Competition Heats Up In Geolocation Services, ‘Juicy Niche’ Of iGaming Market

A little more than one year into the job as CEO of Xpoint, Manu Gambhir and his team are focused on execution in what the veteran of the industry called the “juicy niche” of the online gaming space. It’s a niche that up until fairly recently, at least in North America, the Vancouver-based GeoComply has basically monopolized, dominated, and more or less dictated the operator cost — for what is not a minor line item, by the way.

But it’s essential to get geolocation right in order for licensed operators to honor the thousands of miles of borders separating, for example, Missouri from Illinois; or Nationals Stadium, in which BetMGM may operate, from the rest of Washington, D.C.  Hence the “comply” in the company name of the market leader, which processes millions of geolocation checks on a daily basis to ensure that when players are transacting with an online casino or sportsbook, they are doing so within a jurisdiction where that activity is permitted.

Asked what differentiates the Xpoint product, Gambhir pointed to price as a feature in and of itself. 

“Pricing is a key part of what it’s going to take to be successful because up until now, GeoComply had the market to themselves,” Gambhir told Casino Reports. “So yes, they charged whatever they wanted to and did well from that. But all the boardrooms in our industry now, the mantra is profitability. And if you look at external vendor costs for [operators], geolocation is always probably top three or four. There’s data costs, there’s payment processing, and then typically geo will come number three, and it’s not a small number.”

Asked to put a number to that, Gambhir estimated that in North America, at present, where 30 states (plus D.C.) permit online sports betting and seven allow iGaming, plus Ontario is a busy market in Canada with other parts of the country coming online: “I think regulated operators are probably spending ballpark $200 million to $250 million a year on geolocation. Before we showed up, essentially GeoComply had all of that. We’ve now taken, admittedly a small bite, so far, but hopefully more.”

Xpoint took one such bite earlier this year when bet365 somewhat quietly switched over from GeoComply, using Xpoint’s flagship product Xpoint Verify. This follows a patent infringement battle from GeoComply against Xpoint, in which Xpoint prevailed in February 2023 on a motion to dismiss, though an appeal is pending. Xpoint also works with Sporttrade, PrizePicks, and iGaming challenger brand PlayStar in New Jersey. 

“Being highly cost effective is a major deal,” Gambhir says. “How do you support massive scale, extremely reliably? With a very high degree of cost effectiveness. And that is not an easy problem to solve. We’re definitely in second place now, but it’s a distant second. There’s going be a lot of innovation, a lot of people going after this, what I call, juicy niche of the online gaming space.”

More competition

So who who else is angling for a spot on the podium?

Another company called Radar is making a run at market share. Radar recently aligned with IC360, which represents the merger of US Integrity and Odds on Compliance, on a strategic partnership. Radar to this point has a larger presence in the retail and consumer goods space, with clients including DICK’s Sporting Goods, Panera, T-Mobile, and Zillow. 

Meanwhile, earlier in May, global sports betting supplier and content provider OpenBet, owned by Endeavor Group with a $13 billion market cap, announced its entry into the geolocation niche with OpenBet Locator.

“Built on the backbone of Amazon Web Services (AWS), OpenBet’s strategic cloud provider, OpenBet Locator™ is a low latency solution that enables operators worldwide to locate, promote to, and monitor customers, remaining fully compliant with regulatory requirements,” the company wrote in a press release.

Going back to Gambhir’s thesis on pricing and profitability, he notes that “OpenBet [Locator] is effectively built on top of a bunch of services that Amazon has built. It’s sort of a partnership, but there’s two hands in the pot. And so how do you build systems that are higher than Amazon, but still be cost effective?”

One additional competitor is the London-headquartered GeoLocs, which was founded in 2012 and primarily services the Ontario market. GeoLocs made its foray into the U.S. in Arizona in Oct. 2023 and soon will go live with a partner in Kansas.

This part is speculation, but we imagine that Sportradar probably will look to compete as well.

Margins matter

The other components of Xpoint’s product strategy and vision are encompassed by what they call “ARC” internally: A for accuracy and R for reliability, while the C denotes cost-effectiveness. 

Accuracy means enabling the operator to take a bet each and every time that a player is in a legal space and a geocheck is made. And if the user is in a no-fly zone, of course, the task is to recognize and reject the bet. The reliability part means that the system is up and functioning pretty much all the time.

“It is not easy to build these systems,” Gambhir said. “For example, Amazon themselves only guarantees 99.9% of time, right. That’s not good enough. You need to be much higher than that. Reliability of the system is key, and it’s not just up time, it’s also performance time.

“If I send you an API call to check someone’s location, do you respond in two seconds or six seconds? Because when someone’s trying to place a bet, in particular a live bet, those extra four seconds can make a difference in the odds, or whether they place a subsequent bet or not. The speed is critical.”

These types of issues and hiccups, at the massive scale at which some of the market’s big fish are operating, tabulate to serious amounts. Gambhir reflected on conversations he’s had with executives at most of the major North American sportsbooks.

“It was a pretty consistent piece of information that about 2 to 3 percent of the time, the current systems get it wrong,” Gambhir said, meaning the system didn’t correctly locate an individual or perhaps it did identify someone as out-of-market within a legal area. “When you are operating at the scale of some of the tier-ones in this industry and you can do the math, 2 or 3 percent of getting it wrong is tens of millions of dollars a year for impact on your revenue.

“Not even counting the indirect impact on the customer experience and the knock-on effect of that,” he added, plus the potential compliance problems. “So getting it right, each and every time, is a huge deal. It’s never going to be 100 percent, but you can solve most of the edge cases.”

As for determining which of the tenets is most crucial to achieving the top podium position, you’re on your own. But odds are that it will come down to price.

“And you know, there’s a lot of room for maneuvering on pricing, to be blunt,” Gambhir said. 

But for now, the Xpoint team is focusing on the work. 

“There’s an endless amount of work for us to do, but we’re already in a very good spot,” Gambhir said. “We keep our heads down and keep executing on all of the things in these three pillars. And once you do that, like, what else can you possibly do? We’ll have built, hopefully, the best possible system that can be built in this space, and that should lead to the goal of becoming the number-one player in this industry. But it will take some time.”