As Massachusetts gears up to launch retail sports betting in January and mobile betting in March of 2023, the question remains: which sportsbook operator will take the lead in Massachusetts?
Boston-based DraftKings has a chance to make a splash in its home state. The bigger question is how the two will compete against nationwide market leaders like FanDuel.
FanDuel is the leader in market share nationally, claiming 42% of sports betting users in markets where it is active. DraftKings is the runner-up in sports betting market share with 24%.
While smaller sportsbook, Barstool, is also local, player acquisition often requires intense capital investment in the market. In the past few years, leading sportsbooks have come under scrutiny from their investors for these expenses.
Spending to Get New Customers
Since the launch of sports betting in the US, operators have been figuring out how to get new customers to their platforms for the least amount of money. Over the past few years, operators have started to figure out the process: promotions, offers, and advertisements.
Each of these dig into the company’s profit, but getting customers is the best investment for sportsbooks in the long run. This is because bettors aren’t very likely to move between sportsbooks once they’ve started using one regularly, and most bettors pick their sportsbook within a year of launch in each state.
By investing big and gaining a large customer base to start, the operator sets itself up for success in the state. Long-lasting customers help to pay for system improvements and the acquisition of additional new players.
Originally, operators invested in advertisements. It turned out that regional advertising spend was expensive, and new players were more interested in promos and free-to-play or discounted play offers.
However, with a larger national presence, sportsbooks get a leg-up on acquisition through advertising. The more aware potential customers are of the brand, the more likely they are to use it in the future. Likewise, people who travel across states or live near the state border can be exposed to additional advertising for free. For potential customers in Massachusetts, they could see ads from Connecticut, New Hampshire, Rhode Island, or New York during their regular travel.
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Who Has Spending Power?
It’s clear from the third quarter results this year that FanDuel has a lead financially. FanDuel is projecting that it could be profitable next year, even with the launches in new states. Additionally, during the 3rd quarter, FanDuel expected to have $3 billion in revenue for 2022.
On the other hand, DraftKings announced a Q3 revenue of $501.9 million. While this isn’t a direct comparison to FanDuel’s expected revenue, DraftKings would struggle to get anywhere near the FanDuel’s projection by the end of the year.
One major part of this is that DraftKings has a smaller market share. This means that the company isn’t bringing in as much money to begin with. The company also has issues with profitability. In its Q3 results, DraftKings announced that it expected to lose an additional $500 million next year. This comes after more than $3 billion in losses over the past three years.
Because FanDuel is planning for profitability, even with new state launches, it has more than enough capital to spend what it needs to induce new customers to play on its platform. DraftKings has planned to take further losses in order to do the same thing. While the spending may yield similar results, FanDuel can be more flexible with its choices if there’s intense competition.
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Will Fan Loyalty Matter?
While FanDuel has a financial leg-up on DraftKings going into the new MA market, Bay Staters are a loyal bunch. Who hasn’t seen a Boston fan going wild for their team, after all?
There are several companies that are based in the US. BetMGM is headquartered in New Jersey, and Caesars is based in Nevada. Neither company has taken a lead in market share in its home state. That doesn’t mean it can’t happen, though.
One factor that FanDuel can’t replicate is that DraftKings will have a better chance of striking deals with local sports teams and having better reception when ads are played at stadiums. If you’re from Massachusetts, wouldn’t you want to support a local company more?
DraftKings has a special opportunity to turn the fan’s obsessions with local sports teams into a passionate base of users for their app. It’s up to the company’s marketing department to put together partnerships with teams and to create ads that depend on the love locals have for their teams.