Sportsbooks as Media Companies

Brands can reach sports audiences via online betting platforms; beware of the associated brand safety concerns

If you’ve been paying attention to sports betting platforms, such as DraftKings and FanDuel, you may have noticed that some of them are gradually becoming new media channels that brands can leverage to reach sports audiences at scale.

There’s been $220 billion wagered on these online platforms since The Supreme Court struck down a federal anti-sports gambling law in 2018, including $94B in 2022 alone, a 64% year-over-year increase. 34 states and the District of Columbia offer legal sports betting with four more states expected to operationalize legal gambling soon.

There’s still growth potential despite those gaudy figures. Indeed, over a dozen states still lack legalized betting. Almost half of American adults have placed a sports bet over the last year according to a 2023 study by Drive Research. However, a 2023 Ipsos study revealed that only eight percent of Americans have bet on sports online in the last year, which suggests that many sports bettors aren’t doing so legally yet. The same Ipsos study revealed a majority of non-sports fans believe people should be able to gamble on sports, which is evidence for greater ubiquity of legalized sports betting in the future.

Source: IPSOS, 2023

The growing popularity of sports betting is creating new opportunities for brands to reach sports audiences. By advertising on sports betting platforms or partnering with these platforms to produce sports content, brands can connect with a large and engaged audience of sports fans. In other words, sports betting platforms have a captive audience, which makes sports betting platforms a valuable advertising opportunity for brands.

So what’s next in the industry and what should marketers watch for?

Differentiation is Always a Good Bet

If 2023 is the “year of efficiency,” the phrase coined by Mark Zuckerberg, sportsbooks have apparently not gotten the memo. Wall Street is souring on the Amazon-inspired growth at all costs model. Although recent data from ad tech firm Disqu projected ad spend for US sports wagering in 2023 to grow 8% year over year to $2 billion, there is evidence that the unbridled growth may be winding down. States including Iowa, Delaware, Michigan, New Hampshire, Ohio, Indiana, Colorado, and New York all experienced declines in sports betting handle (that’s the total amount wagered by bettors) this spring. New Jersey sports betting experienced 12 consecutive months of year-over-year handle decline.

The crux of the issue is high operating costs (for example, new entrants must pay New York state a $50M license fee) and a lack of product differentiation, which leads to poor loyalty and high churn rates. Ask a bettor why a customer should stick with Fanduel instead of Draftkings or BetMGM, and you will probably get a “no-idea” shrug; in fact, over 80% of bettors use multiple sportsbooks, per survey data from OddsAssist. According to the Wall Street Journal, three powerhouses hold an estimated 85% of the US market, but there’s over a dozen licensed sportsbooks offering similar products.

The online sports retailer Fanatics launched its first sportsbook this year with the vision of differentiating the online sports betting experience via its existing ecommerce user base and crossover loyalty program. The long-term ambition is to be a one-stop shop for sports betting, merchandising, collectibles, tickets, and live sports — basically everything a sports fan would want to spend money on. The jury is out on whether CEO Michael Rubin’s vision will be enough to earn market share, or profits.

Betting On a Content-Driven Model

The sports betting and media startup Betr, which raised $35 million this spring, may offer a window into the content-driven future for the industry. Co-founded by social media personality and professional boxer Jake Paul, social media is at the core of Betr’s growth strategy. Paul leveraged his savvy and celebrity to give Betr an instant follower lift compared to other sportsbooks.

TikTok followers among sports betting & adjacent companies

Source: Betr, 2023

The company’s vision is that owning the conversation around sports betting culture via social media content, which, in turn, should attract new users at a lower customer acquisition cost while increasing the lifetime value of its customers. The thesis holds some weight — according to data from OddsAssist and HPL Digital Sports reports, half of sports bettors do so for entertainment, and a third of sports bettors cited social media content as a reason they chose a sportsbook. Therefore, it is easy to see why Betr ois betting on social content as a core pillar of its growth strategy.

From a product perspective, Betr is leaning into in-game micro bets, which allow customers to bet on the outcome of one discrete event during a live game, such as whether the next pitch will be a ball or a strike in a baseball game.It provides curated short-term entertainment without the need for heavy research, nor any long-term commitment to engage with the result of a game.

Betr hopes that its focus on in-game micro bets will help it to attract a wider audience of casual players. It remains to be seen whether this could be a winning strategy,: while casual players are a large and growing segment of the sports betting market, they also tend to be fickle and not very platform-loyal.

Simply Buying Content Won’t Win the Bet

Industry leaders like FanDuel, DraftKings, and Caesars have inked content deals in recent years with sports media personalities and entities. However, that content more resembles promotional materials and little has broken through to become culturally relevant.

Gambling company PENN Entertainment took a similar tact as Betr, but in reverse: it acquired sports media company Barstool Sports in 2020 (the deal eventually totaled $551 million) and rebranded as Barstool Sportsbook. The partnership was short-lived, as PENN failed to crack five percent market share. Barstool was sold back to its former owner, Dave Portnoy, in conjunction with a $2 billion agreement to license the trademark ESPN Bet in August. (ESPN’s previous gambling partnership with Caesar’s sportsbook resulted in a modest 6% market share.)

Overall, the failure of the Barstool Sportsbook partnership is a cautionary tale for other gambling companies that are considering acquiring sports media companies. It is important to carefully consider the cultural fit between the two brands and to invest in marketing and advertising to ensure that the new brand is successful.

Beware of the Potential Issues

Despite of its obvious potential as an emerging marketing channel, there are some potential negative associations with sports betting, some of which regulators are already trying to address. Calls to the National Problem Gambling Hotline have risen 124% between March 2020 and March 2023. A review of 140 studies revealed addiction risks related to online sports betting, with an estimated 75% of college kids engaging in gambling despite elevated risks to youth. Legislation is in the works to ban operators from partnering with colleges.

For marketers, the potential backlash from associating with sports betting is a real concern. If a brand is seen as promoting gambling to problem gamblers or young people, it could damage the brand’s reputation and lose customers. Therefore, it is important for marketers to be aware of the risks associated with sports betting, and take steps to to ensure that their brands are associated with legitimate platforms and responsible betting,

Then, there’s also the issue of varying legality from state to state. Two of the nation’s biggest states, California and Texas, still do not offer legal sports betting, which hinders its current scale somewhat. Texas has a pair of active bills to legalize sports betting, but they’ve garnered little support in the state Senate. Meanwhile, California saw a pair of costly propositions fail last fall. Florida is engaged in legal battles with the Seminole tribe, which claims to have exclusive rights to gaming in the state.

However, the recent history of marijuana legalization suggests that sports betting will nevertheless thrive in those states, with or without legal options for customers. And when states realize they are losing out on sizable tax revenues, especially to neighboring states where certain vices are legal, they tend to reconsider their legislative stance on said vices sooner or later.

In Conclusion

The proliferation of sports betting culture and content gives marketers more opportunities to reach a young male audience. Between controversial figures and risks to customers, marketers must be cognizant of the potential negative association aligning their brand with any sportsbook, as with any media opportunities associated with the vice economy. We recommend brands give careful consideration to the pros and cons before hitching its wagon to this vice.