DraftKings and FanDuel are the most favored platforms by bettors willing to change operators as they place more bets and lean into parlays, according to a J.P. Morgan survey. The survey suggests that the omnichannel approach employed by MGM Resorts International and Caesars Entertainment to lure customers won’t be as effective as expected, especially since both were victims of recent cyberattacks.
J.P. Morgan analyst Joseph Greff said the survey of more than 1,100 online sports bettors and internet-casino players provided a strong sense of consumer preferences, loyalty, and trends. The results were encouraging to analysts in terms of the prospects of improving user experiences and market consolidation, both of which are driving loyalty and a more rational promotional environment going into the most seasonally significant period for operators, Greff said.
For online sports betting, Greff said that one of the key takeaways shows DraftKings and FanDuel are clear leaders in market share and user experience, with 70% of survey participants (combined) favoring the pair. In addition, they learned that promotional leverage is being realized by scaled operators as lower-tier platforms bow out, parlays are driving incremental growth of gross gaming revenue, and consumers expect to place as many or more bets over the next year as in the past.
“Consumers largely reported at least a moderate degree of loyalty to their primary platform, but many have changed operators within the past year and most still use two or three apps,” Greff said. “Most surprising to us was that new-state users are placing a higher mix of parlay bets than in existing states, indicating improved same-game parlay products and better merchandising leading to quicker adoption.”
For online sports betting, loyalty is driven by brand recognition and trust, rather than by promotional offerings and odds, Greff said. This is significant enough to drive users to change apps and continue using more than just their primary platforms, with most users still reporting usage of multiple apps.
“Coupled with improved experiences in terms of technology and offerings, users are betting more frequently versus a year ago, partially driven by parlay offerings providing a more favorable hold rate for operators that have quality parlay experiences. In order to keep up with industry leaders who are taking market share, smaller operators are forced to provide incremental promotions to drive growth, though the overall environment is similar to a year ago, given the rationalization from major operators.”
For igaming, Greff said the survey shows DraftKings and FanDuel are clear leaders, but less so relative to online sports betting. Gamblers have less loyalty relative to sports betting.
“Loyalty is less concentrated among top operators, but is similarly driven by brand/trust and less by offerings/odds,” Greff said. “This could result in operators with a strong online sports betting loyalty driving incremental improvements in their respective igaming performance. The omnichannel strategy seems to have limited benefit to operators and given that its success is dependent on positive in-person experiences, we see risk for MGM Resorts International and Caesars Entertainment, given recent cybersecurity incidents.”
When assessing user dynamics in new states versus existing state cohorts, customer acquisition tends to be driven by promotional intensity, with 43% of users selecting DraftKings as their primary platform and 42% indicating DraftKings as having the most generous promotions.
“In existing states, lower promotional intensity is driving stronger user loyalty to the best-known brands and we see tailwinds from product improvements driving further loyalty across operators,” Greff said. “On the parlay front, we suspect improved same-game parlay products and better merchandising could be enticing new users to invest sign-up bonuses into a larger portion of parlays, where 67% of users in new states indicate over 20% of their bets are placed on parlays, compared to 60% in existing states.”
For igaming, limited state legalization narrows the survey-response count relative to online sports betting, Greff said. Generally, igaming trends are similar to OSB, but with more fragmentation.
As for stocks in J.P. Morgan’s coverage universe, investors find DraftKings on top in terms of user experience. And due to strong state -evenue results, continued momentum comes at the expense of smaller operators.
“For Penn Entertainment, we anticipate the launch of ESPNBet to gain initial traction, but not without significant promotional intensity,” Greff said. “For MGM and Caesars, the results from this survey emphasize the importance of brand recognition and cross-sell from their land-based operations.”
