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The Kayak of Sportsbooks

The ironically named villain of retail investment platforms, Robinhood, was once known as a pioneer in the effort to democratize financial markets. However, after a successful IPO, the firm had to begin divulging financial information about how they generated such astronomical revenue, and with that skeptics began to arise. What we discovered was that Robinhood makes more than 80% of their annual revenue on Transaction-Based Revenues, the primary source of which comes from payment for order flow (PFOF). In layman's terms, PFOF is the process of receiving a small payment for directing orders to a particular market maker. This method of producing revenue is controversial for a handful of reasons, but all you really need to know is that when dealing with PFOF, more transaction = more money, no matter how successful those transactions are for the user. Robinhood is therefore incentivized to motivate users to transact as much as possible, which is historically counter-productive when trying to build wealth through equity markets.

Additionally, the average Robinhood user only owns 2 stocks. From this data we can conclude that the typical Robinhood user executes a large number of transactions per year, while also owning ~2 stocks at any given time, resulting in virtually no diversification of assets, and a large amount of exposure to single security risk.

These principles and pitfalls are widely known throughout the financial community and easily learned, so it made me wonder how Robinhood has successfully created a user base of naïve trading junkies that ignore traditional investment theory? Through my research, I found that their success is largely driven by the incorporation of gamification. Gamification is the application of typical elements of game playing in a traditionally non-game environment . Visit the Robinhood platform and you'll see streamers falling from the top of your screen, bright green lines for gains and soft purple lines for losses, stock recommendations based on arbitrary factors (i.e. popularity) and advertisements for margin investing, cheap crypto-currencies and option trading. These methods of manipulation can be extremely productive and dangerous. They are meant to take advantage of novices of finance and make investing feel more like an addicting game than a means to financial freedom.

Now, the next great Gamification Revolution is happening in the apps of the largest sportsbooks in the world.... And it's working. Daily boosts, loss coverage, free spins, player props, enhanced odds! These are methods of manipulation to get you to engage more with the application and take uneducated chances on opportunities that are "too good to miss out on". Sportsbooks make most of their money on the vig (which I've been told is also known as Juice), which is money they make through adjusting lines using a mathematical formula that ensures they make a commission no matter the outcome of the game. So, like Robinhood, transactions are what is crucial to the revenue of the Sportsbooks that dominate market share.

What can be done to defuse this gambit and convince users to make smarter, more educated sport bets? *Enter the Alternative Sports Recommendation Engine (or ASRE for short)*. ASRE is not a sportsbook it is a third party application that crowdsources the lines from each app to create a data-base of all live and upcoming bets across the universe of sportsbooks. If you would like to bet on the over for an upcoming game, you would enter into ASRE and search the game you are looking for. When you find the bet you are looking to place you will see the line/odds from each app offering the bet in context (e.g., DraftKings -110, Caesars -105, MGM -120). In addition, if you are looking at a specific bet that is highly unlikely (e.g., a parlay that has +10000 odds) when you select to place the wager ASRE will produce a pop-up that says something along the lines of "You have the same odds of getting struck by lighting as you do winning this bet. Are you sure you still want to place it?".

ASRE will look out for the users best interest because it doesn't rely on transactions to generate revenue. As a result, sports bettors will make wiser decisions with their money and hopefully make more of it.

Track your bets, and follow your friends on the Pikkit app. Use Code: WORSTBETS to earn between $5 and $50 when you link your Sportsbook!

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