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Sportsbook Customers: Finding the Fish Sportsbooks are spending millions of dollars on customer acquisition in the U.S., even at the expense of profits. How long can the feeding frenzy continue? By Marjorie Preston
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t was 2012 when three guys from Beantown launched a fantasy baseball contest out of a spare bedroom. Less than 10 years later, in 2020, Boston-based DraftKings went public with revenues topping $640 million, up 29 percent from 2019. And founders Jason Robins, Matt Kalish and Paul Liberman were rich as kings themselves. Despite dizzying top-line numbers, these three kings weren’t quite rolling in dough. DraftKings plowed more than 80 percent of revenues into customer acquisition for the year, and likely won’t turn a profit for several years more. Like its chief rival FanDuel, the DFS and sports betting behemoth is burning more cash than it keeps in the race for market share. “All the big online sports betting companies—the DraftKings and FanDuels, the BetMGMs and Caesars—have gobs and gobs of money to spend on marketing,” says Josh Swissman, founding partner of the Strategy Organization and CEO of Moneyline Sportsbook. “Whenever they raise money, they’re quick to say the vast majority of those funds go to grow their player base, at the expense of profits.” 14
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Shopping Spree It’s not necessarily a bad thing, and it’s not new. As far back as 2015, during the NFL season, the Seattle Times groused that DraftKings and FanDuel were “cramming their brands down viewers’ throats via television commercials seemingly between every series of downs.” In the week after kickoff, DraftKings ranked No. 2 in the iSpot.TV rankings of television’s Top 10 ad spenders, with FanDuel close behind at No. 5. By November, the two giants had spent more than $200 million on combined advertising. But that investment “put them in the pole position,” running neck and neck at the front of a fast-growing industry, according to Zak Cutler, former director of product management for DraftKings, now CEO of North American iGaming for Paysafe. “When you’re in that luxurious position, it makes sense to keep your foot on the gas and blow everybody else out of the water. DraftKings’ products retain well, so the spend is probably well worth it when you look at the lifetime player values (LTVs).”
