Robins Touts DraftKings Lowered Marketing, Customer Acqusition Costs

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DraftKings CEO Jason Robins spoke at Morgan Stanley’s Technology Media and Telecom Conference last week, touting the company’s recent cost-cutting in new state launches.

DraftKings has seen an “unbelievable ramp-up” in lower customer acquisition and long-term marketing costs over the past few months in Ohio, Maryland and Kansas, as opposed to states where it previously launched, Robins said:

“Ohio, typically we would have thought that that marketing spend would be spread out over at least six to 12 months. Instead we’re actually able to spend more at better (customer acquisition cost.) It’s ramping [up] faster and we’ll be able to ramp down the spend faster as a result. Net, what that means is, it actually pulls a little more marketing into Q1, but Q2 through Q4 will be much better.”

Robins said he expects a similar scenario to play out in Massachusetts, where the company launched its app on March 10.

National ads, awareness lower costs

Moving from local advertising in new markets to leaning on more national ads has been a primary driver of that lower marketing spend, as the company is benefitting more from built-up brand awareness in states that launched sports betting later than others, Robins added:

“A lot of prelaunch states had been seeing national ads, so [that] allows [us] to build momentum and ramp spend down faster. We don’t have to spend as much locally as long in an Ohio because we can continue to lean on national advertising instead of keeping it locally heavy in Ohio. It’s the same story with existing states.”

Robins said the company has long believed that if it is available to at least a third of the US population, national advertising helps it break even.

DraftKings reaches half after MA launch

Nearly five years after the Supreme Court paved the way, 36 states have legalized sports betting and more than 50% of the population has access to sports betting.

The DraftKings sports betting app is available in 22 states, according to its website.

That equates to more than 50% of the country, according to the US Census Bureau’s population estimates.

Earnings call after layoffs drives hopes

In a recent earnings call, Robins said Maryland and Ohio launches prevented what otherwise would have been the company’s first profitable quarter in Q4 2022.

The company indicated its high sales and marketing costs should cool off in 2023, with no states expected to launch after Massachusetts. Those costs were $1.2 billion in 2022, up 20.8% over 2021, according to its earnings presentation.

Success in older markets drove the majority of DraftKings’ 80% revenue jump year-over-year in Q4 2022, with the most mature states growing 50%, according to the call. DraftKings projects between $2.85 billion and $3.05 billion in revenue for 2023, which would represent 27% to 36% growth from 2022, per the earnings presentation.

Savings diverted into DraftKings product

The company has a chance of finishing the year with $800 million on its balance sheet, up from $700 million previously, Robins said, adding that DraftKings does not need any more capital, giving the company more flexibility to invest in resources elsewhere.

Robins said he plans to keep pouring resources into the availability and breadth of markets within its product.

Robins said he sees intelligent live betting, in particular, as a huge opportunity for growth and wants to use probability to help keep live markets open longer when an undetermined foul or flag stops play and can affect a sudden outcome.

“What most operators will do is just take the market down, ‘we’re going to wait til we get the data’ and so being able to then incorporate into your models’ probabilities and other things that allow you to keep markets up longer becomes a big differentiator,” Robins said.