Operators hoping to lower their marketing costs will be disappointed in the next few months as some serious new players make their presence felt.
The long-awaited start of the new NFL season is upon us, and while sports fans up and down the country will rejoice at the idea of their favorite football teams occupying their every sporting thoughts, the next six months will by some distance be the busiest period of the year for the U.S. online betting operators competing for wallet and market share.
The next half year will also be the riskiest time of year for sportsbooks. As DraftKings’ CEO Jason Robins alluded to on the company’s second quarter analyst call, matchday results can impact operators’ revenues by “between negative 10% and probably positive 20%, it can get that wide in any given week”.
However, Robins noted that the improvements made to DraftKings’ key betting products – in other words, the enhanced retention metrics and margins generated by its same game parlays – were the main reasons for the company’s strong second quarter and why, all things being equal, it should reach EBITDA-positive status throughout 2024.
Previewing the upcoming NFL season, the analysts at JMP also pointed to the importance of product, and how it benefits the current market leaders once it has gathered momentum.
Indeed, one could even argue that the groundwork DraftKings and FanDuel have laid over the past five years is enabling them to add customers faster and at lower costs than their competitors. Brand recognition helps, but players are also opening accounts with them because of their strong products, features and the user experiences they offer.
And as that volume helps them boost their net gaming revenue margins, operators “with superior product like DraftKings and FanDuel” also save valuable marketing budgets by not having to “fully chase the free money and let casual players be drawn to the best product offering”, adds the JMP team.
Another sign of how important product is that DraftKings’s progress on that front is what has enabled it to close the gap so significantly on FanDuel, a feat few would have thought possible not that long ago.
Speaking of skepticism, when it comes to new sports betting entrants wanting to compete at the top level, it was interesting to note how dubious much of the industry was about the arrival of Fanatics Betting and Gaming on the scene and the recent Penn-ESPN Bet announcement.
As I wrote two weeks ago, if one was relying on the reactions of industry observers as to the viability of those new projects, their chances of success would be minimal. But DraftKings has shown, fantasy sports betting player databases aside, that it is possible, albeit slowly and gradually, to close the gap on FanDuel.
Interestingly, the one feature Fanatics and ESPN Bet have in common with both DraftKings and FanDuel is a large audience of sports fans to tap into. Again, that is no guarantee of success, but at least they will have some idea of how to recruit those potential bettors.
More loyal than imagined?
Still, in betting parlance, the odds are long with regard to their chances of success. The analysts at Jefferies also picked up on some important factors in a note published last week.
They surveyed 600 adults who had wagered in the past 12 months and found that “brand stickiness is higher than ever” at 89%, while “ease of use remains most important with FanDuel and DraftKings retaining leadership”.
With regard to ESPN Bet, Jefferies found that 53% of respondents said they were willing to try the app and “the primary drivers” for trying it will be promotional offers for 57% of them and familiarity with ESPN content for 38% of them.
This data is encouraging for ESPN Bet, especially with 80% of respondents saying they use ESPN as their main source of sports information. But it was also “not surprising”, Jeffries said, because the key issue will be “whether the offering will be as sticky as more seasoned players (operators)”.
The analysts added that even though sports betting is highly commoditized, a third of respondents (33%) of bettors said they planned to keep just one account and 39% plan on keeping two and this “may justify elevated spend initially when markets open”.
As for whether they would stay with their current sportsbooks, 53% said they were “likely” to and 36% “very likely”.
It’s also worth noting that 33% of the respondents said they were “more likely” to keep just one account vs. 40% previously, 39% intend to have two (vs. 37% prior) and 20% plan on having three accounts vs. 15% in the last survey.
It must be acknowledged that the sample size is small and the Jefferies team admits that, but it also found that “DraftKings and FanDuel bettors appear most likely to keep just one or two accounts, while BetMGM and Caesars’ bettors are more likely to keep three or more accounts”.
The Jefferies data suggests that bettors, widely reputed for their lack of loyalty to betting brands, are in fact more loyal than imagined, and one assumes the 89% “stickiness” statistic mentioned earlier refers to brand awareness.
Another brand that is coming up quietly but consistently is Bet365. It is already competing for third spot in Ohio with BetMGM and in app tests carried out by Eilers & Krejcik, “its [in-play] bet placement speeds were best in class—indeed, no other app was particularly close—and tester commentary was broadly positive”. The group is live in five states and set to launch in Arizona and Kentucky.
What seems clear is that any marketing or promo wind-down the leading brands might have forecast or hoped for is unlikely to happen. Just like the new NFL season, the next six months will see many of the leading operators’ marketing campaigns cranking through the gears.