Hitting the Jackpot: Daily Fantasy

Dan Behof
Dan Behof
May 9, 2019 · 10 min read
Image Source: https://www.nytimes.com/2015/11/12/opinion/the-trouble-with-fantasy-sports-gambling.html

Introduction:

Hello! We are Ryan Stinebaugh, Billy Lawton, and Daniel Behof. Three guys who like to believe we know a thing or two about sports. Our conversations consistently revolved around games and who is hot or cold. This notion, and our competitive nature, brought us to try our hand at daily fantasy sports. Intrigued by the wonders of using our sports intuition to make some money seemed too good to be true, so we dove in and found out for ourselves.

Ryan, Billy, and I (Daniel) are in a graduate program that studies innovation as well as the creation of new products and services. We are interested in digital ethnography, a understanding of the online community or platform, because we can look deeper into the culture of daily fantasy and the structure inside. Getting this insight could potentially help create better user experiences as well as allow the company to continue to move forward with its platform.

Key Takeaways:

Contrary to daily fantasy’s advertising, it’s very difficult to be a consistent winner without the help of an intricate algorithm to inform your picks. We experienced this first hand by relying on our lifelong sport knowledge, ultimately losing money on our bets. Many different information sources are present for interested parties to utilize in creating their fantasy teams, but it lacks structure and validation from an official source in the case of Reddit and Discord threads. As a result, casual sports fans get frustrated and leave the platform. DraftKings incurs significant cost in replenishing this user base to fuel spending on and profits from their platforms. For DraftKings, they need to devise strategies to enhance the stickiness of their platform through other in-app purchases and base level guidance in making picks for novice players. This will motivate players to continue playing by seeing some incremental returns and dedicate more time to refining their daily fantasy skill.

Partnerships with elite fantasy professionals can give DraftKings access to better data and new revenue streams through subscription services for these models, where elite pros benefit from greater visibility for their models and new sponsorship revenue. Great changes may be forthcoming for fantasy platforms and its players, as IBM’s Watson now has the capability to analyze the unstructured data from many of these online chat platforms to help increase the accuracy of player and lineup predictions. This creates even greater incentive to become the central hub for data related to games, teams, and players, keeping DraftKings ahead of competitors in the data space with ever growing and improving proprietary data stores.

Other strategies include official partnerships with sports leagues and gamifying the app experience through leveling up and earning access to higher buy-in games, preventing debilitating money losses and building confidence and a sense of achievement for players. These changes could improve the user experience for players, while cutting costs from turnover and bringing in new revenues for DraftKings. The subsequent sections will explain our process and how we arrived at these conclusions.

Overview:

The world of sports betting and fantasy has increased interest around the athletic community and commands a significant user base across a variety of platforms from ESPN fantasy to DraftKings and Fanduel. The recent Supreme Court ruling on sports gambling makes this platform prime for further growth. Crossover between sports fantasy and betting, as states are now free to decide and have been moving toward advancing sports gambling. Professional sports organizations like the NBA have already established partnerships in this space, and further research on the users, activities, and cultures of these platforms would provide value for them in the form of brand extensions, greater fan engagement, and new revenue streams. With this research, we were looking to understand betting habits, online culture of daily fantasy/sports betting, and identifying norms and values of this community. Some of the key questions we focused on included:

  • How do previous outcomes affect future use?
  • Is it more gambling or more fantasy?
  • Does involvement in these platforms increase viewership of the games?

These questions guided our research and participation on the DraftKings platform.

Background:

Fantasy is often related to dungeons and dragons and things that do not seem possible in our world. That is why it is surprising that the term is so closely correlated with something that does not seem so far fetched. Users come for the feeling of creating that masterful team of stars that could crush their opponents week in and week out, a little bonus of winning cash is just the cherry on top. When daily fantasy first hit the scene it revolutionized the industry allowing users to not be locked in to bad teams for wholes seasons, letting them reset their lineup each day. This change brought waves of new user as well as promotion to sell the dream of winning big. We wanted to further look into one of the originators of this phenomenon and see what really lies behind it.

DraftKings is a mobile app and web platform, where users create daily lineups across a variety of sports (MLB, NBA, NFL, etc.). They compete with friends and random users to gain the most points and win or place in a certain “pool”. Buy-ins for the pools can vary depending on skill level and willingness to bet, as well as size from large public pools to small friend only groups. Players come to the site with various motivations for playing, including making a quick buck, competing against friends, gambling, applying analytics models to sports fantasy, and creating a sustainable revenue stream.

Image source: Draft Kings App

Since Draft Kings is in essence a fantasy sport platform one will find that they get to build their own dream team. In Draft Kings and other daily fantasy platforms, the most popular style of game play is with a team salary cap. This requires the user to choose players based upon a set value without going over the limit, making sacrifices for the higher price players and hunting for those who will have a good night. The allure of daily fantasy is that no matter which players you pick, they are only there for one night. The only goal is to get in the sweet sweet money zone on the leader board, the higher you get the greater the reward.

Understanding the players:

To gain insight into the world of daily fantasy, we each created accounts to experience it ourselves. From there we employed methods like online observation, digital interviews, and direct participation in studying the DraftKings community. We sought to uncover the different categories of daily fantasy users and the split between fantasy and betting usage on the platform. We focused on natural areas for interaction and activity related to the platform like reddit and discord threads, while exploring the blogs and websites of seasoned players. Some formal questions during interviews included when and why they began participating in DraftKings fantasy, where they get their information from and how they make their picks, and getting a walkthrough of how the player uses the DraftKings platform. These methods helped us gather meaningful insights related to our set of research questions and we quickly started to develop an understanding who the major players were and what their goals are.

Elite professional players:

Elite professionals spend the most time on the platform and create their own predictive tools to make the picks instead of relying on intuition. These players experience win the most, which can be seen on a global leaderboard. They also sell their daily pick suggestions as a subscription service on personal websites. Other pro players are generally the ones who buy this on a subscription basis, priced between $20-$50 per month. These players likely earn a significant portion on their income from subscriptions and winnings from the Draftkings site and may not have other full time jobs.

Professional Players:

Professional players, like the elite professional players, use daily fantasy games to supplement their income. While it isn’t a complete full time job, they spend a significant amount of time playing in higher payout game modes. They likely subscribe to at least one paid algorithm site run by an elite professional player. For the players that use their own methods for picks, some have blogs that outline their decisions processes and occasional picks.

Regular Fantasy Players:

Regular fantasy players are likely to participate in season long fantasy leagues with friends, colleagues, or random people. These season long leagues are likely for money, so the players stay engaged in results and performances around the league. These players do no not have their own algorithms or tools to help inform their picks, but they frequent blogs and other discussion sites to make decisions for both season long and daily fantasy. This group is most likely to engage in casual conversation regarding fantasy sports on reddit, discord, Rotogrinder’s forum pages, professional blogs, and comment sections of videos.

Casual Sports Fans:

This group of fans play the least amount of daily fantasy. While some may be in season long fantasy leagues, these fans are less dedicated to sports leagues, and instead follow a favorite sport or their hometown teams. These players are the main target for advertisements for daily fantasy websites, which entice these casual players by selling them on using their sports knowledge to win money and prizes. Since these players are the least informed, they are the least likely to win money, which leads to a low retention rate of this group.

Blind Gamblers:

This group of players may have general knowledge of sports and players but primarily uses Vegas odds to inform decisions. These players use the platform purely to gamble and will not spend too much time reading into the decisions they make. Unlike the casual sports fans, they understand up front that playing means gambling and are less sensitive to losing money, which leads to greater retention of this player group.

Elite professionals use analytic models to inform their picks in daily fantasy and sell access to some of their insights to the predominantly the professional players. These professionals keep a blog and post regularly about the right picks based on a day’s matchups. Regular fantasy players and casual sports fans consume this free information through reddit and discord chatter, as well as cable sports outlets relaying similar information. Regular fantasy players and casual sports fans then make their picks and discuss matchups over the aforementioned public platforms. Blind gamblers don’t pursue these information sources and pay attention to the Vegas odds, informing the money dollar amounts they’re willing to put down on a given game.

Cultural Model:

In the age where everyone wants to make money fast, Draft Kings appeals to people with big prizes every day. But there are a couple sayings that describe daily fantasy sports very well.

  1. You need to spend money to make money
  2. TRUST THE PROCESS

Looking into the Elite Professionals and how they are consistently in the money line, we found evidence that they trust their predictive models and very rarely use personal intuition. As the radar chart illustrates, there is a sizable disconnect between the professional (Elite and Pros) players and the average joes (Fantasy, Fans, Gamblers). This was made evident during our participation in Draft Kings. We understood the sports we competed in and some of us even are well versed in fantasy, but when it comes to the daily games it is a whole different ballpark. We each started with $10 and played around in the $1-$3 pool range thinking we could scrape some wins together. In the end out of a combined 25 pools we were in the money in only 3. This seems to be the norm with players who are new to the platform. Once the account is started and the first deposit is made, players tend to quickly lose money without learning and eventually fade out for a new batch of inexperienced player to come in.

Talking to player who regularly used models and analytics, their win percentages rose far beyond ours. One person said they went on a 6 day win streak by just plugging in the recommendations. Of course, to keep playing and winning more you need to have a sizable bankroll as some entry fees can get up around $5000. Awesemo is currently the number 1 daily fantasy player out there playing in multiple pools each day with the average fee being around $30-$50.

When discuss the priorities of using Draft Kings with players in each category we found that were 3 major factors that helped drive usage. While yes, it revolves around sports, daily fantasy is a delight because it allows people who are not necessarily good or knowledgeable at sports to have good enough odds through the use of analytics. Fantasy players, such as myself, see the allure of it because we think we have done this before what is so different. But the overarching factor that connects all of the major culture groups is the KING, the 🐐, that COLD HARD CASH.

Final Thoughts:

This ethnographic research represents a good starting point for further investigation into the cultural values and participants on the DraftKings platforms. Future research could include a comparison study between DraftKings and Fanduel, price sensitivities of different participant groups with respect to pool buy-in amounts, and the churn rate across our predefined groups and the associated expense of replacing those players. These studies could provide interested stakeholders with more nuanced data to better understand daily fantasy players and develop new platform functionality and marketing strategies to better engage specific player segments.

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