Today, I am proud to have special guest Jason Trost, CEO of Smarkets.com, talk to us. With the current hike in the Betfair premium charge everyone is now currently looking for viable alternatives and Smarkets could be one of them. Therefore, its important you have a good read through what Jason has to say so you get a better idea of just what sort of position Smarkets is going to be taking within the Sports Exchange world! This could be a big benefit to you!
Hello Jason, I appreciate you taking some time out to talk to us. So, Is it fair to call Smarkets a sports exchange or is it something else in your view?
Sure, Smarkets is in part a sports exchange, but we’re trying to do things differently to the standard industry model. We think the future of sports betting is in sites that strive to be simple, efficient and transparent. That’s what we are trying to do with Smarkets.
Before we go any further lets answer the question most of the readers are dying to know. Just what is the commission structure on Smarkets?
At the start we pegged it at 5%, which was pretty standard across the industry. Since then we’ve had a number of promotions offering 1% and the majority of our users are on this 1% rate, either from previous or current promotions. We’re looking at what would be the best structure as we go ahead. In general I think commission across the exchange industry is needlessly high and that we should be aiming at much lower rates.
So how long ago did you come up with the idea for Smarkets?
Before setting up Smarkets I had spent some time as a securities trader in Chicago. I knew people who would trade horses much like they would any other commodity or instrument. You’re buying low and selling high at the end of the day. But the technology of these betting sites felt like something out of the mid-90s, and transaction costs very high. My business partner, Hunter Morris, who had experience designing market making systems and trading infrastructure for Wolverine, and I, felt that we could bring to betting some of the technological innovations we’ve seen in trading. We wanted to make betting cheaper, faster and a better experience.
Around when did you start to put your plan for the creation of Smarkets into action?
It took a long time for things to come together. We spent a lot of time carrying out research and deciding upon a plan of action, but I quit my job to work on the project full time in 2007. Needless to say, setting up a betting company isn’t simple, and although we founded the company in 2008, it wasn’t until early 2010 that we came out of Beta.
It’s quite a competitive market and Betfair virtually dominates the Exchange world. What makes you think that Smarkets can compete? Is there anything different offered?
We’ve taken a long time to make sure that we get things right. We hired some of the best engineering and software talent in the industry, taking full advantage of the East London tech ecosystem. We’ve developed our own proprietary exchange software, based on Erlang/OTP – a first in the betting industry. Downtime is almost unheard of for financial exchanges – it’s time that betting websites follow suit.
We’re also trying to think differently about customer acquisition and retention. Much of the industry is based on inefficient affiliate and bonus models to draw customers to the site. While we do have a small bonus program, we’ve looked at the web innovations of the last 10 years and thought how we can apply them to a betting context. That’s why we’ve invested heavily in our SEO, why we put an emphasis on fun, social features that encourage a healthy retail flow, and why we care so much about the look and feel of our site. By focusing on this sort of soft marketing, we are able to ensure that we remain efficient and are able to pass on our savings to our customers.
We think focusing on a scalable and efficient model will give us the edge to take on the bigger players.
So how long has Smarkets been live and how has it all gone so far?
Our first real money transaction was in late 2009, at which point the exchange was only open to friends, though we opened to the public later that year. Since then we’ve been continuously improving and developing our product with our small team based out of offices in Clerkenwell. People said that it was impossible for a new exchange to succeed in the current climate, but we’ve overcome these expectations and are continuing to grow organically month-on-month at an astonishing rate.
You have recently added horse racing to your markets. Which markets are most popular with your clients?
It depends on what is going on. We see a lot of interest in horse racing, and as there are so many meets its pretty big for us. But we only introduced horse racing at the beginning of this year, so it will be interesting to see how it compares when the football season gets underway again.
I noticed there was no possible way of seeing how much money had been traded on a particular event. Why is this?
It made little sense for us to surface that information while we were small, so at present we don’t show this. However it is something we’re looking at adding.
With your strong financial background, I was wondering just what sort of punter Smarkets was aimed at?
Great markets need the proper ecosystem of participants with a diverse set of motivations for participating. Encouraging retail flow, either by getting customers to come to you directly or by appealing to brokers, is very important. I think for an exchange to be really successful it needs to bring in money from a wide and diverse customer-base. However, traders are the life-blood of an exchange and I want them to be confident in using our site.
Betfair have recently increased their Premium Charge which has caused a lot of discontent amongst the professional traders who use their platform. Surely this could be an opportunity for Smarkets?
Sure, this is an opportunity. As people become frustrated with the old exchanges they will be looking for alternatives to fill the gap. I want Smarkets to be well placed to fulfil that role.
Finally, what are your plans for the future of Smarkets?
I’m very excited about what the next few months will bring. We’re still a small tech-start up, but our technical expertise and fresh approach gives us an edge over larger competitors. We’re close to getting to the stage where we can focus on really growing the business and proving that we are a viable alternative to the larger exchanges. We have a lot of innovations planned for betting and we look forward to continuing our disruption in a very old industry.
Many thanks for your time, once again!
So it does seem like Smarkets will be trying their best to level the playing field with Betfair. Could be worth having an account in the near future if they carry on growing at the rate they are!