Leadership in the US online sports betting market is often fluid and varies at the state level, but what isn’t up for debate is that a duopoly has formed, comprised of DraftKings and Flutter Entertainment’s FanDuel.
Flutter’s second-quarter earnings report contained multiple points suggesting FanDuel can maintain and extend its already dominant footprint in the domestic sports betting space. These include favorable average revenue per monthly active user (ARPMAU) trends. FanDuel’s first-quarter ARPMAU was $134 compared to $137 for DraftKings, but during the June quarter, the tide turned in favor of FanDuel.
Possible explanations for this shift include improvements to FanDuel’s Major League Baseball (MLB) parlay product and a relative shift of the player base from daily fantasy sports to casino, where monthly unique players increased by 30%. DraftKings, meanwhile, likely saw its decline affected by the inclusion of Jackpocket customers into its MUP number and thus the calculation.
Improvements to parlay products are notable for any operator, particularly with the imminent arrival of the 2024 football season. Studies indicate that NFL bettors are planning to wager more frequently this year than in 2023. Parlays have long been part of operators’ toolkits to spur more betting, especially during football season.
Relative to competitors such as DraftKings, FanDuel has the advantage of being a unit of a larger, mature company. While competitors focus on near-term profit objectives to foster confidence among analysts and investors, FanDuel can focus on long-term objectives. This point isn’t lost on institutional investors in the US, many of whom have been quick to buy shares of Flutter since the gaming company listed its shares in New York in January and later made the New York Stock Exchange its primary listing venue.
Owing to the support of a well-heeled parent and its own commendable execution, FanDuel has long been profitable and has used that cash to reinvest in the business, whether it be in customer acquisition, technology, or other areas. FanDuel noted that payment costs had increased to about 6% of NGR, thanks in part to a faster deposit/withdrawal system that meant customers were transacting more often. This is costing FanDuel money, but the product payoff is worth it, because customers love that feature. This type of focus on product has helped FanDuel achieve five straight number one rankings in OSB app testing.
As was widely expected, FanDuel didn’t follow DraftKings in announcing a surcharge on winning sports wagers in select high-tax states. In fact, when FanDuel didn’t play ball, DraftKings was forced to reverse course on the controversial issue.
While DraftKings scrapped plans for the surcharge, rivals such as FanDuel that passed on the opportunity may have already won the battle in the court of public opinion and beyond. This may have been a wise move to avoid potential backlash from customers and, perhaps more importantly, policymakers, who likely would not have looked kindly on any attempts to skirt paying taxes.
