Group pledges to up 2018 marketing spend by £20m as online gaming revenues fall 2% and sportsbook grows below wider market rates
Paddy Power Betfair has pledged to up its marketing spend by £20m in 2018, as the firm saw its gaming division continue to decline and Paddy Power brand lose sportsbook market share.
The group this morning reported 5% year-on-year rise in FY17 online revenues to £898m, with sportsbook revenues up 8% to £660m and gaming down 2% to £238m.
The firm admitted both major bands had “underperformed against the market on gaming” with Betfair up 4% and Paddys down 8%.
“While the completion of the platform integration has facilitated some product enhancements in recent months, including a new Games app for Paddy Power customers and an improved live casino product offering on both brands, our gaming product still requires additional investment to address gaps versus competitors including improving in-app customer journeys and our promotional capabilities,” the firm said.
“In this context, we are yet to see a return to revenue growth and we continue to examine how best to position our gaming brand propositions to compete more effectively.”
PPB has previously considered launching a gaming-first brand.
On sportsbook, Paddy Power was the drag on revenues, with Betfair sports revenues up 11% in 2017 (sportsbook +29% and exchange +1%), while Paddy Power “lost market share”, with sports revenues up only 3%.
In addition to product development improvements following the migration, PPB pledged to increase investment in Paddy’s via above-the-line marketing, in part at the expense of promoting Betfair.
PPB will also increase PP’s customer value proposition through “enhanced generosity, including an expansion of the “Paddy’s Rewards” loyalty scheme, along with continued use of high profile headline promotions”.
“This follows similar investment in Sportsbet in 2017 which successfully delivered strong increases in customer activity,” the company noted.
For Betfair, the focus will be more international, with the group saying the brand remains “sub-scale in most geographies outside of the UK and Ireland”.
“We have identified a number of markets with characteristics that may have the potential to deliver greater scale and we will assess this opportunity with additional exploratory marketing investment in 2018,” PPB added.
Those efforts combined with marketing for Paddys will see an additional c.£20m invested across marketing and retention activities in the Online business in 2018.
Peter Jackson, group CEO said: “ Following the successful completion of our European technology integration, Paddy Power customers are now enjoying the fastest sports book app in the market. Our considerable development resources will now be focused on bringing more new products to customers, some of which will be delivered ahead of the World Cup.
“We saw the benefits of investing in our customer propositions in 2017, with Sportsbet launching a number of product features that give extra value to customers and Betfair moving to a clear market leadership position in its football pricing. Now the Paddy Power brand is operating with an improved product, we will increase marketing spend to align with its mass market positioning and step up the retention-focused investment that we started in 2017.
“At the same time, we also plan to increase our investment in international markets. Our scale, leading customer propositions and strong balance sheet mean we are well positioned ahead of the regulatory and fiscal changes expected in the UK, Australia and the USA. Our strengths in operating efficiently and responsibly will enable us to build a business that can sustainably generate shareholder returns over the long term.”
Underlying group EBITDA climbed 18% to £473m for the year, higher than the previous guidance range (£450m to £465m) due to favourable Q4 sports results.
PPB shares were down 5% to 7,795p at the time of writing.