The sports betting industry exploded in 2020. Buoyed by increased legalization in states across the country, the sports betting industry broke records for the total amount legally wagered, even despite the sports shut down due to the COVID-19 pandemic. Consumers weren’t the only ones shattering betting records; industry advertising also took off. In an industry with upwards of a dozen competitors contending for the still-growing audience of sports bettors, customer acquisition is critical. For DraftKings, its strategy is simple. It will not be outspent on its quest to become the industry leader.
DraftKings’ multi-faceted approach isn’t slowing down
Industry research shows DraftKings outspent its competition on the way to the top of the sports betting industry. Chances are even the most casual sports fan was inundated with ads from the brand throughout the fall. The online sportsbook tried to hit the potential sports bettor from every advertising angle. It spent on traditional television and digital ads, especially capitalizing on its partnerships with media properties like ESPN or Bleacher Report. DraftKings also formed partnerships and continues to do so, with various sports leagues and teams, such as MLB and its newly announced partnership with UFC. Beyond the increased inventory surrounding the field or in the octagon, it also enhanced integration in coverage and activations.
DraftKings’ deal with the Chicago Cubs includes plans for a DraftKings sportsbook near Wrigley Field. Although bettors primarily use DraftKings online, it understands the value an enhanced in-person sportsbook experience can provide. That’s why DraftKings, in addition to its competitors, has focused on providing a unique, exclusive sports betting experience for its in-person sportsbooks outside of just being able to bet on games, such as by including VIP lounges or having the sportsbook feel more like a bar or restaurant. Additionally, it was recently announced that Dish Network will integrate DraftKings and its app across its platforms, allowing customers to easily engage with sports betting as they watch the sport live through Dish. This type of media integration that allows consumers to conveniently watch and bet all in one platform will be a differentiator for sportsbooks moving forward.
All of these partnerships significantly raised the advertising bill for DraftKings to roughly half a billion dollars for 2020 – nearly 80% of its revenue. While it now can tout itself as the number one online sportsbook in the US, it still lost over $800 million. Despite these losses, do not expect DraftKings to change course, as it raised its 2021 revenue projections. Through its heavy advertising spend, DraftKings is essentially adopting a loss leader approach, but with advertising. It hopes to establish high awareness levels and a strong customer base so that online sports betting is synonymous with its brand as the industry continues to grow. The legal sports betting industry remains in its infancy as only 20 states along with Washington D.C. currently have legalized sports betting. As this number grows and more states get added to the list, DraftKings and its advertising will be there to greet the potential new customers and raise awareness of how it can elevate the sports experience through betting.
What we think
According to Mintel research on sports betting, nearly seven in 10 sports bettors agree betting makes them more interested in following sports; and nearly half bet because it makes following a game more interesting. With most sportsbooks seemingly offering the same deals and offers, driving awareness is critical to convince consumers to pick one sportsbook over another. While the financials may look worrisome in the short term, DraftKings understands customer acquisition is imperative in the early stages of the industry. As the saying goes, “the house always wins.” With the sports betting industry poised for continued growth, DraftKings will continue to focus on attracting consumers to its house.
