Many companies have been attracted to the market by its attractive revenue potential. DraftKings, and FanDuel are the two leaders in US sports betting. They represent 80% of that market. It is extremely hard for new operators to get traction. Russell Karp, DataArt, explains how to best enter the competitive US sports betting markets.
It is risky to enter and survive the highly competitive US sports betting industry. New entrants have many options for making an impact. It is important that each new competitor chooses the best path to achieve their goals and align with their strategies.
While companies such as DraftKings, FanDuel and others have a significant advantage due to the fantasy sports platform they are built on, newcomers can still gain market share.
Significant user base
DraftKings, FanDuel and other fantasy sports sites are successful on the US market because they have been able to move their large user bases from the profitable products of their fantasy sports to the sportsbooks.
This strategy has been successful in acquiring customers.
Both companies are also very aggressive in their marketing, have many partnerships with leagues and media, and have an intuitive product. All these factors combined, it’s no wonder that the US market shares and downloads of their apps are leading.
Some companies have already built up a large following in their industry, including Fanatics (which is planning to launch soon) and Barstool which has multiple locations.
Fanatics, a global online retailer of sporting goods and team apparel across the major US sports leagues and sports teams that began as an ecommerce business two decades ago, is now a multi-national conglomerate. The retail customers of Fanatics are now about to enter the world of igaming, sports betting and other e-commerce.
Fanatics wants to be a market leader immediately, even though it has a huge database of 100,000,000 customers. Due to the company’s evolving launch strategy, which has seen it move from buying a platform of a third party to purchasing a betting firm with proven technology stacks, its go-live plans are still not fulfilled.
Barstool began with an enormous media following. In 2003, it was a printed publication that distributed throughout the Boston metro area. It featured gambling ads and fantasy sports predictions. Later on, other topics were added. Barstool Sportsbook launched in Pennsylvania in September 2020, with wagers totaling $11 Million in the first seven days.
Despite their huge social media following and loyal fans, they’ve had limited success. Some of the reasons are launching strategy into new states, app useability and accusations against executives.
Existing users, such as clients and followers (e.g.) are still important to convert into active sportsbook bettors. Operators still have to learn how to convert existing users into active bettors. New operators need to have an effective strategy that differentiates them from the competition in order to successfully penetrate the US sports betting market. The longer operators wait before entering, the harder it is to attract users.
Is there any way for sports betting operators to increase their market share? Yes, but it requires careful planning and precision. Here are some strategies to gain a competitive edge when you enter the US market for sports betting.
Technology as an advantage in the marketplace
The sports betting industry is highly complex, dealing with huge amounts of information from major events like World Cups or NFL matches, and constantly changing odds. This requires lightning fast decision-making and updating. Sportsbooks are also aiming to introduce a betting solution that is successful in a short period of time. Sportsbooks can choose from several options to launch their products on the market.
- Create a customized solution.
- Utilize a technology from a third party (“Off-the-shelf” product or white label).
- Purchase a betting company that already operates a reliable, stable platform
If not properly managed, building custom sports betting solutions is complex and takes a long time. According to DataArt’s tech experts, between 40-60% IT projects are unsuccessful. These failures often stem from internal processes rather than technology issues.
Third-party technology is not always reliable, and as a licensed sportsbook you are totally reliant upon your solution. Sportsbooks are not in control of technical problems that can occur due to the high usage (especially when major sporting events take place).
It is for this reason that acquiring an existing company, with a proven platform of betting and a solid tech stack could be the best solution. By acquiring a betting platform, sportsbooks get an almost immediate working solution with a base of existing users.
DraftKings decided to switch from Kambi’s technology platform, which was a third-party product, to its own engine powered by SB Tech. DraftKings was publicly listed in April 2020 after a reverse merger between SB Tech, Diamond Eagle Acquisition Corp and Special-purpose Acquisition Company.
Fanatics, as I have mentioned previously, is another betting company who decided to switch its product strategy. Instead of buying technology from third parties they acquired a betting platform that was already in operation. Fanatics initially acquired the source code of B2B provider Amelco. But, to date, no betting operator who purchased Amelco’s source code has made an impact in the US market.
Further, developing an in-house tech is a longer-term project that requires many resources. It also poses technical challenges. Fanatics has therefore begun negotiations with Tipico.
Hyper-localization: Benefits and advantages
Sportsbooks’ profits are directly related to the amount of bets placed, so it is important that they target multiple states at once and not only one. This assumes the sportsbook has licenses for several regions.
New York has its own unique case. Going local may seem like a difficult task in New York, with a tax rate of 51%. New York is the US’s largest market for online sports betting. Even though some operators, like BetMGM, have reduced their wagering options in New York to limit their exposure, I recommend targeting the market due to its number of users as well as the potential revenue it could bring.
To gain an advantage in the market and to attract new fans, multi-state operators must have hyper-local strategy. Affiliates such as Chalkline, local associates and sports teams, which work with social media content strategies, are some of the ways to go hyper-local.
Daniel Kustelski stated that localization is important in our video about customer acquisition strategies for sports betting. “There is a lot national coverage of brands but it really comes down to what works on a State-by-State basis. There is a lot of advertising above the line. Then, at a more local and regional level, the focus is on determining who has been betting illegally or is interested in sport betting in these different states.
Rush Street Interactive is following the localization strategy by offering market-focused audio and video sports betting podcasts in the US. CityCasts are broadcast on different platforms and provide news, insights, and analysis to assist bettors in making more informed decisions. Each CityCast also sources local talent and production personnel to provide a unique perspective for the content of each city.
Social media can also be used to localize. PointsBet’s Twitter account is a great example of good content. They have witty comments and interesting content for US and Canada.
The CEO of PointsBet says that “being local is extremely important.” While there are similarities between Canadians and Americans who watch sports, the focus of their attention should be what they’re watching, and not how or why.
Forming valuable partnerships
DraftKings’ aggressive marketing is always based on the assumption that a new state will be profitable in two to three years. New Jersey has been the only state that reached this checkpoint, with DraftKings turning profitable and delivering its promise to investors.
This spending can be viewed from the perspective of customer acquisition costs (CAC) or lifetime value (LTV). DraftKings, for example, spent $370 last year to acquire a client with a value of $2,000. It is important to ask if every customer can deliver the value expected.
Sportsbooks haven’t had enough time to test the average revenue per customer (ARPU). Investors (and sportsbooks), therefore, are concerned about the customer’s retention over time, their stickiness, their churn rate, and overall profitability.
In order to remedy this problem, partnering with other industries, sports teams, retail stores, stadiums and media companies is one way to attract and retain bettors. Most of the time, leagues and teams are where you will find most successful partnerships.
Both DraftKings, and FanDuel are credited with making great strides to partner with teams and leagues.
DraftKings has a number of media deals, including Bleacher Report and Bleacher Report. They also have agreements with Bleacher Report.com, Bleacher Report.com, Bleacher Report.com, Madison Square Garden. Staples Center. Bleacher Report.com, ESPN. FanDuel has, on the other hand, formed exclusive partnerships Turner Sports, Bleacher Report and The Ringer. They also have agreements with SportsGrid Entercom Minute Media, WAVE.tv SportsGrid Entercom. FanDuel has also formed a strategic partnership with Tel Aviv startup WSC Sports. This technology company uses artificial intelligence in order to create highlights of live sporting broadcasts.
Other types of partnership include collaborations between retailers and stadiums. Examples are: Fubo Sportsbook with MetLife Stadium; BetMGM Sportsbook with Nationals Park; DraftKings AT&T Stadium.
Final Thoughts
Sports betting is a business that has been concentrated into fewer hands. There is however still much to be explored. If you want to survive (and participate), then invest in cutting-edge technologies, target local markets and form smart partnerships. They will have to compete with industry giants like DraftKings, FanDuel and others who are well-established, experienced, market leaders, and possess a large following.
Russell Karp, vice president of media and entertainment, is a technology consultant who designs, develops, and supports software solutions that are unique to its clients. DataArt, a global technology consultancy that designs and develops unique software solutions for its clients and is known for superior technical skills and deep domain expertise in the creation of new products as well as modernising legacy complex systems, has partnered with sports betting companies around the world for over ten years. The firm helped sports betting operators to change the market for better by providing their customers with more choices and lower prices. Paddy Power Betfair and Evolution Gaming are among the clients.
