The month in US sports betting
Adam Krejcik and Chris Krafcik from Eilers & Krejcik Gaming analyze the latest market and policy movements across the regulated US sports betting landscape
In our recent H1 2023 US online sports betting (OSB) app testing report, a few things jumped out. One, of course, was FanDuel putting even more distance between itself and the rest of the playing field. Indeed, FanDuel took the number one overall app-performance ranking for a third straight quarter, with a highest-ever score in our testing to date. As we’ve noted in previous reports, the FanDuel app does — and continues to do — just about everything well.
Other standout items included:
• A vastly improved SI Sportsbook app (which jumped up nine places in our rankings to 15th — it has a viable path to a top-10 ranking, in our view).
• Another third-place ranking for the reliably good PointsBet app (which offers positive readthrough for acquirer Fanatics, which has since received PointsBet shareholder approval for the sale of its US division).
• Another fourth-place ranking for bet365 (which boasts one of the best feature sets on the market but still lacks a US-localized UX).
• Little indication overall that apps not named DraftKings have potential to dethrone FanDuel.
US retail casino brands are being left in the dust
In the US online gambling space, retail casino brands are getting demolished by two digitally native, sports betting-first brands: FanDuel and DraftKings.
Our proprietary estimates at Eilers & Krejcik Gaming show that FanDuel – DraftKings are owning the OSB vertical (74% combined gross gaming revenue (GGR) share in Q1 2023) and are closing in on 50% GGR share of the overall online casino vertical.
In our most recent analysis of US OSB app performance, we wrote: “In H1 2023, the top two OSB operators — FanDuel and DraftKings — simply crushed everyone else in the OSB product landscape.
Meanwhile, what of OSB apps run by and branded after their retail casino parent companies? With few exceptions (e.g. BetMGM) they are being left in the dust by the FanDuel-DraftKings tandem.
“So, the questions must be asked: Are retail casino companies taking the OSB opportunity seriously enough? And could their early efforts in US OSB — in which they’ve increasingly ceded product and market share supremacy to their aggressive, digitally native rivals — come back to haunt them?”
The same analysis applies in online casinos. Online gambling is not a build-it-and-they-will-come proposition, and ownership of a significant slice of addressable EBITDA does not and will not come from a sub-scale revenue base.
Houston, we have a problem.
Well, hello there, bet365
Bet365’s US OSB ramp-up is one of the lesser-covered storylines of 2023 so far, in our view. In a very short space of time, the European OSB giant has gone from idling to aggressively field trialing in the US. One interesting way of lensing bet365’s ramp-up is via OSB app install data from digital intelligence source Sensor Tower.
Indeed, from an OSB app installs perspective, bet365 has recently begun to outperform Caesars and Barstool Sportsbook across the US as a whole. That’s despite bet365 having a much smaller geographic footprint (five states versus 20 for Caesars and 16 for Barstool, as of June 2023). So, how has this happened?
Let’s start with the important caveat that OSB app installs do not equal conversions or paid actives and so should be treated as a pinch-of-salt directional indicator of user acquisition. A lot of bet365’s install momentum is being driven by populous Ohio, which opened in January 2023 and is currently bet365’s core market of focus.
Bet365 has accounted for nearly 11%, or $47m, of Ohio OSB bonusing spending on a since-launch basis. Although bet365 could be accused of merely buying Ohio installs (and GGR share, of which it has ~7%), we note it turned NGR-positive (net gaming revenue) for the first time in Ohio in April 2023 (month four of operations).
We also note bet365’s US OSB app regularly outperforms Caesars and Barstool in our proprietary testing at Eilers & Krejcik Gaming (EKG), which matters full stop — but will especially matter after the initial wave(s) of bonus-driven user acquisition subside in Ohio.
So, bet365’s Ohio-driven US OSB app installing momentum — although timely and directionally interesting — is merely the opening chapter of a larger (and hopefully eventful) US story that will unfold over the next few years.
Some things we’ll be watching for during that time:
• Can bet365 carve out significant, sustainable NGR share of the Ohio OSB market without the trappings enjoyed by other competitors in the space (e.g. brand halo, existing customer databases, and so on)?
• Will bet365 open a reported 800- person US office and send a signal that it is here to contest the US opportunity in earnest?
• In addition to throwing resource at select high-conviction OSB markets like Ohio and, potentially, Texas (where it has an advanced marketing integration with the San Antonio Spurs), will bet365 surprise the market via the acquisition of a higher margin, OSB-adjacent business like PrizePicks?
What’s next in US OSB
Here are five quick thoughts from EKG managing director Chris Krafcik:
1. Novel integrations: Think B2C meets direct to consumer. Early versions of this dynamic have included BetMGM-Buffalo Wild Wings and PointsBet-TopGolf. Digitally native brands like FanDuel could further differentiate by offering sports tourism-based integrations and cross-referral partnerships with hotel chains. Such integrations could position digital brands to (better) compete with US land-based casinos, which haven’t really begun to harness their omnichannel potential.
2. Disruptive product: US market OSB product is, at this early stage, a case study in homogeneity, with most operators doing a version of the same thing — and very few of them well. The focus now is how to slice, dice, and repackage parlays. But I’m intrigued by casual/non-intimidating product variants that mostly exist in the fantasy sports space. In the US OSB market, nobody has stepped into — let alone claimed — this non-intimidating lane.
3. A widening sports aperture: The US is one of the world’s most exciting growth markets for sport. Lionel Messi’s move to Inter Miami CF could have a significant positive impact on Major League Soccer betting volumes and, longer term, a transformational impact on soccer fandom levels in the US. I’m also excited by Formula 1’s push into the US market (admittedly, the Netflix F1 show Drive to survive hooked me) and especially by the myriad betting-racing mash-up possibilities that exist in Las Vegas.
4. Paradigmatic shift in customer service: My wife and I buy our pet food from a company called Chewy. In short, Chewy’s customer service — which includes handwritten notes and gratis paintings of your pets (seriously!) — is phenomenal and has gone viral over and over (and over) because of how thoughtful it is. I have yet to see a US OSB operator have a viral moment in response to its thoughtful, outside-of-the-box customer service.
5. The unexpected: Despite the US OSB market having the appearance of a settled affair (e.g. FanDuel and DraftKings consistently controlling a steadily expanding total addressable market), it…is so not that. The combination of transformational M&A, unlooked-for market entrants, disruptive product, and policy change — among other factors — could and will likely reshape the playing field in some surprising ways.
Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada. The firm’s focus is on product, market, and policy analysis related to the global regulated gambling market. Clients include operators, suppliers, private equity and venture capital firms, institutional investors, and state governments. To learn more about the firm, visit http://www.ekgamingllc.com