DraftKings is attributing its record-setting $40.4 million in March iGaming revenue in Michigan to more casual bettors in a mature online gambling market. But record promo spend also is a major factor.
Michigan has offered online casinos since 2021. FanDuel, BetMGM and DraftKings Casino Michigan have been the top three operators in every month.
On a first quarter earnings call last week, DraftKings CEO, Jason Robins (above), said he’s seeing “healthy growth” in mature states such as Michigan. Robins also noted that DraftKings is much more diversified than other operators, including casual bettors.
“The trend we’re seeing is more and more casual [bettors] coming to the market, particularly, in older states,” he said on the call. “I think as more people come into the market, that percentage of casual [bettors] increases. So definitely something that we’re seeing trend in that direction.”
Robins pointed out that DraftKings has found that more serious bettors tend to jump on board first after a market launch and casual bettors follow later. With Michigan now three years into an iGaming sector, that’s exactly what DK is seeing in the Great Lakes State.
While FanDuel and BetMGM have been atop the standings in Michigan, DraftKings is going to keep leveraging casual bettors, and look to be more efficient.
Bucking DK’s national trend, it has also increased promo spending in Michigan to solidify its standing in the market.
DraftKings leaning into another market for iGaming success
The market leaders each have their fair share of VIP and regular online casino players. Those customers often drive the majority of the revenue for operators in a given month.
DraftKings mentioned another trend has started to pick up momentum in more mature markets, including Michigan.
Last month, for the first time ever, DraftKings generated more than $40 million in Michigan online casino revenue. Casual bettors are driving some of that growth. DK’s record promo spend in Michigan is also key.
According to an investors presentation, DraftKings has increased monthly unique players (MUPs) from 2.8 million to 3.4 million year-over-year. It has also increased the spend of those players from $92 to $114.
DraftKings’ cross-sell strategy from its sportsbook to online casino is one of the best in the market, too. All of these trends have DraftKings in a strong position, especially in Michigan.
Robins says promo spend down overall, but not in Michigan
DraftKings reported on the call that promotional spend dipped 7% year-over-year.
“Just as the customer base matures, we’re seeing an increase in the ratio of existing customer volume to new customer volume, which is naturally bringing down the promo rate,” he said.
However, that is not the case in the Great Lakes State. Since Michigan is an incredibly important market in DraftKings’ portfolio, the operator has actually been increasing online casino promo spend over the last several months.
There’s a good reason. DraftKings has been falling behind in Michigan.
Since November, the gap between both BetMGM and FanDuel has increased each month when compared to DraftKings’ iGaming revenue in Michigan.
As FanDuel distanced itself from DraftKings and eventually overtook BetMGM, DraftKings needed to keep pace. Here is DraftKings’ online casino promo spend since last November:
- November: $3.5 million
- December: $3.6 million
- January: $3.6 million
- February: $3.7 million
- March: $4 million
March marked the highest amount of promo spend DraftKings has incurred in Michigan, bucking the nationwide trend Robins alluded to on the call.
Should DraftKings want to keep pace with FanDuel and BetMGM in the Great Lakes State, it might have to keep up the spending.
DraftKings worried about profitability, not necessarily market share
DraftKings does not claim the top spot in either the sports betting or online casino categories in Michigan, in terms of market. The operator is the second-largest sports betting platform and third among Michigan online casinos.
Despite that, Robins isn’t concerned about his company’s position in the market. He looks at other metrics, such as delivering the best customer experience, to determine success.
“And I think if we do that, we’ll maximize our long-term share of the pie,” he said. “But I do want to note that share is not the only metric. Obviously, everybody follows that and that [opens] a lot of questions. But we’re focused on being the most profitable company in the space and making the most money.
“So I think that’s ultimately how we define share of the space, not GGR share. Obviously, GGR shares a helpful metric to look at, but bottom line share is the most important thing.”
DraftKings stock ‘overvalued’ says Zack Equity Research
Financially, it appears that DraftKings delivered a great quarter, as it increased revenue to $1.2 billion from $770 million last year.
The current price of DraftKings stock sits at $44.86, which is up from Friday’s close of $41.82. The price is up nearly 86% from this time last year.
However, Zacks Equity Research, an independent research firm specializing in the stock market, is a bit skeptical about DraftKings’ stock.
“Valuation metrics show that DraftKings Inc. may be overvalued. Its Value Score of F indicates it would be a bad pick for value investors. The financial health and growth prospects of DKNG, demonstrate its potential to underperform the market.”
