Given the massive amounts of money wagered by professional punters that utilise algorithms designed around sports statistics, tech company SportsHero (ASX: SHO) is trying their hand at eSports with a ‘Predictor’ they claim can exploit bookmaker mispricings of eSports matches.
The Predictor, which they label as state-of-the-art, correctly predicted 125 match winners out of 189 head-to-head matches (66.14%) with the average winning odds of $1.78.
Given that a 66.14% win rate would be met with an average return of $1.51 at 100% market efficiency without knowing anything about eSports, there is merit in SportsHero’s claim that, “that betting companies have mispriced their odds when compared to the underlying data and percentage win rate that the Predictor’s algorithm suggests.”
However, the release of their predictive algorithm rather than using it to bet themselves highlights the underlying problem with eSports gambling – a lack of market liquidity. In many instances, small bets as little as $100 would likely move the odds of an eSports head-to-head market which are also priced with higher vig (house cut) to account for the lack of gambling regulation in eSports.
Without being able to sustain returns themselves due to the limited eSports wagering liquidity, SportsHero are seeking other methods to monetise their Predictor.
“We are innovators in the esports prediction market and are excited for the additional markets and verticals that the Predictor enables the Company to operate in,” said SportsHero CEO, Tom Lapping.
“The impressive performance to date validates the accuracy of the deep learning algorithm and we believe that this asset will continue to grow in value as it continues to increase in accuracy through data optimisation.”
“The Predictor has the potential to be a company making platform by allowing SportsHero to enter new markets, generate revenue at scale and leverage our existing products, data and market position to our advantage.”
The Predictor’s game of choice is League of Legends which is one of the world’s largest multiplayer online battle arena games where teams can compete for real money. In 2020, there was an estimated total of USD $8 million in global prize pools throughout the year for League of Legends tournaments.
While the game itself has one of the largest datasets available for online games and data modelling, the 189 head-to-head matchups would not be classified as a reliable population size by quantitative modelers.
So rather than using their Predictor to exploit bookmaker mispricings, SportsHero is set to launch eSports predictions competitions where users will be invited to “Beat the Predictor” to win prizes, such as sporting memorabilia and eSports merchandise.
For a monthly fee, users will also be able to gain access to the Predictor’s eSports match predictions like that of common touting services for professional sports and horse racing.
For the year ended 30 June 2021, SportsHero reported revenue of USD $40,570 (approx AUD $55k) which was an 1181% increase on the previous year’s $3,434.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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