As young as the US online gambling market it, analysts are already asking BetMGM when operators will cut back on spending. It has had a dramatic impact on profit margins, and led to questions about when – and even whether – some operators will start turning a profit.
Such questions from analysts peppered Wednesday’s “update on performance and outlook for 2022” from BetMGM.
Answering them, BetMGM CEO Adam Greenblatt said for his company, that time is soon.
BetMGM CFO Gary Deutsch added that operations in Michigan and New Jersey, where the brand offers online casino and sports betting, are already “contribution positive.”
BetMGM will seek to attain profitability next year
Along those lines, Greenblatt made an overall prediction for BetMGM:
“We will reach profitability in 2023.”
It may be shocking to hear that analysts asked a top-performing US online gambling operator with comparatively conservative spending habits these questions. If so, then imagine how heavily the marketing and promotional spending methods of its competitors must weigh on investors’ minds.
Being the No. 1 online casino operator in Michigan, New Jersey, Pennsylvania and West Virginia still doesn’t make BetMGM exempt from those queries.
Greenblatt addressed those concerns.
Online gambling operators need ‘rationalization’
BetMGM spends less to acquire customers than most other online gambling operators need to outlay.
First of all, BetMGM has less brand awareness work to do. Second, it doesn’t have to do as much to acquire customers. That’s because it has an existing database of gamblers who may be interested in being cross-sold a new product.
After all, BetMGM is a joint venture between Entain and MGM Resorts International. As such, BetMGM offers online gamblers access to MGM’s loyalty program, M Life Rewards (soon to be renamed MGM Rewards). That also means that MGM customers see information about BetMGM, which reduces the acquisition costs to convert those gamblers to online customers.
Deutsch said if BetMGM promotes its online products to its online gambling database, “most typically, the flow is from sports into casino.” Among online bettors, “the casino player values are significantly higher” and BetMGM doesn’t expect that fact to change, he said.
Meanwhile, BetMGM’s marketing costs will drift down as it acquires fewer players, Deutsch said.
When markets mature, there are fewer new online gamblers to sign up.
“We’re already seeing [costs] come down.”
Greenblatt said these and other omnichannel marketing strategies are why BetMGM is trending toward a $250 cost per online gambler.
That focus on efficiency and ROI is why BetMGM ran its first national television ad in September 2021, he said. The commercial was aimed at driving increased BetMGM brand awareness. The plan was that this would pay off in the form of lowered omnichannel marketing costs, Greenblatt siad.
Deutsch added that BetMGM will continue with that “efficiency” in its cost per customer acquisition practices.
Legal online gambling competition is fierce
BetMGM’s peers may have trouble following its lead in this “aggressive, competitive market,” Greenblatt said.
However, investors may push operators to be more profitable.
“I do think capital is going to become more demanding,” he opined.
Greenblatt said those investors will push for a “rationalization” of the promotions environment.
At the moment, it’s not uncommon for operators to offer consumers a $1,000 promotion to sign up for their online casino or $2,000 to join an online sportsbook. Already, BetMGM’s promotional spending is more conservative than that.
In one offer, a BetMGM Casino registration earns new bettors a $25 no deposit bonus and a 100% deposit match “up to” $1,000. For BetMGM Sportsbook, the welcome bonus for new customers is a $1,000 “risk-free bet.”
Although generous, that’s less free money than some operators provide.
However, in Greenblatt’s explanation of “how and why we are a leading operator,” he said customers are loyal to the superior customer experience.
“Our focus on players, rather than just products, continues to deliver results.”
BetMGM Sportsbook in New York ‘performed flawlessly’
If online gambling operators want to keep customers, they need to provide a positive customer experience. A stellar customer experience is what keeps BetMGM gamblers loyal, according to Greenblatt.
In his mind, BetMGM Sportsbook’s Monday launch in New York provided the perfect example of how to acquire and retain online gamblers. As it does in all of its markets, BetMGM expected an aggressively competitive market and planned for it.
Greenblatt said on Wednesday:
“We’ve broken all of our records.”
BetMGM’s historic highs included its most bets and largest handle upon launch, he said.
“Our technology performed flawlessly,” Greenblatt said.
However, what made him the happiest was “the area of operations,” including answering all players’ questions within 29 seconds.
One of BetMGM’s competitors had trouble in New York
Greenblatt mentioned that customers of certainly other operators took to social media to complain. He didn’t name names, but it’s not hard to figure out who he was referring to.
On Wednesday, Mike Mazzeo published an article at PlayNY titled: From Payout Delays To Lack Of Customer Service, Addabbo Tells Caesars Sportsbook To ‘Get Your Act Together’
New York Sen. Joe Addabbo, D-Howard Beach, isn’t a lawmaker to ignore. He leads the Senate’s Standing Committee on Racing, Gaming and Wagering.The
Based on Mazzeo’s reporting, however, the customer services issues Caesars encountered may be more concerning in their own right than Addabbo’s ire:
“Players have had multiple issues with the operator since it launched in the Empire State on Jan. 8.
“Among them: confusion over bonuses, significant delays in withdrawals and nonexistent customer service.
“The app also crashed due to heavy volume in each of its first two Saturdays in New York — including for three hours on Day 1.”
Even though Caesars had a head start on BetMGM and a larger signup bonus, poor service may cost it that lead. In the meantime, BetMGM’s performance in New York has been the apple of investors’ eyes.
That doesn’t mean analysts will let BetMGM off the hook when it comes to profitability, however.
“Capital is rational,” Greenblatt concluded. “Money is rational.”
That may be true. Yet, right now, the online gambling marketplace is exactly the opposite.