Benjie Cherniak: Innovation in online gambling is coming, “but not from guys like me”
As legal sports betting cements its presence across North America, both new and established companies are battling to become the preferred home of the next-generation punter.
iGaming NEXT editor Conor Mulheir sat down with investor, adviser, and principal at Avenue H Capital, Benjie Cherniak, to see where he thinks the market is heading in 2023 and beyond.
Betting and iGaming: The next generationWhile many operators rely on tried-and-tested methods to attract online sports bettors, Cherniak believes the time has come for the market to be shaken up by the new kids on the block.
Innovation in gambling is an area of significant interest for Cherniak and Avenue H, who can support new businesses by deploying capital or providing advice built on years of experience.
“The challenge is I’ve been around a long time, and I see the world the way that I see it,” insists Cherniak, adding: “The innovation isn’t going to come from guys like me.
“The innovation is going to come from a teenage kid, who’s probably sitting in his parents’ basement right now and who grew up in a different world than I grew up in, and who has a better sense of what that the next generation of consumers is looking for.”
“The challenge is I’ve been around a long time, and I see the world the way that I see it. The innovation isn’t going to come from guys like me.”
Examples of companies adopting a new approach include, for example, Betr. Founded by Simplebet co-founder Joey Levy, Betr is a microbetting operation which offers sports fans a simplified user experience. It has been referred to as the “TikTok-ification of sports betting” and is backed by online influencer Jake Paul.
Other innovators in the space include Australian start-up Dabble, a social-media inspired brand aiming to inject a more sociable element into online betting.
Then there are the companies such as Sporttrade, the sports betting-cum-trading platform modelled on financial trading markets, and Mojo, which also presents real-money sports betting in a manner more palatable to those familiar with stocks and trading tools.
“These companies collectively are all very different, but what they have in common is they’re offering users a real-money gaming experience that deviates from what the norm is today,” Cherniak said. “In doing so, by definition, they’re challenging the status quo.”
AI and new tech
Further disruptors in sports betting will doubtless be driven by the advent of new technologies.
Amid the hype of AI-driven products like ChatGPT, Cherniak believes artificial intelligence has reached the stage where it is ready to enter into the mainstream.
“I think 2023 is a turning point in which AI shifts from a buzzword to having real applications for sportsbook operators,” he said.
“Within that, if you look at an area such as personalisation, I think we’re at the point where a number of operators are going to be asking: ‘how can I differentiate my offering so as to maximise my relationship with my existing players, and to help bring in new audiences?’”
The companies that are able to help answer these questions will put themselves on a strong growth trajectory moving forward, he suggested.
Indeed, a Google search for “AI-based personalisation tools for gambling” returns no shortage of results, with businesses such as Graphyte, Vaix and Frosmo all promising to take the heavy lifting out of personalising the end user experience.Personalisation, of course, is not the only area of application for AI in online gambling.
Sportradar, for example, already offers AI-driven technology services aimed at improving operators’ trading, risk management and marketing capabilities, while Kero Sports uses the tech to curate contextually relevant micro-markets for punters to bet on, based on in-game statistics.
Such technological advancements may serve as a unique selling point for operators in the fiercely competitive US market, Cherniak suggests, now that companies are beginning to shift their focus from aggressive market entry to profitability.
“The focus over the last number of years has been getting live at all costs in the various states that opened up,” he said.
“But that’s slowing down a little bit now because there aren’t as many states opening up in 2023. Now operators are thinking more about how they can offer their players a superior experience. And many operators are starting to realise there are emerging companies that can help them tap into new audiences via personalisation and differentiation.
“These third party products can help them not only retain customers, but also tap into new audiences.”
Investment expectations for 2023
For the founders bringing these products to market, the investment landscape of today may appear unwelcoming. Cherniak remains optimistic, however.
Although macroeconomic headwinds have created significant challenges for those seeking and deploying capital, the situation looks positive for this year and beyond, he insists.
“From an investment standpoint, it’s not as doom and gloom as people think it is, even if the markets struggle again this year,” he said.
“VCs raised a record amount of capital in 2021. They didn’t deploy much of it in 2022 because the world fell apart and VCs were conservative with their capital. Which means they’ve got some capital to deploy in 2023 into deals with sound unit economics.”
“I think there’s more money to go around in 2023 than people think. My best guess is that in 2023, the really hot start-ups and scale-ups are going to be super competitive.”
Indeed, investment slowed in 2022, and the usually-resilient gambling sector suffered just as much as others. New businesses found that cash wasn’t as easy to come by as it had been previously, and that they needed to jump through a lot more hoops to secure investment.
While those holding the money became increasingly reluctant to share it last year, savvy investments continue to garner their attention and companies with real upside potential will still be able to thrive, Cherniak said.“I think there’s more money to go around in 2023 than people think. My best guess is that in 2023, the really hot start-ups and scale-ups are going to be super competitive, whereas all the other deals are going to create opportunities for investors to capture significant value on terms.
“As such, the majority of start-ups are going to have to be more flexible than they might want to be in the year ahead in order to secure their piece of the investment capital pie that is out there.”
Benjie Cherniak is currently an investor and adviser to emerging companies in the sports betting space. Previously, Benjie was Principal & MD at Don Best, the leading provider of in-play pricing services and sports information products relevant to the North American sports betting industry, acquired by Scientific Games in 2018.
Benjie will be speaking at iGaming NEXT New York City on 8 and 9 March 2023. See the latest conference agenda here.