The race between FanDuel and DraftKings for No. 1 in the daily fantasy sports industry is as close as it has ever been with about month left until the NFL season begins.
From spring to summer, any change?
In June, Legal Sports Report’s Chris Grove took a look at the question of who is No. 1 in the DFS industry. The answer, by a number of a different metrics — at least for that snapshot in time — was DraftKings.
Many of the same things working in DraftKings’ favor then are still in play:
- FanDuel offers only Major League Baseball contests, while DraftKings adds golf, NASCAR and mixed martial arts as revenue streams. Fantasy golf, in particular, provides a lot of revenue; even on weeks without a major championship, DraftKings is approaching or surpassing a million dollars in guarantees. The MMA/UFC vertical is also growing.
- In the Major League Baseball DFS market, DraftKings continues to benefit from its partnership with MLB. Just last week, DraftKings announced official deals with 27 MLB teams.
- DraftKings pulled ahead of FanDuel in search interest, according to Google Trends, and has maintained that position.
Despite all that momentum, Eilers Research’s Adam Krejcik, who tracks the DFS space, believes FanDuel is still the biggest operator, in the grand scheme of things. From a recent story at CBS MoneyWatch:
“DraftKings argues that they have closed the gap considerably and are even ahead of FanDuel if you use the most recent monthly or quarterly data. That being said, I still think FanDuel is the largest … DraftKings has said they will pay out over $1 billion. The rest of the market will pay out at most $100 million in prize money.”
Who is giving away more prizes in 2015?
The question of prize money is a good barometer, and this has been a dichotomy that has largely gone under the radar in recent weeks.
DraftKings, in the wake of its $300 million round of funding, reiterated that it would award “well over $1 billion in prizes” this year.
FanDuel has constantly revised its prize estimate upwards, saying after its $275mm round of funding that it expected to award “about $2 billion” in prizes this year.
Are the semantics here worth noting? Could the terminology employed by both sites mean they are separated by only a hundreds or even tens, of millions in contest prizes? If that is true, the revenue currently taken in by each could be very similar by the close of 2015.
The valuation question
Both companies are now valued at north of a billion dollars, and there is very little separating them in this metric.
A Wall Street Journal story pegged FanDuel’s valuation at $1.275 billion. Estimates of DraftKings’ valuation put it past $1.2 billion, as well.
Both companies are theoretically flush with cash after closing their rounds last month.
Those ad deals by DraftKings
DraftKings has committed what is reportedly half a billion dollars in ad and marketing spend at ESPN’s and Fox Sports’ platforms in coming years. That spend could be a double-edged sword.
That money spent could translate into huge numbers in customer acquisition for DraftKings. At the same time, that’s simply a lot of money to spend on advertising.
We’re certainly not privy to all the expenditures at either company, but it appears FanDuel is being much more cautious — at least right now — in spending on marketing, and is instead focusing on its infrastructure.
Will either strategy pay off in a big way in the quest to dominate the DFS market? Only time will tell.
The NFL contests
As Grove wrote in June, the NFL season will determine who is really on top. Everything leading up to the four months of NFL is small potatoes, by comparison, in the DFS industry, as the lion’s share of revenue generated will come from September through December.
We got a sample of the dynamic already, as both sites have launched their week 1 contests.
FanDuel went first, guaranteeing more than $6 million over its first three contests. The amount guaranteed has grown over $8 million as contests have been added.
DraftKings responded by going even bigger, announcing on Friday that it would be running a $10 million guaranteed contest. The total amount of money guaranteed in all of DK’s NFL contests currently eclipses $12 million.
Guarantees are only that; they don’t tell us how many people will actually be playing at either site. But obviously DraftKings is banking on more money coming in to its coffers for Week 1 than FanDuel, or it is willing to pay out some overlay in a bid to attract to new customers.
The early data on entries in the sites’ biggest contests gives us a little bit of insight.
FanDuel’s $5mm contest ($25 buy-in) has just nearly 6,000 entries after two weeks of appearing in the lobby. The DraftKings $10mm contest ($20 buy-in) is already past 7,000 entries after just a few days.
Of course, DraftKings needs more than twice the number of entries than FanDuel to fill its biggest contest.
And the answer is…?
Again, with the caveat that this is just a snapshot in time, there’s plenty of reason to believe that DraftKings is No. 1, currently. We’ll certainly get a better idea of where the sites stand after week 1 of the NFL season is complete.
But who will be No. 1 when the smoke clears after the NFL season? We might not know until the final snap is taken.
