DraftKings and FanDuel have remained uncontested online sportsbook market leaders, but BetMGM is the uncontested industry leader in online casinos. Only seven states allow online gambling, and only six of the seven allow online slot and table games. (Nevada allows only online poker, so it’s usually excluded from discussions about igaming altogether.)
Even though BetMGM can’t offer its online casino in Massachusetts, its MGM Springfield location will boost its online sportsbook registrations. Gambling companies often use their existing products to cross-promote new products.
MGM Resorts has leaned into this strategy to secure sportsbook customers in a sports betting industry dominated by DraftKings and FanDuel. BetMGM will do the same in Massachusetts where, unlike the state’s other casinos, it actually has the app’s name — MGM — in the name of the casino.
How a retail casino presence helps the sportsbook app
BetMGM’s Q4 investor presentation touted the company’s ability to convert customers from existing MGM products.
The presentation noted:
- “48% of all new MGM Rewards sign ups in 2022 were BetMGM originated”
- “3-6x higher spend (came) from omnichannel customers in states with both land and online vs. a single channel”
(An omnichannel customer is one who bets with multiple MGM products — i.e. online casino and online sportsbook.)
This trend — of existing brick-and-mortar casinos helping drive sportsbook downloads — is one that not only BetMGM hopes continues with sports betting in Massachusetts. WynnBET and Barstool Sportsbook hope their presence Encore Boston Harbor and Plainridge Park Casino helps boost their apps’ profiles in the state, as well.
“The most significant upcoming launch is Massachusetts, where obviously, we have Encore Boston Harbor, and I would hope and expect that we will have a reasonable market share because of that – the presence of that property as our competitors have in other markets,” Wynn Resorts CEO Craig Billings said during a fourth-quarter earnings call.
Why problem gamblers are bad customers
Half of 2022’s new MGM Rewards sign-ups coming from customers who were already using BetMGM is unsurprising.
The higher spending from customers in states with multiple types of gambling is more interesting. It echoes findings from problem gambling researchers that gamblers who engage in more than one type of gambling are more likely to spend more, but are also more likely to exhibit problem gambling behaviors.
Focusing on gamblers who gamble more often does not mean that companies are targeting problem gamblers.
Ethics aside, problem gamblers are not profitable customer segments. Once problem gamblers burn through their funds, they can’t gamble anymore.
A study published in the Journal of Gambling Issues in December 2019 estimated “approximately 1% of individuals who gamble report experiencing a serious gambling problem at some time in their lives.” This is from international data that doesn’t account for differences among different gambling activities.
Consider an imaginary gambler with an extreme gambling problem. This gambler logs onto a gambling app and spends $500,000 in one month. They spend their savings, 401k and all the money they can borrow from work, friends and family. They have nothing left to spend.
For every gambler like this, there may be 100 who spend $100 monthly on the same app. These gamblers can stick around for years without bankrupting themselves.
After 50 months, the group of $100 gamblers has the same customer lifetime value as the one-time $500,000 gambler:
| Monthly Spend | Similar Customers | Months Active | Individual Customer Value | Combined Customer Lifetime Value | |
|---|---|---|---|---|---|
| Extreme Problem Gambler | $500,000 | 1 | 1 | $500,000 | $500,000 |
| Casual Customers | $100 | 100 | 50 | $5,000 | $500,000 |
The real numbers of gamblers, bet sizes and customer lifetimes are closely guarded by gambling companies. This thought experiment, however, shows how a customer segment that spends a lot of money up front can be worth less than a customer segment that bets far smaller amounts of money sustainably — and in greater numbers.
New Jersey’s iGaming industry is five months older than our hypothetical casual bettors’ customer lifetimes. It’s not hard to imagine an online gambler who signed up on day one who plans to continue gambling online well into the future.
So, the gambling industry’s challenge is to find customers who bet higher amounts over longer periods of time without enabling pathological gambling behaviors.
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Why BetRivers, PointsBet aren’t launching in Massachusetts
BetMGM is not the only company to notice the revenue potential of gamblers who use multiple gambling products.
BetRivers and PointsBet seem to be positioning themselves to focus on customers in existing markets, too. Both these companies notably will not launch sportsbook apps in Massachusetts — for similar reasons.
BetRivers
In BetRivers’ Q3 investor presentation, BetRivers identified a lucrative new customer segment it hopes to target. The presentation highlights this finding:
“The average online sports betting and casino customer generates almost 2.2x more revenue combined than either individual product customer per month.”
BetRivers’ online casino customers spend 6.4 times as much as sports bettors, according to the presentation. BetRivers customers who bet on both the casino and the sportsbook spend 14.1 times the sports bettors.
BetRivers has proven to its investors that customers who use both the sportsbook and online casino simultaneously are far more profitable than customers who use one or the other. It also creates an important use for BetRivers’ online sportsbook.
Even though BetRivers Sportsbook has a low market share, it can be used to attract customers between online casino and sportsbook products. The customers most receptive to this product mix are the higher spenders who BetRivers touted in its Q3 investor presentation. Even though online casinos are only allowed in six states, it presents an opportunity to uncover a far more lucrative customer than has been publicly examined.
Rush Street Interactive, the company that owns BetRivers, declined to comment for this story.
READ MORE: PlayMA Projects Massachusetts Sports Betting Market Could Reach $5.7 Billion
PointsBet
In Q4 2022, PointsBet’s average sports betting market share was 3.7%. (Eight of the 10 listed markets were between 2-3%. West Virginia was 1.6%. Illinois was 8.8%.) Sports betting is a low-margin business to begin with. Across its 14 markets, PointsBet’s Q4 net sports betting revenue was $74.1 million.
By comparison, FanDuel made about $73.4 million in two months from December 2022 to January 2023 in New York. Given the lack of realistically available market share in sports betting, pivoting to online casino players seems prudent. This context makes it less surprising that PointsBet withdrew its application to launch in Massachusetts.
“We have chosen this path to emphasize our continued focus on our 14 live states of the US (plus Ontario) and how we can best optimize those markets which provide an immense (Total Addressable Market) for us to go after,” Patrick Eichner, PointsBet director of communications, wrote in an email to PlayMA. “We would like to thank the Massachusetts Gaming Commission for their consideration of our application, conducting extensive hearings, and deeming PointsBet suitable for licensure ahead of the launch of legalized sports wagering in the Commonwealth of Massachusetts.”
PointsBet’s Q4 investor presentation highlighted the iGaming product that PointsBet launched in New Jersey, Pennsylvania and West Virginia.
Preparing a new wave of omnichannel marketing
Omnichannel marketing is when a company uses one of its products to promote another.
So, when BetMGM advertises its online casino to an online sportsbook customer, BetMGM is doing omnichannel marketing. MGM customers can earn MGM Rewards from:
- BetMGM’s sportsbook
- BetMGM’s online casino
- BetMGM’s retail casino properties
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The dominant brands in the online casino and online sports betting markets are masters of omnichannel marketing. The MGM brand is synonymous with casino gaming. It’s the least surprising company to see dominating its segment of the online gambling market.
DraftKings’ and FanDuel’s existing list of daily fantasy sports (DFS) customers conferred the same advantage onto them in the sports betting industry. Both companies were synonymous with sports years before sports betting was legal. They had the backlists of customers and the digital marketing backgrounds to convert current and former DFS customers into sports betting customers.
These large companies’ competitors are well aware of these strategies and are already moving to replicate them. It’s a quiet transformation in strategy that will get missed in the speculation about remaining sports betting markets and the next iGaming markets.
