Major sportsbooks are re-evaluating their marketing costs as they look toward becoming profitable next year. Having poured hundreds of millions of dollars into advertising since 2018, companies such as FanDuel and DraftKings are now under pressure to reign in spending, the Wall Street Journal reports.
Caesars CEO Tom Reeg told investors recently that the company cut almost half a billion dollars from the company’s anticipated spending on marketing this year. Reeg described this as a “dramatic pivot” for the company.
Meanwhile, BetMGM CEO Adam Greenblatt commented: “I think what we’re seeing is everyone is looking around going ‘Hang on, it’s gone too far, we need to make money’. The market is expecting us and others to make money.”
Reasons for this change in attitude are apparent when looking at the broader financial picture. Most sports-betting companies haven’t posted a profit since they launched. FanDuel, the biggest company in this market, reported a profit for the very first time in Q2 of 2022, but is still anticipating an overall loss for the year.
Greenblatt said the key to achieving profitability by next year would be by descaling BetMGM’s marketing expenses and advertising in a more clever and targeted way. He says that the company is using data to identify which customers will be the most valuable for offering bonuses to, rather than giving out ‘freebies’ en masse.
Greenblatt commented: “We’ve become a lot smarter, a lot more fussy and deliberate, about who gets what.”
Caesars is following this tactic as Reeg said they were able to cut the $500,000 in marketing expenses without actually losing any ground in the market.
The marketing cutbacks made by major sportsbooks show they are preparing to move out of growth mode and into profitable models.
