To continue to get Americans excited about gambling, sportsbooks have been spending billions of dollars on intense advertising. The previous season of the NFL saw a slew of constant commercials and advertisements. Even numerous transformed Ubers that looked like chariots sponsored by Caesars happened. BetMGM even went as far as to take a bet from space.
All of this spending, from welcome bonuses to these extravagant advertisements, are a calculated risk. It all comes from traditional forecasts where each player received what equates to thousands of dollars in revenues over the lifetime of those bettors. It’s what has been done in the past, but now it’s looking as if executives want to get ahead sooner than later.
There’s been plenty of gambling – with about $150 billion placed in regulated and legal bets since the Supreme Court passed its ruling that enabled states to make their own laws related to gambling.
Even with such a large pie, it seems as if only FanDuel is looking to make a profit, and they control nearly half the overall market share. This is, of course, after crossing the billion-dollar mark regarding advertising spend. Then come DraftKings and BetMGM, who combined have around a third of the market share.
There are five dozen other operators out there fighting for the remaining pie, and that means they need to be much more cost effective to get on top.
David VanEgmond, who runs Bettor Capital, an investment group, stated that “Getting new customers and market share has become a lot tougher than initially expected. Now we’re going to see a pullback.”
An example is already seen with Caesars, who used to be one of the bigger spenders out there. They’ve already cancelled plans for a $250+ million marketing strategy.
Dan Singer, Partner at McKinsey, stated, “There is a shift of where the focus is, and it’s about making money naturally versus customer acquisition.” He goes on to add, “Initially, when entering a new market, you completely focus on acquisition. Those that sign up with you first tend to give two times more of a return.”
Once the mad rush is over, it’s time to focus on targeted advertising. It’s also a spend that never really seems to stop, as can be seen with the European market. Singer adds to this by saying, “While it has been legal for decades, current operators can see up to 20% of their total revenues dedicated to marketing alone.”
VanEgmond has gone on to also say that “it’s now about retention over acquisition. The customers that were acquired early on have moved on with little to show for it.”
Caesars was known for even going as high as a $5,000 risk-free bet as part of their original aggressive campaigns. When New York opened up, they ran a promotion matching up to $3,000 and also a few hundred dollars bonus on top of that. It helped get them 40% market share, but they lost about half of that, according to a study done by Eilers & Krejcik.
These types of money-based or bet-based incentives were the bread and butter to acquire customers, and even Jack Andrews, who is both a professional sports gambler and runs the site Unabated, stated, “This is akin to bribing to get customers to get in. Yet those bribes will be spent over the years and come back as revenues.”
The situation has changed and shifted away from these lucrative offers, and there are some, such as PointsBet, that are focused on retention and playing multiple times in a row and will offer almost a week’s worth (consecutive) of second chance bets. Their executive Vice President, Rick Martira, added, “This is about giving them a chance to understand the product in a specific and controlled timeframe.”
Vice President of Digital Media and Brand at BetMGM, Raymond Doyle, stated that they are going to go “a data-driven route to help with getting the right type of customers, and not just those that are hunting for the best sign-up bonuses out there.”
Operators are now looking at pay media-type companies that will help send them new bettors and customers directly. An example of this is the Action Network, which appears as a site which offers advice in matters of gambling but also uses an affiliate-like model to refer new customers to the operator’s sites.
The former CEO Noah Szubski mentioned that the goal of the company was earning through these referrals for sign-up as well as a percentage of the revenues they would generate. He added, “This is an extremely lucrative business that easily can hit the billion-dollar mark.” By May 2021, Action Network was acquired for almost a quarter billion dollars.
At the same time, the Action Network still worked out deals to provide content related to online betting for numerous media companies such as the New York Post, Boston Herald and the Philadelphia Inquirer.
These types of sites are getting digital marketing savvy as when you search for sports stats, it tends to lead you to an advice site with a slew of promotions when it comes to operators.
Yet this is still a much less aggressive approach than what was done in the recent past, with constant advertising on multiple types of media channels, from television to podcasts and more.
For example, with Caesars again, we saw the explosive shock of advertisement that was seen on national TV, where many famous actors were used, from Halle Berry to J.B. Smoove and legends of Football from the Manning family, helping with that initial brand awareness which is crucial. Now they’ve taken a step back and periodically will show advertisements on sports-related channels. This is to focus more on advertising that seems more relevant than splashy and the next best course of action.
Tom Reeg, who is Caesar’s CEO, stated, “We knew we could get a foothold into the business, and now we’re focused on healthy revenues to generate profit.”
