Thread by @henrikinvest

I just felt like I had to write another Kambi post, to me it’s just crazy people don't get it but fair enough it’s a complicated industry if you're new to it. For me it’s very simple to explain Kambis moat and why its insanely hard for other players to catch up.

I think there are 3 different ways on how to create odds and do risk management and then combinations of these and the mix is different. Kambi now have more than 900 people employed while some competitors who claim to have a competitive offer to Kambi have only 30-100 or so.

The 3 different way to do odds and manage risk 1) You have odds compilers who independently analyze probabilities and stats and other factors such as weather, injuries, form and all kinds of inputs and then create and adjust odds based on inputs.

Very few are capable of doing this and this is why Kambi have 900 people, they are not there just for fun, another example is Bet365, then there are operators who have some inhouse capabilities but often very limited.

This means if all feeds and competitors were down Kambi and Bet365 would still be able to offer pricing, while many competitors would be down or would be shitting themselves and not trust their odds and limits. In the B2B space its only Kambi who can do this as far as I am aware

2) The second way of doing odds is what almost all companies who claim to be competitors to Kambi do, they simple use feeds or scrape content and call it their owns odds, best example here would be SBtech, without feeds they can’t operate and this have happened

The 3rd way is to let liquidity set the odds, the best example here are the Asian bookies and Pinnacle, I respect their way of doing business but they also have limitations. So the way it works is they just put a line up to start with but with low limits,

The starting line don't even have to be that good, then they adjust the odds according to what people bet on and liquidity, the best ones like Pinnacle also differentiate on sharp money and recreational, this model is highly algo driven and works very well for liquid markets

There are pros and cons with the 3 different models, however, the attractive players everyone wants is the mass market recreational players who but for fun, these players often like to make fun bets on players specials, parlays, live betting and other forms of entertainment bets

It’s one thing doing odds on high liquidity events like NFL or EPL, then it works ok with copying and setting odds based on liquidity, but in order to have a wide and good offer on all sort of leagues and bets on illiquid markets you need to be able to set the lines yourself

And that is why Kambi have 900 employed and a cost base of now close to 100milj Euro per year, in order to compete competitors need hire the same amount of staff and build a similar business. Some think it’s just a matter of cash and scale but it is not as simple

Kambi have built their very sophisticated models and algos and trained their staff for over 20years, it’s not easy to either find the qualified staff or replicate this, first of all its will be extremely costly and take many many years, in the meantime you're losing market share

Regarding finding the staff its very hard I would say, good traders/compilers are hard to find nowadays as no one is really trained from a bottom-up perspective and how to compile odds, they are just trained to copy.

A good comparison would maybe be the stock market and someone who went to Colombia business school and learned fundamental analyses vs a day trader at an algo firm, the skillset is very different

Even if Kambi to a large extent of course also follow the market, sets odds based on liquidity and sometimes follow/copy I think having a fundamental understanding and DNA and capabilities to do their own odds gives them a deeper understand on what’s going on.

They are not in the blind, they can understand if its sharp or recreational action and can also analyze it better to adjust the odds and improve the product over time, while the copycats never improve much and are always one step behind.

I think Kambi had a great CMD and the best presentation so far in their history, I know they are humble and don’t want to bad talk competitors but still think they could explain this edge better as it’s a huge moat IMO vs copycat competitors. Disclosure long Kambi :)