A core issue relating to the US market is the number of brands who are pulling back their marketing activities or in some cases stopping offering their product in certain states. Recently, we have seen the news that WynnBet has pulled back in several states.
On the face of it, many commentators blame the costs of entry and disappointing financials versus expectations. However, the core tenant here is a lack of experience in the sector. As a result, many brands’ marketing strategy does not reflect what can be achieved on a state-by-state basis.
Looking at the marketing skillset of some of the most successful operators, they have drawn on the expertise of experienced betting and casino marketers from legal markets such as the UK or have been bought by gambling groups with lots of experience launching and growing in established markets.
The Unique DFS Bohemoth Brands and First Mover Advantage
Before sports betting was legalised outside of Nevada both Fan Duel and Draft Kings managed to build significant brand recognition and just as importantly a real money customer database through Daily Fantasy Sports. This has been a master stroke as they essentially acquired sports betting and by default casino customers with minimal competition. However, they also created a unique market scenario when sports betting was legalised in each state.
Firstly, with legalisation their acquisition marketing for sports betting was essentially a CRM drive to cross sell existing customers. On the other hand, new challenger brands had to compete in a landscape that all of a sudden saw inflated prices across search, affiliates (CPA deals), T.V. and sports sponsorship.
This is the key piece, analysts without experience in the sector got the entire market wrong. As a result, marketing strategists projected results that were simply unattainable by challenger brands.
The Reality of the US Market and How to Conquer It
The one word that can be applied to success in the US market is patience. Hear me out, anyone who has been involved in either a new brand launch or with marketing a “challenger” brand in an established legal market knows that the key is to peel off customers from the market leaders. However, this takes time and you need to establish yourself in the market first before any high-value customers give your brand a try.
Here is what you need to do:
- Understand your CLV metrics and how the business model requires building a database of customers that will drive revenue for several years.
- Focus on Product: Make your product better from a customer perspective (this is not always possible with third-party platforms)
- Remember that you are serving US bettors. This means that you can’t duplicate a European betting platform and simply port it to the US market. It must be built with the US customer in mind. This includes same game parlays and player props across all US sports,
- Trading margin is key – Can you offer better prices on certain events
- Cross-sell metrics to casino is the most important metric for appraising your “sports” campaigns
- Avoid general CPA targets – These do not work in the industry. Instead, assess VIP tier acquisition and profile new customers. Your budget allocation should focus on VIP hotspots. Remember that in the gambling sector with promo cost considerations most of your new customers will lose money. Yes, these will be “negative” conversions. However, your high-value customers will more than cover non-profitable customers.
- Create brand awareness and give confidence that you can handle large deposits. This takes time to build but believe me it is essential.
- Advertising spend is both a user acquisition and a retention/reactivation cost. Don’t forget this.
- You will need Paid Search, PPC Affiliates and SEO to succeed with new customer acquisition. Here is where your best customers will find you.
- You will need social media such as Meta Ads for retargeting and audience building as well as player acquisition.
- ATL campaigns are to create awareness, increase direct response conversion rates and help increase average deposit amounts.
- On ad platforms create multiple conversion types including “negative conversions” This is one of our secret techniques that really boosts ROI.
Building a Successful Marketing Strategy for the US Market
Firstly get your time horizon right. As a rule of thumb, it will take approximately from 4-6 years to build a user base that delivers cash-positive monthly revenues. In other words it will take 4-6 years to reach profitability.
Why 4-6 years? well, this is what it will take for a significant number FanDuel and DraftKings customers to be peeled off by a new challenger brand. Yes, it will feel like growth is like a slow “drip-drip”. However, it will accumulate and your customer database will grow layer by layer month on month.
If you are doing proper customer analysis and adjusting based on customer quality you will get there. It’s just not a quick fix. However, at that stage, your company valuation will more than justify the marketing spend over the 4-6 year period.
Avoid Overly Aggressive Promos – focus on Product/Margin/RTP and fundamental value to the user to entice new sign-ups.
Remember you must account for promo costs. Casual customers will rinse you for promos so build your approach around sustainable fundamental areas that make a customer’s experience better on a constant basis.
Define a New Customer – No, First Time Depositor is Not Good Enough
Also, you must define a new customer acquisition properly. Don’t use First Time Depositor, you must qualify further.
So, here is an example. In order to remove “promo” activity from the first “free bet” of your offer. Say Bet $100 Get €100 you should only count customers that meet the following criteria.
- Submits Valid KYC documentation
- Makes a real money deposit
- Places at least three bets – 1) a qualifying bet 2) a free bet 3) if the free bet loses places a third bet 4) if free bet wins places a bet above the free bet win return value. This criterion depends on the promo structure.
- Has not self-excluded within x time frame
You see, just focusing on FTDs means your acquisition team could be acquiring purely promo hunters which will render your customer database useless.
US Sports Betting Market for New Brands – Conclusion
The key is to understand that you need the capital to carry operating and marketing costs for 4-6 years. You cannot build a business off casual sports bettors instead you must acquire VIPs that will drive the vast majority of your revenue. On top of sports, you also need a quality casino product. This is where you will see the majority of your profit, even from sports customers.
Remember, the smart operators view their sportsbook as a customer acquisition and retention tool for their gaming product. Margins can be adjusted accordingly to attract customers to the sportsbook. the is more favourable than widely aggressive promotions.
Ultimately, you must be front of mind for high-value customers. they also must trust the user experience and brand reliability to deposit significant funds with you rather than with more established operators.
If you understand what it will take to launch and sustain a new betting operator in the US market from the outset you can deploy an effective marketing strategy that will deliver growth and increase company value over a number of years.
