Flutter CFO on US marketing battle: “We maintained discipline when others were buying handle share with crazy offers”
FanDuel is reaping the rewards of its “disciplined” marketing approach in the US according to Flutter Entertainment CEO Peter Jackson and CFO Jonathan Hill.
The FTSE 100 operator invested more than $1bn in promotions, sales and marketing across its US business during 2021, which helped the FanDuel brand retain a number one position in the market with an estimated 40% of US online sportsbook market share as of Q4 2021.
Flutter’s US revenue grew by 113% year-on-year to $1.9bn as FanDuel supplied positive contribution during the year of $14m and appears on track to deliver positive EBITDA in 2023.
“The team have been very disciplined when it comes to our marketing spend,” said Jackson. “It’s very easy to get sucked into signing deals and partnerships and you can spend a lot of money very needlessly, and there are some opportunities that we’ve passed on, which proved to be the right decision.
“The team have done a great job for us in being very diligent around our marketing investment. And while we do spend more money than others, we think we also spend it very wisely when we do. When we track our acquisition costs, it gives us real confidence in the team’s performance,” he added.
FanDuel is constantly competing with other US operators to acquire customers with great lifetime values (LTV). While marketing is important for acquisition, product becomes essential when seeking to retain those players long-term.
Jackson believes FanDuel has an advantage in this department due to its same-game parlay (SGPs) product and the fact it can cross-sell players from DFS into real-money online sports betting.
During 2021, FanDuel tweaked its product suite to enable multiple SGPs on different matches into a single bet, as well as the ability to place SGPs in-play on certain sports.
Further additions saw the launch of SGPs on college football and the development of in-house pricing for college basketball, which increased the proportion of overall betting handle priced in-house to 80%.
“The reason we’re getting such good use of the parlay product and the reason we get such good retention is because we have the best product in the market,” said Jackson to investors during the operator’s full-year 2021 results presentation.
Jackson also took aim at some of FanDuel’s competitors during the event, including Caesars Sportsbook, although he did not specifically name names.
Caesars raced to the top of the market share rankings in New York after offering generous sign-up offers to customers, including a deposit match of $3,000.
The operator dominated the market share rankings for most of January after the market went live on 8 January 2022 but has fallen behind FanDuel during February.
In the two weeks since Super Bowl, FanDuel has generated handle of $306m and GGR of $9.57m, compared to $173m and $10m for Caesars Sportsbook.
“The great thing about the US is that a lot of market data comes out state by state and often almost on a weekly basis,” said Jackson. “New York for me is a great example, where people got big market shares of handle because they were handing out free dollars.
“You now look at where the market shares have gone and people are reverting back to the best products and FanDuel is now number one in that market,” he added.
Despite going on the aggressive from day one in New York, Caesars has now decided to “dramatically curtail” its above-the-line marketing spend – suggesting its ads would now disappear from TV screens – because it had already reached its market share targets.
Analysts have speculated the pull back could be temporary while Caesars improves its product following blackouts and site outages during key NFL weekends, or simply because the costs to compete in such a cutthroat marketing environment no longer add up.
Commenting on the situation, Flutter CFO Hill said the last six months, including the start of the new NFL season, were the most aggressive he has ever known in terms of marketing.
“We’ve seen some people coming in with very, very aggressive offers and we’ve seen our economics through that period hold up,” said Hill. “We maintained discipline at times when people were buying handle share and there were some crazy offers out there.
“Now what we’ve seen is announcements from competitors around their levels of spend ongoing and pull backs, while we have seen our returns looking fantastic. We’re leaning in, not leaning out at this point, because now we’re seeing some really attractive investment opportunities in terms of LTVs in that market and we feel very positive about where we are today,” he added.
Jackson said FanDuel’s performance during February’s Super Bowl, which was the biggest regulated betting event in US history, was proof of its superior product and technology.
The platform survived massive betting volumes and was up and running for the duration of the event, while there were no reported issues from a customer service perspective.
“The retention levels in the business are very much driven by the quality of the product,” said Jackson. “Our customers are voting with their feet – they may take other people’s free money but then they will come and continue to use FanDuel.”