In U.S. Sports Betting, Its FanDuel and DraftKings Then Everyone Else

Many have compared the legalization of sports betting in the United States to the California Gold Rush of the mid-19th century, and with good reason. VIXIO GamblingCompliance, a gaming industry consultancy, estimated that annual U.S. sports betting revenue would reach $12.1 billion to $17.7 billion by 2025, up from an expected $6.7 billion to $8 billion in 2022. Meanwhile, DraftKings has said the industry could generate between $22 billion and $24 billion a year when it reaches maturity. 

With growth prospects so lofty, competition to claim a piece of the pie is extremely fierce as players in the space spend more on marketing than they are bringing in from current operations.

"They are all realistic, or at least have been very transparent, that in the beginning of states opening up, that they're going to be spending a lot of money,” said Sara Slane, an independent gaming industry consultant. “Acquisition costs are very high when you actually look at the lifetime value of a customer at this point in time."

FanDuel, DraftKings spending big to build on their head start

Years before the Supreme Court overturned the Professional and Amateur Sports Protection Act in 2018, allowing states to authorize sports betting, FanDuel and DraftKings were spending beaucoup bucks marketing daily fantasy sports contests to American sports fans. This early start laid the groundwork for the companies to dominate traditional sports betting once it became legal.

"DraftKings and FanDuel started off with a bigger lead than some of the more established casino brands,” Slane said. “They had obviously been front and center with daily fantasy sports and have spent billions of dollars on building up brand recognition and capturing those DFS customers and then converting them to sports bettors."

As more states have launched legal wagering, the two dominant players have continued to spend massive sums to acquire even more new customers. In the first nine months of 2021, DraftKings spent more than $703 million on marketing and sales, up 132 percent from the same stretch in 2020. Flutter Entertainment, the U.K.-based conglomerate that owns FanDuel, spent 292 million pounds ($398 million) on U.S. sales and marketing in just the first six months of 2021, a year-over-year increase of 230 percent.

These marketing investments include traditional TV and radio advertising, digital advertising, out-of-home displays, sponsorship agreements with sports properties, editorial partnerships with media companies and promotional offers for new customers.

"There's not really a sports betting state in the country where we do not have at least one major professional sports partnership," said Mike Raffensperger, FanDuel’s chief marketing officer.

FanDuel also made headlines recently with its eye-popping $30 million-a-year sponsorship of “The Pat McAfee Show,” the popular program hosted by the former NFL punter, which airs on Sirius XM and YouTube.

"We are hugely integrated into his daily program on YouTube and podcasting and radio, and frankly, he's really integrated into our business, helping us think through how we create new, really fun incentive promotions or betting events,” Raffensperger said. “It’s a really symbiotic relationship."

It might seem like FanDuel is on a limitless spending spree, but Raffensperger said “of course, there’s a cap” to the budget, though he declined to share specific figures.

“We have really ambitious targets for our business across the long term,” he said. “We are really mindful of the unit economics of our business. Fundamentally, that's what it comes down to: What is our cost of acquisition and during what period is it paying back?"

How the big two’s competitors are acquiring customers

Other players seeking to stake their claim in the competitive sports betting marketplace are taking a wide range of approaches that Slane said tend to fall into two buckets.

“The question always becomes whether you build or buy your brand,” she said. 

As an example of the latter, Slane pointed to Penn National Gaming, which bought into digital media company Barstool Sports in early 2020 at a $450 million valuation. Penn National launched its online and mobile sportsbook with Barstool branding and has leveraged the company’s personalities and betting-themed content to quickly gain a foothold with its legions of devout fans.

“It’s proven very effective in acquiring customers, or converting 'stoolies' into sports bettors," Slane said.

In October, Penn purchased Canadian media company theScore, looking to leverage its established audience as the foundation for an imminent launch in the Ontario betting market.

On the other end of the spectrum is PointsBet USA, the U.S. footprint of Australia-based betting operator PointsBet Holdings Ltd., which launched in 2019. During its 2021 fiscal year, which ran through the end of June, PointsBet spent $119.2 million on U.S. marketing while generating $42.3 million from its U.S. operations. The company’s most prominent play came in 2020, when it inked a five-year, $393 million deal with Comcast Corp.’s NBCUniversal Media to make it the official betting partner of NBC Sports.

Kyle Christensen, PointsBet USA’s chief marketing officer, wrote in an email to Morning Consult that the company’s philosophy is “not to spend irrationally but be aggressive and disciplined.”

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