Back in 2012, when DraftKings was just rolling out the tracks. Little did it know that it will become the powerhouse it is today.
Draftkings revolutionized sports betting in most US states. In 2020, the firm went public with official revenues totaling $640 million. That was a yearly increase of 29%, but there is a small surprise.
Despite all the growth, DraftKings spent more than 80% of its revenue on customer acquisition. Like many competitor online sportsbooks, they won’t be in profit for several years going forward.
That’s what all the major sportsbooks do in the USA nowadays. They spend so much on marketing and increasing their player bases. That’s instead of cashing in on profits or doing other things with the money.
How It Began
Back in 2015, DraftKings went huge on ads. Alongside FanDuel, the two companies spent more than $200 million on marketing.
This allowed them to stay ahead of the smaller firms and the goal was to outrace the rest. DraftKings knows that their player retention is good.
In other words, it makes sense to try to get as many customers as possible. That’s because it’s likely they’ll stay loyal and generate value in the long term.
To this end, online sportsbooks use all available channels. This means all kinds of media, including print, radio, and TV.
That’s the tradition, but there’s also the online side of things. Social media advertising can go a long way. That’s because you can target specific sports sites and get the right audience for your ads.
There’s affiliate marketing, too. That’s when live sports betting sites drive sales by getting something in exchange. Each time a sports betting fan clicks the right link, the affiliate gets a share.
This can be either a fee or a small percentage of the customer’s generated revenue. This is why sports betting sites can flourish, too.
With US sportsbooks, they can afford to expand and grow their SEO and Google profiles.
For US sportsbooks, it’s a good situation to be in. They don’t have to pay the affiliate anything unless the customer makes a real money deposit.
As the success of Barstool Sports shows. Companies can be successful in marketing even when they aren’t global.
This particular company started in 2003 as a print media with gambling and tips on fantasy sports. It went to the online arena 4 years later.
Penn National Gaming owns it and it generates about 60 million visits each month.
TV broadcasts are strong as well. That’s because they can target whomever they want to during the major leagues. Whenever a game is on TV there’s room for targeted ads.
This goes both ways, too. Many sports betting fans like to watch games on TV because they have bets on those games. Then, sportsbooks can air their ads during games to attract more action.
The estimate is that 40% of men between 25 and 34 watch TV. Just because they want to be part of the action.
Will It Ever End?
Companies like DraftKings are still willing to go huge on customer acquisition.
In August 2021, DraftKings acquired Golden Nugget Online Gaming for stocks worth $1.56 billion. The reason? They wanted to expand their reach and grow their player base.
At some points, this will have to end and the major players will have to consolidate their positions. This won’t happen anytime soon, though.
That’s because there are still many US states that want to launch online sports betting. For each new state on the market, companies want to get there and grab new customers.
Once the dust settles. Many anticipate there will be around 4 big companies in the US sports betting scene. It’s not an unlimited market, but it is still growing.
This year, there should be 45 million US players betting on the NFL. That’s a 36% increase from next year. Next February, up to 30 US states will legalize sports betting.
For the record, that’s when the next Super Bowl will take place.
One concern is that the market will be top-heavy with gambling ads. Some lawmakers are starting to notice and may try to regulate things.
According to experts, the industry should want to regulate itself as soon as possible. That means setting a cap on ads in some way.
As history teaches us if the industry doesn’t regulate itself. Chances are that regulation from the outside will occur.
That’s always the worse option, as regulation by law tends to affect things much more harshly. This could stifle the plans of companies like DraftKings to expand further.