Gambling Operators Including FanDuel, DraftKings Tweak Marketing as NFL Season Arrives

The college football and National Football League seasons—a prime time to advertise and entice more people to gamble—will be a balancing act on the path to profitability for companies such as FanDuel Group,

DraftKings Inc.

DKNG -0.67%

and BetMGM, the market leaders. Other competitors also are scrutinizing their bottom lines.

Sports betting has exploded across the U.S. after a Supreme Court ruling in 2018 cleared the way for states to establish sports wagering. Sports betting has been legalized in 36 states and the District of Columbia. Nationwide, sports betting generated about $3 billion in the first half of 2022, up about 66% from the first half of last year, according to the American Gaming Association.

Most sports-betting companies haven’t posted profits since they launched. FanDuel reported a profit for the first time in the most recent quarter but forecast a loss for the year. Other sports-betting operators reported losses in their most recent quarters and projected losses this year.

Industry executives, including at FanDuel and DraftKings, say marketing costs, such as advertising or customer bonuses, have gone down in states where sports betting has been established for months or years.

In those regions, they say, their companies will focus on their existing customers and offer fewer and less-expensive promotions.

But if new states join the market—as Kansas and Ohio are expected to—companies are anticipated to spend on new ads and promotional offers to establish a foothold, potentially putting profit goals at risk. The biggest possible entrant is California, where voters will decide on a ballot measure in November on whether to legalize online sports betting. An advertising spending frenzy in the state could derail several operators’ goals of being profitable in 2023, executives say.

In New York, where online sports betting launched in January, customer promotions included offers as high as $3,000 in free bets.

“I think what we’re seeing is, everyone is looking around going ‘Hang on, it’s gone too far,’” BetMGM Chief Executive

Adam Greenblatt

said. “We need to make money. The market, frankly, is expecting us and others to make money.”

MGM Resorts International

MGM 1.77%

and

Entain

ENT -3.27%

PLC, equal partners in BetMGM, have said the companies plan to invest $450 million combined into the online-gambling venture this year. That would bring the total investment to $1.1 billion since BetMGM launched in 2018.

Mr. Greenblatt said the company is spending less in promotions overall, but not all of its customers will notice the rollback. He said the company is using data to identify which customers will be the most valuable for offering bonuses.

“We’ve become a lot smarter, a lot more fussy and deliberate, about who gets what,” he said.

Other businesses, from streaming services to electric vehicles, that have been hustling to grow as fast as possible and gain market share are now trying to show investors that they also can be profitable.

“It is very hard to make these businesses be profitable when they are in growth mode,” said Chris Grove, partner at Eilers & Krejcik Gaming, a gambling industry research firm.

DraftKings’ share price at its peak was about $72 in March 2021 and has since slumped to around $21. American depositary shares of

Flutter Entertainment

FLTR -0.43%

PLC, which includes FanDuel and U.K. betting brands, were trading at $118 in March 2021 and are now around $65.

Caesars Entertainment

shares have gone from about $90 to about $52 over that period.

Still, the National Football League and college football seasons this fall are the biggest opportunities for online sports-betting operators to acquire new customers. The TV ads and some of the freebies that became ubiquitous last year will still be around for kickoff, company executives say.

Overall, companies are expected to spend $1.8 billion on online gambling advertising this year—including $300 million in New York alone—up from $1 billion last year, according to media consulting firm BIA Advisory Services. That is expected to level off somewhat to $1.9 billion next year, unless another market such as California were to open up, said Nicole Ovadia, BIA’s vice president of forecasting and analysis.

Caesars Chief Executive

Tom Reeg

told investors recently that the company cut almost half a billion dollars from what the company anticipated spending in marketing this year without losing ground in the market. “This is a dramatic pivot for us,” Mr. Reeg said.

While Las Vegas casinos are booming, Caesars’ digital segment, including online sports betting, reported a net loss of $692 million in the first half of the year. In the third quarter, the business will be dominated by marketing to existing customers, Mr. Reeg said.

“We’ve got a long track record of really turning highly subsidized businesses on the brick-and-mortar side into far more profitable business,” Mr. Reeg said. “It’s the same thing that we’re doing in digital.”

FanDuel Chief Executive

Amy Howe

said the company is taking a different tack. It ramped up customer-acquisition efforts earlier this year after seeing competitors pulling back after the Super Bowl.

“We’re going to spend what we need to spend in order to be competitive, but we’re going to maintain the same financial discipline,” Ms. Howe said.

DraftKings recently reported that sales and marketing costs in the second quarter were up 18% compared with the same quarter last year, but marketing costs were down in states where DraftKings had been operating for more than a year.

“You’ll see us fairly aggressive as we always are during the start of the NFL season,” DraftKings Chief Executive

Jason Robins

said in an interview, likening it to a holiday season for the business.

Write to Katherine Sayre at [email protected]

The college football and National Football League seasons—a prime time to advertise and entice more people to gamble—will be a balancing act on the path to profitability for companies such as FanDuel Group,

DraftKings Inc.

DKNG -0.67%

and BetMGM, the market leaders. Other competitors also are scrutinizing their bottom lines.

Sports betting has exploded across the U.S. after a Supreme Court ruling in 2018 cleared the way for states to establish sports wagering. Sports betting has been legalized in 36 states and the District of Columbia. Nationwide, sports betting generated about $3 billion in the first half of 2022, up about 66% from the first half of last year, according to the American Gaming Association.

Most sports-betting companies haven’t posted profits since they launched. FanDuel reported a profit for the first time in the most recent quarter but forecast a loss for the year. Other sports-betting operators reported losses in their most recent quarters and projected losses this year.

Industry executives, including at FanDuel and DraftKings, say marketing costs, such as advertising or customer bonuses, have gone down in states where sports betting has been established for months or years.

In those regions, they say, their companies will focus on their existing customers and offer fewer and less-expensive promotions.

But if new states join the market—as Kansas and Ohio are expected to—companies are anticipated to spend on new ads and promotional offers to establish a foothold, potentially putting profit goals at risk. The biggest possible entrant is California, where voters will decide on a ballot measure in November on whether to legalize online sports betting. An advertising spending frenzy in the state could derail several operators’ goals of being profitable in 2023, executives say.

In New York, where online sports betting launched in January, customer promotions included offers as high as $3,000 in free bets.

“I think what we’re seeing is, everyone is looking around going ‘Hang on, it’s gone too far,’” BetMGM Chief Executive

Adam Greenblatt

said. “We need to make money. The market, frankly, is expecting us and others to make money.”

MGM Resorts International

MGM 1.77%

and

Entain

ENT -3.27%

PLC, equal partners in BetMGM, have said the companies plan to invest $450 million combined into the online-gambling venture this year. That would bring the total investment to $1.1 billion since BetMGM launched in 2018.

Mr. Greenblatt said the company is spending less in promotions overall, but not all of its customers will notice the rollback. He said the company is using data to identify which customers will be the most valuable for offering bonuses.

“We’ve become a lot smarter, a lot more fussy and deliberate, about who gets what,” he said.

Other businesses, from streaming services to electric vehicles, that have been hustling to grow as fast as possible and gain market share are now trying to show investors that they also can be profitable.

“It is very hard to make these businesses be profitable when they are in growth mode,” said Chris Grove, partner at Eilers & Krejcik Gaming, a gambling industry research firm.

DraftKings’ share price at its peak was about $72 in March 2021 and has since slumped to around $21. American depositary shares of

Flutter Entertainment

FLTR -0.43%

PLC, which includes FanDuel and U.K. betting brands, were trading at $118 in March 2021 and are now around $65.

Caesars Entertainment

shares have gone from about $90 to about $52 over that period.

Still, the National Football League and college football seasons this fall are the biggest opportunities for online sports-betting operators to acquire new customers. The TV ads and some of the freebies that became ubiquitous last year will still be around for kickoff, company executives say.

Overall, companies are expected to spend $1.8 billion on online gambling advertising this year—including $300 million in New York alone—up from $1 billion last year, according to media consulting firm BIA Advisory Services. That is expected to level off somewhat to $1.9 billion next year, unless another market such as California were to open up, said Nicole Ovadia, BIA’s vice president of forecasting and analysis.

Caesars Chief Executive

Tom Reeg

told investors recently that the company cut almost half a billion dollars from what the company anticipated spending in marketing this year without losing ground in the market. “This is a dramatic pivot for us,” Mr. Reeg said.

While Las Vegas casinos are booming, Caesars’ digital segment, including online sports betting, reported a net loss of $692 million in the first half of the year. In the third quarter, the business will be dominated by marketing to existing customers, Mr. Reeg said.

“We’ve got a long track record of really turning highly subsidized businesses on the brick-and-mortar side into far more profitable business,” Mr. Reeg said. “It’s the same thing that we’re doing in digital.”

FanDuel Chief Executive

Amy Howe

said the company is taking a different tack. It ramped up customer-acquisition efforts earlier this year after seeing competitors pulling back after the Super Bowl.

“We’re going to spend what we need to spend in order to be competitive, but we’re going to maintain the same financial discipline,” Ms. Howe said.

DraftKings recently reported that sales and marketing costs in the second quarter were up 18% compared with the same quarter last year, but marketing costs were down in states where DraftKings had been operating for more than a year.

“You’ll see us fairly aggressive as we always are during the start of the NFL season,” DraftKings Chief Executive

Jason Robins

said in an interview, likening it to a holiday season for the business.

Write to Katherine Sayre at [email protected]