iGB brings readers a new column from WaterhouseVC’s Tom Waterhouse. In this first part, he analyzes the companies that will drive the growth and adoption of cryptocurrency betting.
The growth of crypto betting and web 3.0 is disrupting traditional betting.
The entire real-world betting ecosystem is being rebuilt in virtual worlds like Decentraland, presenting opportunities and threats for incumbent operators.
At Decentraland, players must first purchase or transfer cryptocurrency tokens (MANA or DAI) to their Decentral Games wallet to wager on certain games.
Online crypto operators that share a similar UX to online fiat operators such as FanDuel and DraftKings are already seeing exceptional revenue.
In the third quarter of 2021, the total number of bets placed using cryptocurrency increased by 181% year-on-year, while the share of crypto bets (43.3%) is fast approaching fiat (source: Softswiss).
For example, crypto-focused Sportsbet.io (not to be confused with Flutter-owned Australian company Sportsbet) has $2.7 billion in monthly revenue.
For comparison, Australia’s largest operator generated average monthly revenue of $1.2 billion in 2021 and has around 50% market share in the country.
Sportsbet.io has partnered with several prestigious football clubs including Arsenal, Southampton and São Paolo.
The fund has a particular focus on companies that provide a significant B2B service to gaming and betting providers. Examples include investments in race data providers, voice and text betting solutions, and affiliate marketing services.
An interesting company we’ve seen in the Metaverse is Admix, founded by Sam Huber in 2017.
Admix’s core business is creating and publishing in-play ads that don’t detract from the gaming experience. This aligns the interests of the advertiser, the game developer, and the player.
Admix already counts many of the world’s largest brands among its customers, with over 1000 brands purchasing Admix inventory each month.
A persistent criticism of Web 3.0 is the lack of monetization in worlds like Decentraland and The Sandbox. However, Admix demonstrates how critical B2B service providers can generate revenue from Web 3.0.
Admix is incredibly excited about the growth of Web 3.0, but approaches it more like a real estate developer. The company has been buying land from Decentraland and The Sandbox since 2020 and leasing that land to numerous brands that are already customers of its core business of in-game advertising.
“The same concepts of proximity, how pricing comes about, and why buy over rent are all the same questions you would ask about physical real estate.”
Sam Huber, CEO, AdmiX
Building experiments on lots and leasing them to their clients has sometimes yielded monthly rents in excess of $60,000, with per-development profit margins in excess of 70% (Fast Company). At Decentraland, for example, Admix developed an exhibition of oversized perfume bottles for L’Oréal and built temporary installations for events such as New York Fashion Week.
Not surprisingly, much of Decentraland’s current activity takes place in its Vegas City neighborhood, a digital sin city.
We envision service providers like Admix taking lessons learned from previous tangential ventures and applying them to the growth of crypto gaming and betting, potentially attracting clients like Sportsbet.io as well as established landmarks like Caesars, Wynn and MGM.
We wouldn’t be surprised to see many of these companies featured on an Admix scoreboard at Decentraland.
Dominant Web 2.0 companies are typically only 20 years old and have taken a few years to generate significant revenue. Their extraordinary growth has resulted in many of these companies being among the largest in the world by market capitalization.
They all have one simple thing in common: they provide a service that their customers need or value. For example, today it is almost impossible to run an e-commerce business without Google ad spend.
Booming worlds like Decentraland and The Sandbox are largely letting landowners lead the way in monetization, and we’re excited to see what happens next.
|Company Revenue (Million Dollars)||First full year||First full year +2||First full year +5||First full year +10||First full year +15||2021|
|Meta (founded 2004)||9||153||777||12,466||70,697||117,929|
|Google (founded 1998)||0.22||70||3,180||2,370||65,670||257,637|
|Amazon (established in 1994)||0.51||147.8||2,760||8,490||34 204||469,822|
|Twitter (established in 2006)||0||4||106||2,530||5,077||5,077|
|Nvidia (founded 1993)*||13.3||374.5||1,369||3,069||3,998||26,914|
Since its inception in August 2019 Waterhouse VC posted a total return of 2,057% as of 30 April 2022, assuming all distributions are reinvested. Check out our long-term performance chart at the end of this newsletter.
Please note that the above information on Admix, DraftKings, Decentraland, The Sandbox, Sportsbet.io, Meta, Google, Amazon, Twitter, Nvidia, Caesars Entertainment and MGM Resorts is based on publicly available information about the company and is not intended to be be considered or construed as advice on financial products. Waterhouse VC has interests in Flutter, Meta and Google. The information provided herein is general information only and does not constitute investment or other advice. Readers should rely on professional investment advice tailored to their particular circumstances.