BUSINESS

Can ambush marketing impact profit?

TAGs: 2014 world cup, bookmakers, Irish bookmaker, Mike O’Donnell, Paddy Power, Patrick Kennedy, Playtech, Ryder Cup, sports betting, sports betting operators, uefa, William Hill

Squads are currently being selected for the 2014 World Cup; the biggest sporting event of the year, a global show and, more importantly, a golden opportunity for sports betting operators.

Can ambush marketing impact profit?Sporting events as large as this one always provide a huge boost to figures and if results go their way then bookmakers can bring in a huge profit. The chances are that most of the plans surrounding the event are already finalised and ready to be put into action. Marketing strategies will be ready to roll out and expectations will be set.

Paddy Power has revealed that it expects more than €160 million of bets to be placed during the World Cup and that they were hoping for a vast increase on figures from the last World Cup in 2010.

Chief executive Patrick Kennedy, who recently announced he will be leaving in 2015 explained at the company’s AGM this week: “We turned over approximately €80 million in 2010 on the World Cup and we would expect that to be at around €160 million this year.”

Although nothing has been confirmed yet, nor is it likely to be until the last minute, it’s likely that a large part of Paddy Power’s marketing strategy for the upcoming tournament will involve some good old fashioned ambush marketing. The Irish bookmaker has become the master of this art having caused amusement and upset in generous measures over many years of attention seeking stunts.

Two years ago in 2012 was the perfect storm when it came to sporting events for Paddy Power to disrupt. Euro 2012 included a 100ft statue of the England manager being put in place on the cliffs of Dover, a giant vuvuzela truck and, of course, Danish footballer Nicklas Bendtner and his lucky pants.

Paddy Power’s own figures claim that within a two-week period during the tournament the reach of Paddy Power on Twitter exceeded five million people while more than 800 news articles were written about the Bendter incident. MediaCom Denmark estimated that the coverage received by the stunt worked out at about £10 million worth of work.

A bit of sky writing was then in order for the Ryder Cup as messages of support and some slightly tongue in check messages regarding the infidelities of certain US players were spelled out by stunt planes.

As if upsetting UEFA and the whole of America wasn’t enough, Paddy Power also took on the London Olympic Committee Organising Group (LOCOG) after not approving of their brand protection stance. The bookmakers set up an egg and spoon race in a small village called London in France and proclaimed themselves to be the ‘Official Sponsor of the Largest Athletics Event in London this Year’. Unsurprisingly LOCOG took exception to this and created even more attention for Paddy Power. As an added bonus, LOCOG eventually backed down and the ads that stated this claim were able to remain in place.

Despite all this fantastic coverage and what you can be sure was a lot of fun, Paddy Power is still a serious company, even if they don’t want their customers to know it. As such all of this ambush marketing is only good if it’s helping the bottom line. So, has ambush marketing really paid off for Paddy Power?

Ambush marketing is largely regarded as a very cost effective form of marketing. The increasing potential for content to go viral has added to the perceived value that can be had by staging some form of outlandish stunt. Whether or not this translates to success on the balance sheets is till up for debate.

Paddy Power’s operating profit from 2012 doesn’t necessarily paint their marketing stunts to be the all singing and all dancing success that they were made out to be. Operating profit did increase by 14% in 2012 from 2011 but that’s to be expected in a year with so many major sporting events. The major concern comes in the fact that profit from online platforms (excluding Australia) actually decreased by 2% from 2011 by going from €74.3 million to €72.7 million. Were it not for the growth of 35% for online profit in Australia these figures would have been considerably more disappointing.

It’s surprising that online profit decreased at a time where not only were there some major sporting events but also a general trend of large growth in the online sector. The fact that mobile, which was seeing sharp growth at the time, is encompassed within the online bracket in this instance makes these results appear even stranger.

Looking at the figures in slightly more detail and it appears to make more sense. There was in fact an increase in active customers of 44% while online sportsbook net revenue increase by 35% (ex. Australia). What really held them back was the sharp increase in operating costs which went up by 52%. This was due to the company’s entry to the Italian market as well as investments in new mobile and social products.

Given that those costs are irrelevant to the profit resulting from the marketing at large events it would be harsh to take them into account. So the 35% increase is what we should be focusing on. However, given the number of events that took place during the year it’s hard to tell whether this is impressive is simply a result of increased betting across the board.

Looking at rivals William Hill who have experienced similar online growth in recent years thanks to their Playtech partnership and the resulting formation of William Hill Online, we can see similar growth figures. Hills reported that in 2012 sports book amounts wagered increased by 36% while online operating profit also increased by 36% – showing strong similarities to Paddy Power.

These figures suggest that while the brand awareness benefits exponentially there might not be much in the form of tangible profit that comes from Paddy Power’s ambushing exploits. Even if this is the case, don’t expect Paddy Power to stop this sort of activity any time soon. Ambush marketing has a long history in online gambling with the likes of Golden Palace being the first to really push the boundaries but not Paddy Power have taken on the mantle and they don’t look like relinquishing it anytime soon.

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