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Sustainable innovation for acquiring customers: Gen-Z Addition
I hope you all enjoyed your Super Bowl Sunday! With the NFL season coming to an end, this week’s Edition 33 is especially relevant for operators. We’re taking a look at creative marketing techniques to maximize customer acquisition.
We’ve put out a lot of more serious articles the past few weeks. Don’t get us wrong, we’ve enjoyed taking a deep dive into the various parts of the industry and love sharing the research that we do. At the same time, we love to be creative and present new ideas that really just exist in our head. For this week, we decided to present some creative ideas for sustainable customer acquisition that we’ve been thinking about.
We’ve all seen the ridiculous ads and deposit matches offered by books. Early on, this means that a significant portion of revenue is spent on online promotions. For example, in September 2020 in Pennsylvania, promotions were equal to 91% of online revenue. We aren’t going to be looking at that first weekend for our ideas. Generally, we don’t think those are very productive forms of advertising. Anyone who is making an account the first weekend a state opens up is likely to be a reliable customer and following the state of the industry. Giving them extra money to gamble with is simply a cherry on top for someone who would have become a customer either way. It’s not an efficient use of capital, even if deposit bonuses do play a role in determining where the first deposit goes. These promotions often aren’t sustainable and require huge outlays of initial investment. At the end of the day, winning the first deposit on a bettor who was always going to gamble does not grow the industry and is a zero sum competition, even if books do need to do this to garner their first customers.
Sorry for that brief digression there. The other type of advertising we think is unproductive for the industry as a whole is basically any affiliate link seen on a page that says something like “What are the best bets in the NBA tonight”. These people are already betting, and any money paid from this affiliate link is being spent in inter-book competition rather than conversion of new bettors. At the end of the day, conversion of new bettors is what drives TAM (total accessible market) growth, not bettors who are rotating across books to take advantage of generous offers from affiliate links. As a result, we won’t be focusing on these types of advertising in our creative ploys. Instead, we’ll be looking at ways that books can sustainably spend money to increase the TAM of the overall industry. This is where we see the bread and butter of the affiliate revenue going in the future anyway. We’ll also be heavily avoiding any advertisements that rely on promoting problem gambling (looking at any media site that promotes a parlay that pays out like a lottery ticket).
Creative Idea Number 1: The fantasy-sports betting engine
Our first suggestion for operators looking to engage more customers is to run a season long fantasy sports platform, similar to the widely popular models of ESPN and Yahoo. Having this tech set up on a DraftKings, FanDuel, BetMGM or other operator with no deposit required would allow operators to onboard and engage a whole new tier of sports fans who aren’t looking to wager at the moment but want to elevate their fan experience. Basically, most people are indifferent to where they draft + play their season long fantasy leagues with their friends. People who play fantasy are prime candidates for conversion to sports bettors. Especially in states where sports gambling has yet to launch, offering a traditional, free, season long fantasy format is one way for operators to expand their customer base. This one seems like a no-brainer to us. With that said, operators would have to sweeten the pie to get people to leave their current fantasy platforms. There are a few ways we’re thinking about incentivizing leagues to make the switch to an operator:
- Offer the league commissioner + any league members a $50 credit for moving their league over. All things considered, $50 is a pretty small sum compared to what operators spend on customer acquisition, but still large enough that a normal person would want to switch where their league is hosted.
- Offer league winners free bets and higher deposit matches, integrating humorous content such as league Sacko losers (see here if you don’t know what I’m talking about) or giving free tickets to events for league winners. Operators love user generated content, and fantasy sports is ripe with the ability to do that.
- Building a better product. We don’t feel any of the fantasy engines would be that difficult to make and shouldn’t be outside the scope of what’s possible for operators. With that being said, the amount of resources available to high-level operators leave no excuse as to why they shouldn’t or have not built a fantasy engine. Let’s see it before the 2022-2023 NFL season.
Creative Idea Number 2: Bet with a friend: Double your bet and give them the same (first) bet for free
Our second idea taps into two traits inherent in gamblers. First, the desire to compete (and hopefully win) against friends. It’s much more satisfying taking $100 from a friend on a bet we spent hours arguing on and watched together, opposed to $100 from an automated DraftKings App. While that might just be the competitor in me, bragging rights amongst friends taps into social patterns and is near the top of the totem pole when it comes to incentives. The second is the idea of FREE STUFF. You throw free in front of almost anything and it draws eyeballs and customers. There is nothing better for a degenerate than feeling like you are getting good “value” or something for free. While true bettors know nothing in this space is ever free and there is always a caveat somewhere or another, the idea that it might be free is enough of a hook to draw some bettors in. Our thought is to allow a double down feature on a bet with a friend where the friend gets the double down feature for free if they sign up and make an account to place it. For example, if Spencer wanted to bet $50 and convinced me to place my first bet on the game, Spencer would get his bet doubled to $100 and I would get a $50 free bet on either the opposing or same side. Obviously, there would need to be a limit on the size of the free bet, but we believe the combination of “free” and competing / betting with friends should be enough to bring on new clients.
Creative Idea Number 3: The Second Account Advertisement
It’s a pretty clear consensus among the sharp betting community that holding more accounts is better for bettors. The more sophisticated a bettor, the more likely they are to have multiple accounts. At the same time, the less sophisticated a bettor is, the more likely they are to lose at very high percentages. Onboarding these more recreational users, who are just betting for fun, is the key to establishing long term profitability. Generally, these users will be comfortable only having one account. They don’t really understand the importance of looking across books to get the best price. However, most of these recreational users are still intelligent people. Provided with the right information, they could still be persuaded to open a second account for any number of reasons. As a result, smaller operators could chip into the stranglehold held by larger operators through well targeted ads at customers to make their second account at a given operator. For example, a company like Pointsbet (which recently came out with a more robust live same game parlay product), could run ads under a google search like “Fanduel log-in” explaining the benefit of having a second account along with a more reasonable deposit bonus to get a user started. Rather than having the ad just display a home page, the ad could display an FAQ page for why having a second account is beneficial to even a novice bettor. This is a relatively low risk high reward strategy. Most books are already running search based ads, even on other competitor’s names. Changing the target strategy from just another random homepage to encouraging users to make a second account could lead to far higher uptake of users making a second account. It is a direct way for operators to educate customers while increasing their user base.
Creative Idea Number 4: Bet the Check
This is inspired by Barstool’s overs club giveaway and probably a lot closer to the gray line that exists in the world of how promotions should work, so take this with a grain of salt. Cards on the table, we haven’t looked through each state’s list of regulations on promotions, we’re just trying to have some fun. We would love to see some kind of promotion where a group of people could go to a restaurant and with their receipt, receive a deposit match up to some number (say $100), equal to the amount they spent at the restaurant if they are a first time depositor. They could submit a picture of their receipt and get the reward after eating at the restaurant. The promotion would benefit both the restaurant (by encouraging users to dine there) and the book (new customers who eat out and watch sports). It would also encourage buzz by allowing people to eat with their friends and encouraging social betting where large groups of friends could make an account at the same time. Again, it’s a bit out there, but a promotion that we think would be a lot of fun. We’re much bigger fans of deposit matches, but this could also be done with a free bet as well.
Overall, we’ve seen a lot of promotions and potential on ramps for customers across the betting space. We’ve seen promos like “new customers win if one point is scored in an NBA game”, or books using free to play games to encourage users to move to more traditional sports betting. We’ve seen large free bet promotions, weird commercials, and over the top media productions. It really is incredible to see how advertising is taking the space by storm. And not a lot of it is sustainable. Again, none of the ideas we’ve thrown out above are easily implemented nor are they guaranteed success. We just wanted to have some fun with creative ideas that we think could lead to more sustainable customer acquisition spend.
