise their prices in real time, based on their risk preferences and objective analysis of their proprietary data. And if operators upgrade their approach to risk management in this way the outcome is clear.

Increased margins, higher profits, lower volatility, improved brand differentiation and a sustainable increase in market share, all delivered with customer safety, are at the heart of the equation.

Proprietary data can power a new economic era for sports betting operators. But it’s how it’s used that will make the difference.