Stocks of sports betting companies like DraftKings face Super Bowl hangover
Betting newbies have to spend a lot of money to attract new users – but like a gambler looking for a huge salary, companies can easily get in over their heads with marketing and acquisition costs. if they are not careful.
Investors are clearly worried that the company will continue to lose money this year as it spends heavily on ads and promotions. And DraftKings also said first-quarter sales would be lower than Wall Street forecasts.
Ad spend isn’t the only headwind for DraftKings. CEO Jason Robins said in an interview with CNN Business that Major League Baseball’s current lockdown could be a problem because it could lead to a delayed start and a shortened season.
“When games aren’t played, it’s not positive for us,” Robins said, comparing the possibility of fewer baseball games to the shutdown of almost all sports that took place in the spring of 2020 at the start. of the pandemic. “Let’s hope baseball understands that.”
The crowded field forces rivals to try and promote each other, often luring them with limited free bet offers. The hope is to gain a loyal and frequent customer, but such promotions reduce short-term profits.
Targeted approaches are essential. Robins told investors on a Friday morning conference call that the company does not plan to spend too much money in new markets.
“When the New York market launched, many operators engaged in aggressive promotional behavior, but DraftKings is committed to maintaining its disciplined approach to customer acquisition and is targeting a two- to three-year profitability trajectory for state,” Robins said. .
Robins added during the interview with CNN Business that the company saw record Super Bowl volume. He also said the increase in marketing by DraftKings and its rivals was positive for the whole industry.
“We’re doing better than ever and the increase in overall spending is helping. There’s a lot of awareness for the industry,” Robins said.
But investors don’t seem to see it that way. The sports betting market is still in the nascent stage of land grabbing, where market share may matter more than profits. And there’s a lot of money backing some of DraftKings’ rivals.
The competition is fierce
Flutter’s FanDuel is also aggressively going after new customers, while trying to satisfy existing players in its established markets.
“We’re talking about 70% more Super Bowl bets than this time a year ago,” Raffensperger said.
Raffensperger added that there was a lot of interest in so-called “proposal bets” – bets that go beyond traditional betting. A popular prop bet allowed people to bet on a player who was not a quarterback throwing a touchdown. (That bet paid off: Cincinnati running back Joe Mixon checked for a score.)
Yet shares of FanDuel owner Flutter have also been hurt by the intense competition. The stock is down 6% in 2022 and more than 20% in the last 12 months. MGM, Caesars and Penn are also in the red this year.
Investors are not yet betting on a long-term winner in the industry. They are waiting for the dust to settle after the blitz marketing is over.