Path to Profitability: The forces evolving US sportsbook marketing
This forms part of the ICE 365 US sports betting series’ Path to Profitability, a deep dive into marketing, product and new revenue streams across the US. Read the full range of analysis from the iGB team here.
iGB also hosted a webinar discussion on US marketing practices, featuring theScore, Yahoo Sports and Catena Media. You can listen to that on-demand here.
By Robin Harrison
At its core betting aims to add a new dimension to an existing behaviour, in this case consuming sports-related media. This appears to be first and foremost in the industry’s mind as it rolls out across the US.
The standard playbook for new launches, as has been the case in Europe for more than a decade, is to make a big splash upon entry by investing heavily in marketing. The rationale being that legalisation opens up above the line channels for the first time, and to highlight new and legal offerings, an advertising blitz is necessary.
In Europe, where the climate is turning increasingly inhospitable to gambling, this approach now quickly attracts criticism.
Sweden is a good example. There, operators had enjoyed less than three months of legal activity before the regulator started warning against excessive advertising. For that market, bonuses and promotions were heavily restricted from the off, with Spelinspektionen swift to act against non-compliant licensees.
In the US, however, the rise of sports betting is being widely embraced by traditional media, and promotional activity is largely viewed as a sign of a thriving, competitive market. But this requires hefty investment from the industry.
DraftKings has been one of the big winners of the early stages of US sports betting. This was evidenced by a 49.0% year-on-year jump in pro-forma revenue to $643.5m for 2020. In that same period, sales and marketing expenses ballooned 156.5% in that same period, to $499.3m.
Its big rival FanDuel Group, owned by Flutter Entertainment, brought in £695m across a portfolio of sports, daily fantasy, igaming and racing brands. Again, it was up significantly from 2019’s total. And again, sales and marketing spend soared, rising 107.1% to £348m.
Entain, meanwhile, noted that 2020 revenue for its BetMGM joint venture beat expectations, reaching $178m. It also incurred a £60.2m loss from its 50% stake in BetMGM, suggesting a total operating loss of £120.4m for the brand.
Furthermore, media intelligence platform MediaRadar estimates that sports betting ad spend jumped 82% year-over-year in the second half of 2020. That covers a packed sporting calendar, in which events cancelled in the first six months of the year the novel coronavirus (Covid-19) pandemic took place.
Steven Astrachan, vice president of marketing for sportsbook operator Fubo Gaming – formerly Vigtory – says that level of investment is unavoidable.
“With the way the landscape currently is right now, if you are not aggressive when you first launch in a state, you’ll be left behind,” he says, bluntly.
Spray and pray
Yet there have long been questions over how effective that spend is, and what can ensure it actually provides a return on investment. The phrase “spray and pray” has already been widely adopted to describe this approach of throwing money at media giants in the hope of building brand recognition.
But to go back to the core purpose of betting, to add a new dimension to an existing activity, it’s worth looking at how this is being done. For example, betting complements traditional media, whether that’s sports broadcasts or sports news. Whether that’s an odds overlay on the screen, or lines being included in a piece on a team’s preparations for a match, it is designed to provide an enhanced experience for the audience.
Fan loyalty, after all, dictates what games an individual watches, and the media they consume is also influenced by their support for a team or league. The operators are going where the fans are, essentially.
And they’re certainly flocking there. Every major media brand has some form of sports betting integration, whether that’s William Hill’s tie-ups with CBS Sports or ESPN, or DraftKings’ own ESPN and Turner Sports deals. Turner Sports, incidentally, also sits within FanDuel’s roster of media partners, while PointsBet scored a coup with its NBC Sports deal.
Then there are the deeper integrations. BetMGM is closely aligned with Yahoo Sports, and Bally’s has even paid for naming rights a host of regional sports networks owned by Sinclair Broadcast Group. This can go as far as co-branded betting products, such as the FanDuel-owned Fox Bet, in partnership with Fox Sports, or Penn National’s Barstool Sportsbook.
To theScore, an operator that began life as a media business before expanding into betting, this wave of deals acts as an “incredible validation” of its strategy, vice president of content and marketing Aubrey Levy says. It has integrated its media and betting products, to the point that users can switch between the two seamlessly to put money down.
“Our philosophy is to bring the bet closer to the user, to treat the bet as a component of your sports fandom,” he continues. “So what we can do to that end is offer unified product ecosystem – that is how you serve that objective.”
Yet Levy is doubtful that most media deals provide that level of integration.
“I think largely, it’s still to be determined how all those play out,” he says. “As we’ve seen betting is increasingly a mobile and in-play behaviour and you have to do more than just blast a message across a linear broadcast feed in order to properly service the fan.
“It’s great to have these linear channels as as a touchpoint, but you have to connect that through to make their betting life easier and more intuitive.”
Having been acquired by FuboTV, a sports-focused streaming service, the company formerly known as Vigtory aims to take a similar approach. It will first roll out free-to-play games to subscribers in the third quarter, before launching Fubo Sportsbook in Q4 2021.
“Ultimately, we intend to integrate Fubo Sportsbook into FuboTV’s live TV streaming platform for a seamless viewing and wagering experience,” Fubo explained in a shareholder note. “Our platform provides unique customer opportunities that combine video streaming with wagering including cross marketing and promotion.”
For both Fubo and theScore, the focus is on adding an accretive element to an existing product the user would already consume. But that doesn’t preclude it from extending its reach through additional media partnerships.
However to make these work, Astrachan says there must be a clear view of the target customer. Before its acquisition, Vigtory set its store in offering an experience for the avid bettor. It saw its niche as a customer that was price sensitive, that may have bet offshore pre-PASPA, and that pores over analytics and data to detect trends that could influence future bets.
Therefore brand recognition through a high-profile above the line outlet may not reach that user.
“We won’t be turning away players, but our focus will be on finding ways to identify this higher value bettor,” Astrachan says.
He points to its partnership with The Action Network as an example of one that furthers its goal bringing in a savvier bettor that has showed an interest in using data and analytics to increase their sports betting performance.
Levy doubts that this level of careful planning has gone into many of the deals struck to date.
“I think right now there’s an attempt at a land-grab, where there’s this notion of shouting as loudly as you can through linear broadcasts and above the line channels, to win that awareness battle,” he says.
“But it’s not necessarily coming across as differentiated for one to the other, or making clear what the value is for the end user. So all you have is shouting.”
William Hill, as an operator with a presence in 15 states, describes its core customer as the “everyday sports fan”. While that may sound as if it is spreading its net wide, chief marketing officer Sharon Otterman instead advocates for intimate relationships with customers.
“We don’t believe in the ‘blast’,” she says. “We believe in having a set of customers we can reach out to, one on one and know what their interests are, then offer them things of interest.”
While it may be on a larger scale than theScore or Fubo Sportsbook, the core principles are the same. It targets something a player will readily consume, and aims to add betting as an accretive element.
And unlike Fubo or theScore – and indeed, most of its peers – William Hill appears to set great store in a physical presence. Mobile betting has soared where it has been permitted – for example, in January New Jersey bettors staked 92.5% of the month’s $958.7m handle online.
In Iowa, DraftKings noted that after an in-person registration requirement for mobile sportsbooks ended on January 1, 2021, it signed up more customers than it did throughout 2020 in its entirety – by January 5.
But Otterman says that face-to-face interaction with patrons makes retail a marketing asset in itself, especially as an educational opportunity. “You actually get to see customers on the ground, and nothing can take the place of getting to know customers.
“There’s nothing better than having boots on the ground, and one of the things we pride ourselves on is having so many sportsbooks, as we do spend a lot of time understanding each state, and what the local interests are, and what the regional differences are.”
That local know-how feeds into online, she adds: “We know Virginia is different from Iowa or Nevada, for example, so we get to know our customers locally get to understand what they like, help them sign up, and work with our property partners to help consumers download the app and explain it,” she explains.
Again, this links back into adding to existing behaviour, only in this case cross-selling casino patrons into sports betting.
Second that promotion
But whatever above the line channel operators are targeting, promotional spending is going to be unavoidable.
If media partnerships have increased sportsbook marketing spend, promotions and bonusing have added a few zeroes to that figure. Significant sums are being invested across the industry in every state, but how much exactly remains unclear.
Only Pennsylvania and Indiana highlight promotional spend by operators. In Indiana’s case, the Gaming Commission only terms this money as “adjustments” meaning it could be more than simply promotional credits.
But Pennsylvania, as the third largest sports betting state by handle, offers some insight into spend. In January 2021, Pennsylvania licensees paid out $15.3m in promotional credits.
For the state’s 2020-21 fiscal year to date, running from 1 July 2020, they have gifted customers $75.7m in credits. For Indiana, adjustments in January totalled $2.3m.
Astrachan says that promotional spend is unlikely the sustainable at its current rate. However, he concedes, it’s going to be “extremely important” to provide added value and price boosts to make a sportsbook attractive to customers.
Levy concedes that promotion are a valuable tool for operators. “[But] they can’t be your only tool,” he adds. “There is a lot of spray and pray. We don’t think it’s sustainable, so we entered the market saying that won’t be our approach.
“I think that at some point you have to show more value than what you’re giving away through promotions,” he continues.
“You have to do more to sustain the user, or you will never generate profits. For those that are only leveraging big promotional spend, it’ll just be a race to the bottom.”
Again, Otterman says that it has to link back into what customers are interested in, and complement their preferences. Rather than just giving them an offer, getting the bettor to put down some more money, rinse and repeat, bonusing has to be used not only as an activation or retention exercise, but also as a data-gathering tactic, she says.
“In terms of loyalty, whether it happens to be a programme or promos, we are looking to see what customers are interested in,” she explains. “Some might be interested in the Daytona 500 and some might only be interested in basketball, so it’s important not to think of it as an email spray but instead a way of developing that relationship and knowledge.”
She argues that as it looks to strike a balance between simply hosing down the market with money and effectively leveraging promotional spend, there’s an industry it should look to.
“The credit card industry is a highly regulated one. It needs to keep data and money secure, liquid and safe,” she explains. “And I pick my favourite credit card based on the promos and rewards that I am offered.
“I’m a huge Delta SkyMiles person, and I carry [and use] that Delta SkyMiles credit card everywhere because of the perks I get for using it.”
That approach would shift strategies away from a “promo war and acute one-upmanship”, she adds. “It’s about all the bells and whistles that make your game more enjoyable. It’s possible to do that in a way that benefits the consumer and keeps them coming back and having fun.”
Again, it’s taking something that the customer uses regularly, and adding something that enhances the experience.
This is a lesson that is being slowly surely learned by the industry. And Astrachan says the spray and pray is beginning to rationalise, even if significant marketing war chests will be a fact of life in the industry for some time yet.
“I think we’re starting to see some of the players in the space consolidate where they’re spending media dollars,” he explains. “Over the last year, we’ve seen operators lean in to media and partnerships that they’ve had success in.
“Ultimately, a lot of the companies came out with a trial-and-error mentality and took those learnings and adjusted their marketing strategies.”
The pace of state launches show no sign of slowing. In January last year there was some form of legal wagering in 14 states. A year on that number increased to 20. South Dakota, Maryland, Louisiana, New York and Connecticut are among those likely to join the fray as the year progresses – it’s not inconceivable that the number of states will be double that of January 2020.
And this accelerated roll-out will surely lead to less trial-and-error, as the playbook of successful tactics grows. At that point, the market focus shifts from acquisition, to refining the product proposition.