GIG economy hits growth path

GIG economy hits growth path

Monday, November 7, 2016
Debut Betit contribution lifts third quarter revenues

A series of acquisitions within the past 12 months across all areas of Gaming Innovation Group’s (GIG) business areas helped produce a trebling of third-quarter revenues for the Nordic-facing operator and services supplier.

GIG’s consumer-facing online gambling operations were boosted at the start of the quarter by the €54m acquisition of the Betit brands, including the popular Swedish-facing Thrills.com, Kaboo and Superlenny.com.

Along with its existing Guts.com, Rizk.com and Betspin operations, the newly-added brands helped push revenues for the B2C segment to €11.4m including a €2.6m contribution form the Betit brands since they were incorporated in September. Organic growth rose 35% for the period.

Total revenues for the third quarter rose to €14.5m, a 50% increase on the preceding quarter while EBITDA stood at €1.07m, up from breakeven last year.

Active players for GIG’s existing B2C brands hit a record of over 95,000 during the third quarter, up from nearly 82,000 in the second quarter and almost treble the number from the same period last year.

However, with marketing expenses rising in line with revenues – up to €5.39m from €1.97m or a 170% rise – it led to an EBITDA loss of €0.45m for the consumer-facing business. The company said it had embarked upon a series of TV adverts for its main brands, but the overall mix of marketing had titled further towards affiliates with 32% of marketing expenses allocated to revenue share for the period compared with 24% in prior quarter.

GIG said the increase in revenue share was due to integrating Betit where 50% of all marketing expenses goes on the affiliate element. But it added that it would be shifting further towards upfront and above-the-line marketing which, though more expensive, produced better margins and lifetime values.

However, the company also blamed a rise in chargebacks over the period and it has instigated new risk and fraud procedures and services to combat the decrease risk profile of the business.

With regard to GIG’s own digital marketing business, its subsidiary Innovation Labs bought two additional networks in March this year – Delta Markets in the Netherlands and Magenti Media in Sweden – adding over 1,000 referral or affiliate sites to the company’s network. Year-on-year, the number of first-time depositor referrals to operators more than doubled to 9,600, but this figure was down from the 11,400 achieved in the second quarter. Of the third quarter total, 18% were referred to GIG’s own brands while a further 18% went to the clients of GIG’s platform provider iGaming Cloud. The remaining 69% went to other operators.

The fall between the second and third quarters was partly due to seasonality but also due to a refocusing on higher-value players.

The last leg of GIG’s business is the aforementioned iGaming Cloud, an open platform provider which over the third quarter added seven external brands to take its total to 18, excluding GIG’s own brands. The company said the Betit brand propositions will be transferring to the platform this month. The company hopes to have a total of 27 brands up and running on the platform by the end of the year.

iGaming Cloud will be adding a new sportsbook offering to its platform in the first quarter of next year having acquired the OddsModel business in March this year for €8.6m. The OddsModel business has developed software for automated and manual pricing of global betting markets producing data through the use of quantitative methods and proprietary analytical models. The new Sportsbook engine will allow the company to sell proprietary odds on a range
of markets.

In total, the B2B businesses achieved revenues in the third quarter of €4.3m and EBITDA of €1.4m. For the nine-month period, total revenues for both B2B and B2C came it at €32.1m, up over 180% on 2015. EBITDA for the whole business for the none month to September hit €1.95m.

GIG added to its executive team in the period with the hiring of Mikael Ångman as chief operating officer in September. He joins from Playtech’s mobile sportsbook supplier business Mobenga where he was chief executive.

Totally Gaming says: The conglomerate structure has gone out of fashion in most sectors, but GIG is certainly making a go of it. When chief executive Robin Reed spoke to TotallyGaming.com back in the summer he suggested the three arms of the business gave the company a 360-degree view of the business. Reed said the sector was still young and certainly GIG is growing with it but it is also having showing how the attempt to weld together the fragmentary parts of the sector into a coherent whole has a logic to it.

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