Online Sports Books Shake Up Their Ad Strategy

Online sportsbooks like BetMGM, FanDuel, and DraftKings are switching horses.

Like a roulette player spreading dozens of bets across the board, online gamblers have long pursued a strategy of broad growth and customer acquisition. But now, with losses mounting, they’re scaling back marketing budgets and doubling down on their most reliable customers.

One for the Money

Sports betting, legal in 36 states plus Washington DC, generated about $3 billion in revenue for bookkeepers through the first six months of the year, according to the American Gaming Association. That’s a 66% increase year-to-year, but still not enough for most major sports books to earn a dime (FanDuel posted its first-ever profit last quarter, but is still projecting a net loss for the year). The house may always win in Vegas, but online upstarts are spending hundreds of millions just to attract new guests through the front door.

With the lucrative pro and college football seasons on the horizon, sportsbooks may have miscounted their chips:

• Most major sportsbooks have pegged cost per customer acquisition of around $300, with a customer lifetime value of around $2,500. But the frenzy to sign-up new customers has shattered that comfortable ratio: to attract newly legal New York gamblers earlier this year, Caesar’s offered $3,000 in free bets, forcing competitors to call, raise, or fold.
• Now Caesars is slashing its marketing budget for the rest of the year by nearly half a billion dollars, and much of the industry is following suit. Meanwhile, BetMGM, the largest player in the game, is dialing back promotions for most users while using data to target high-value customers.

“I think what we’re seeing is, everyone is looking around going ‘Hang on, it’s gone too far,’” BetMGM Chief Executive Adam Greenblatt told The Wall Street Journal. “We need to make money. The market, frankly, is expecting us and others to make money.”

California Dreaming: Sportsbooks are expected to shell out $1.8 billion in advertising this year, up from $1 billion last year, according to media consulting firm BIA Advisory Services. But that’s expected to cool to $1.9 billion next year, unless voters in California, the biggest state in the nation, approve a ballot initiative to legalize gambling in November. Should the measure pass, expect sports books to rush the Golden State like it’s 1849.