Igaming Focus: The road from market share to profitability 

Igaming Focus: The road from market share to profitability 

  • Hannah Gannagé-Stewart, CDC Gaming Reports
June 9, 2022 2:00 PM
  • Hannah Gannagé-Stewart, CDC Gaming Reports

It has been clear over the course of this year that the U.S. sports betting and igaming markets have been transitioning into a new phase. The number of regulated states is going up more rapidly, marketing spends have peaked, and those without the firepower to compete have started to fall by the wayside. 

This week, DraftKings CEO Jason Robins gave his appraisal of the U.S. market from the DFS giant’s perspective. Speaking at a Goldman Sachs investor conference moderated by the bank’s U.S. Gaming, Lodging and Leisure Analyst Stephen Grambling, on Monday, Robins explained how the market was evolving to place an onus on profitability over market share. 

He implied the new paradigm represented less of a shift for DraftKings itself. “We haven’t really changed our playbook and we think our playbook actually thrives in this type of environment”, he said. 

Presumably referring to the massive sums of money being invested in marketing until very recently, he added: “We’ve stayed disciplined even when there were some, I would say, undisciplined behaviours happening with competitors.” 

He said Draft Kings has a formulaic approach to new state launches, in terms of planning a timeline to profitability by assessing payback periods for the new users it acquires, giving each state and product its own target based on LTV models, and keeping the business “sustainable”. 

“If we’re doing things in a way we think is sustainable, and we can do it better than others who are doing it in a way that’s sustainable, we win. If we’re in an environment where there’s unsustainable, irrational behaviour happening, that may offset some of the advantage we think we have, so we feel like right now we’re in the best position we’ve been in really since sports betting started in the U.S.” 

He highlighted a move to greater efficiency and optimisation, in terms of marketing but also fixed costs across the business. This seems more imperative as the market matures, and as lifetime values (LTV) among acquired players reduces. 

When the market launched, it is likely that it was mainly high-rollers and those with a more sophisticated understanding of betting and gambling that moved over to the regulated markets. These players tend to have a higher LTV, but of course as market penetration increases so a less sophisticated player, with a lower LTV, tends to be introduced to the platforms. 

“As we see LTVs come down, as we’re getting into that fourth, fifth sixth year of a state. We’ll just adjust our CAC [customer acquisition costs] targets and have been doing so in more mature states accordingly”, Robins explained. 

“So, we managed to the same paybacks no matter what. The other thing that’s interesting that I think could affect this market a little differently is that there is still a pretty prevalent illegal market. The propensity to switch the legal market for those people, some have, but a lot haven’t, and I think that’s going to continue to happen over time. So, some of the biggest betters are still pushing their action offshore.” 

Meanwhile, DraftKings is looking at new markets, beyond North America and LATAM; it has also invested in the emerging NFT space with Reignmakers Football, its first NFT-based fantasy sports game.  

Robins recently mooted a move towards accepting cryptocurrency payments, telling Decrypt’s gm podcast: “Certainly people want it. Certainly, within the marketplace, we should be able to do that, so we’re working towards it.”  

His aim, obviously, is to carve out new markets. DraftKings had a route into sports bettors from the get go; it then created one with igamers via the Golden Nugget merger, and now it’s looking to those that are native among the blockchain-enabled technologies of Web 3.0.