Building up to the big game
FanDuel Sportsbook – Flutter’s leading US sports betting brand – paid out $20 million to happy customers on the first Sunday of the NFL season in September last year. Field goals were scored by every team playing that afternoon and around 21,000 bettors, brought together in part thanks to social media, revelled as the long-shot bet came in. The 200/1 odds meant a stake as modest as $5 returned $1,000.
For bookmakers like FanDuel, the size of such a payout may sound painful. But if the odds on any outcome accurately reflect the associated probability, it can run successful, sustainable businesses while providing top-class entertainment to customers.
As excitement builds ahead of this weekend’s Super Bowl in Las Vegas between the Kansas City Chiefs and the San Francisco 49ers, pundits are debating the influence of multiple factors – form, talent, coaching, sporting legacy, even the appearance of Taylor Swift. While the result will be decided by a couple of finely judged plays on Sunday, both teams will have spent weeks trying to identify the best way to win.
Bookmakers are no different as they are set to face off against punters in what has quickly become the biggest global betting event for the industry. Sports experts, data scientists and computer models have been working together to analyse information and access risk in intricate detail. Such probabilities, and therefore odds, are calculated by crunching together several factors, as Conor Farren, FanDuel’s Senior Vice President of Sports Product and Pricing, explains.
How do we calculate the odds?
Accurate prices for complex probabilities
First there’s what Conor calls ‘hard news’; the set of historical statistics that are built up over many decades of setting and offering prices, which can provide an initial view on the likely outcome. Second, is accounting for ‘soft news’; these are nearer term developments that could impact the result, such as player match ups, star player fitness concerns or the possibility of adverse weather. Third is ‘market news’; what intelligence is to be drawn from the behaviour of rival sportsbook makers and customers.
Accurate bookmaking is not so much about picking winners, as many may assume, as calculating the different probabilities of any team winning, or any imaginable outcome becoming reality. “Our aim is to get the right price, the true probability of what may happen,” says Keith Goldner, FanDuel’s Vice President of Data Science, Sports Modelling and Innovation.
Hundreds of thousands of possible outcomes for every game are generated. In FanDuel’s case, its in-house trading team can use technology to simulate each individual game tens of thousands of times to not only try to predict the game winner, but also who might run in a touchdown or how many yards a quarterback might throw for. To get the prices right, as Keith says, “we also need to quantify how much we don’t know in order to calculate better probabilities.”
If the price setting process is accurate, it’ll predict the most likely winner and the margin of victory. Meanwhile, accurate price-setting converts the probability of other outcomes into the odds we see on screen. FanDuel says it takes about 1.5 seconds to receive a data point—what happens on the field—and about 1 second for its model to process the data and push out new odds. That information travels faster than the game broadcasts and streams viewers watch at home in order to stay ahead of the market and protect its business.
In principle, FanDuel’s approach may sound similar to its peers. In practice, it is very different. The company is able to price sports like American Football in-house, whereas rivals have to outsource such capabilities, and is underpinned by Flutter’s Global Trading Technology, a platform that prices and shares data for over 750,000 sports events each year.
Combined with the strength and breadth of FanDuel’s product, which has advanced existing innovations within Flutter to create the popular Same Game Parlay, this allows it to generate stronger margin compared to the wider industry. In fact, FanDuel was able to expand its expected gross revenue margin to 13.5% in the last quarter of 2023.
Such benefits derived by FanDuel form part of the ‘Flutter Edge’, which encapsulates the Group’s distinctive, global and competitive advantages. As Dom Crosthwaite, Flutter’s Group Chief Trading Officer, explains, “talent, technology, product and capital are at the heart” of this concept and represent “a symbiotic relationship between Flutter’s different divisions and brands like FanDuel, all of which contribute to and benefit from it”. This in turn helps to facilitate better entertainment for customers, the fair pricing of bets, and business success, according to Dom.
Profitability isn’t really about luck, though randomness is a factor. The margins generated by the Flutter Edge allows the Group’s brands to develop local sports propositions around sports that matter most to their customers, such as NFL and NBA in the US with FanDuel, or soccer and horseracing in the UK with Paddy Power and Sky Bet.
It is also about communication. Since trading teams are fully connected by sophisticated and secure technology platforms, they give themselves the best chance of calculating accurate probabilities round the clock.
As Dom points out, “it doesn't happen by chance; it happens by design. We make sure we are aligned globally where we need to be and similarly autonomous where it suits our brands, and that we operate in the most effective way for our customers and for the business.”
Global approach to biggest sporting events
To win this game of entertainment, Flutter operates from three core trading hubs, one in each of the world’s main time zones – one in Dublin, Ireland; one in Melbourne, Australia; and one in New Jersey, in the U.S., where the Super Bowl prices are set.
However, across Flutter, there are more than 1,000 specialists compiling odds and building risk management tools to price and manage just about any outcome in any sport on its proprietary trading platform. Through this, they are also able to share views and insights within the network, while setting odds that are adopted by other brands around the world. Crucially, the three-hub global network means Flutter is awake to the ever-changing probabilities throughout the day. So, whatever time you plan to watch one of the biggest annual events in global sport this Sunday, a member of Flutter’s global risk and trading team will be on the other side of your Super Bowl bet and may even be rooting for the same outcome. That is, if their prediction matches yours!