Rivalry projects profitability in H1 2024

September 1, 2023 12:23 PM
Photo: Shutterstock
  • Mark Keast, CDC Gaming Reports
September 1, 2023 12:23 PM
  • Mark Keast, CDC Gaming Reports

Rivalry CEO Steven Salz spoke earlier this summer about how the marketing strategy for the Toronto-based company sets them apart in the hyper-competitive igaming market in Ontario. Their just-released second-quarter-2023 earnings report bears that out.

“The way that retention and acquisition are historically done in this industry is they’re driven by bonuses and bonus promotion,” Salz said a few months ago. “The sports betting industry has a potential problem: People are habitually transient; they go from app to app. The average customer will have two to three different sports betting apps. Our view is if the customer is coming for the latest bonus and if the only way you’re transitioning people is reliant on who has the latest and greatest best offer, and then the only way to retain them is to be continuously feeding them essentially subsidies, so they continue to use your product, then what is the value of the thing that you have?”

Rivalry is an esports and entertainment company that all but owns the Millennial and Gen Z market (97 percent of their active customers and 1.5 million registrations globally; over 80 percent of their customers are under the age of 30).

Rivalry focuses on youth-oriented, organic, social-media fueled, fun promotions that generate viral word-of-mouth marketing.

In Q2 2023 (ended June 30), Rivalry told investors they expect to reach profitability in the first half of 2024. Betting handle was $112.2 million, up 192 percent year over year, while marketing spend declined six percent during the same period. Revenue was $12 million, up 60 percent year over year. Gross profit was $3.8 million, up 86 percent year over year. And average betting handle per customer increased by 62 percent year over year.

The company in a statement said they acquired 44 percent more new customers year over year at a 41 percent lower cost of customer acquisition as a result of their marketing strategy.

On the sportsbook front, Salz told investors the company is releasing more of a higher-margin product mix through the release of same-game parlays.

“Our position among young Millennial and Gen Z customers represents one of our greatest competitive advantages, but has also presented unique learnings regarding betting behaviors. Generally, we experience higher margin volatility within the sportsbook among this demographic, which impacted revenue this quarter,” Salz added. “That said, challenges like this come with our position at the bleeding edge of a demographic shift in online gambling and it has allowed Rivalry to learn more than other operators about what’s needed to succeed among this coveted cohort.

“In the immediate term, we’ve been tuning our operational initiatives to address normalizing margin and seeing early results. And to contextualize the upside potential of this work, at consistent industry average margins, Rivalry would have been profitable in Q1 and Q2 this year against the betting handle we generated. With these ongoing adjustments being made based on our learnings, alongside the general benefits scaling handle through growth provides to margin, we expect to reduce volatility, positively impacting bottom-line results and propelling us to profitability in the first half of next year.”