Igaming Focus: FanDuel strategy — lean in when others pull back

Igaming Focus: FanDuel strategy — lean in when others pull back

  • Jake Pollard, CDC Gaming Reports
June 23, 2022 2:00 PM
  • Jake Pollard, CDC Gaming Reports

FanDuel continues to increase its lead in the U.S. online sports betting market. The speed of the firm’s dominance may be surprising, but the reasons are fairly logical.    

There is much talk of a big three of top U.S. betting brands, but the reality of the market as it stands currently is that FanDuel is pulling away from DraftKings and BetGMGM with seemingly increasing ease. 

The latest data from the analysis firm Eilers & Krejcik shows that FanDuel generated more gross gaming revenues from sports betting than all other U.S. brands combined in the month of April. 

To emphasize what is a quite staggering statistic, Eilers & Krejcik’s managing director of gaming  Chris Krafcik reminded industry observers on his social media account that “there are 54” of those operators all fighting hard for a slice of the U.S. sports wagering pie. 

Krafcik added that FanDuel was helped by “above-market” margins in New York in April, which helped it scoop 61% of the state’s GGR and was “a driver of its national outperformance”.

The reasons for FanDuel’s dominance are varied: the stronger quality of its app and the user experience it offers its players; better trading and risk management is enabling the group to generate stronger hold; and, of course, it leads the field when it comes to the high margin single game parlays that are proving so popular with U.S. bettors. 

Lean in
There is also a simpler, more-to-the point explanation. FanDuel has carried on marketing its wares – or, ‘leaning in’, as the group’s management has called it.

This has happened at the same time as most of its competitors have reduced their advertising exposure; and have also not been shy about announcing their intention to do so. 

Peter Jackson, CEO of FanDuel’s parent company Flutter Entertainment, said the group would be “leaning in as hard as we can” at the same time as competing bookmakers struggled with balancing high marketing costs and tight margins. 

Speaking in early May during Flutter’s first quarter results presentation, Jackson said: “Post-Super Bowl, we believe the marketing activity and generosity levels are stepping back further than we have seen before. We have not stepped back to the same degree. We’re leaning in as hard as we can.” 

The result of that decision is clear in the GGR figures collated by EKG. 

Looking at the GGR figures for April 2021, it’s also interesting to note that the rise in FanDuel GGR has been gradual. This demonstrates the incremental aspect of its strategy, although its share of the gross revenues is at its highest during the months of April, May, June and July of last year. 

This is not surprising as it is when sporting seasonality is at its highest and will be the time when its biggest competitors will have chosen to time their marketing slowdown.  

On target
Returning to the theme of more targeted marketing, when Caesars announced its first quarter results in May, its CEO Tom Reeg confirmed the trend when he said bonus offers had been indiscriminate, with “every customer, regardless of value, getting a similar offer.”

He added: “So what’s going to happen as we move into 2022(-23) football season and beyond is we’re going to segment our customer base and we’re going to target our promotional spending at our profitable customers.”

On a slightly different note, but still alluding to how adverts are marketed indiscriminately at players, Gary Deutsche, CFO of BetMGM, around the same time said the group had decided to pull back from an “irrational” New York market and would divert marketing spend to markets with better ROI. 

He added that the “specific problem in New York is the high rate of tax applied to real revenue and phantom revenue” and noted that the effective tax rate was well over 100%. 

Despite its move to reduce advertising in New York, CEO Adam Greenblatt said BetMGM would benefit from the scale being a national advertiser would offer.

“Given our current footprint, the ROI in national advertising can now be effective. Plus the leakage in non-OSB or igaming states can also be valuable when we do launch down the road,” he said. 

But as the EKG data would indicate, the combination of less targeted advertising and broader national campaigns from BetMGM and DraftKings (which has also announced plans to focus on scale of marketing, at the same time as FanDuel is ‘leaning in’ with more marketing to recruit players) means the Flutter sportsbook is ploughing ahead when it comes to leading the market. 

Fast domination
It also shows few signs of loosening its grip on this lead. In May it captured 53% of GGR share in New Jersey, having captured 60% of it in the Garden State in the previous month, the EKG team said. 

A simpler way to put it could be that FanDuel is targeting its advertising more efficiently than its main rivals and that enables it to recruit and, importantly, generate stronger player retention rates on its betting app thanks to its stronger product and user experience.

The U.S. online betting and gaming market has developed at a faster pace than anyone could have predicted, but few would have imagined that FanDuel would become so dominant so quickly. 

U.S. déjà vu?
The UK government’s White Paper on gambling reform is due to be published by the end of this month, and although many UK stakeholders seem remarkably relaxed about it, the impact of proposals such as a £2 maximum stake on online slots or affordability checks is likely to be substantial for the UK industry.

As the industry stateside matures and operators compete with everything they have to reach profitability, they will be hoping they get through what will surely be a very tough next 12 months. The danger of over-marketing gambling and betting products throughout mainstream channels, sports teams and celebrities is not new. U.S. stakeholders however must ensure they don’t repeat the mistakes of their UK counterparts