DraftKings benefited from an “iGaming-first” customer acquisition strategy in Q4 2024, helping the online gambling operator achieve more than 80% growth in that metric vs. Q4 2023. The DraftKings, Golden Nugget, and Jackpocket brands all played a part in the rise of that iGaming-first customer acquisition strategy.
So said DraftKings Co-Founder and CEO Jason Robins on Aug. 2 during the operator’s Q2 2024 earnings call.
Traditionally, DraftKings (DraftKings 44,26 -1,29%) acquired new online casino players via cross-sell from its online sports betting products.
That OSB-to-iGaming route remains the “most efficient means” of customer acquisition, Robins said.
According to the Seeking Alpha transcript, Robins explained:
We definitely are moving dollars around based on performance and what we’re seeing, and that’s always been consistent with what we’ve done. But the result … has been some shift towards that iGaming-first customer acquisition investment, which I think, again, it’s all just kind of where do we get the best return, right? It’s not that we think cross-sell is inherently a better way of doing it. It was just — and still is, by the way — that that’s where we get the bulk of our iGaming customers, and that’s the most efficient means of doing it. But certainly, where we see opportunity to invest directly in acquiring an iGaming-first customer, we’re also taking advantage of that.
iGaming-led online gamblers may cost more to acquire, but they have higher customer lifetime values (LTVs), according to a question asked by conference participant Jeffrey Stantial. He’s the managing director of equity research at Stifel Financial Corp.
DraftKings’ ‘iGaming-First’ Isn’t ‘iGaming Only’
The 80% YoY increase in customer acquisition was for iGaming and online sports betting. During Q2 2024, DraftKings generated more than $1.1 billion in revenue from all of its products.
The Boston-based company credited the $230 million YoY revenue rise to “continued healthy customer engagement, efficient acquisition of new customers, the expansion of the Company’s Sportsbook product offering into new jurisdictions, higher structural sportsbook hold percentage, and the impact of the acquisition of Jackpocket Inc.”
Robins said:
We anticipate the healthy customer acquisition environment to continue through the back half of the year and possibly beyond, which may indicate that the US online gaming opportunity could be even larger than we previously thought.
Even so, DraftKings is no longer bragging about being the No. 1 US online casino operator. That honor now belongs to FanDuel (27% of gross gaming revenue (GGR) in Q1 2024), which also holds the top sportsbook market share (46% of US GGR). BetMGM had been the dominant iGaming operator for years, before DraftKings claimed the hill in Q3 2023.
However, DraftKings — often called the other half of the sports betting duopoly — surprised industry analysts by announcing a sports betting tax. The surcharge will be implemented on Jan. 1 on bettor winnings in states with “high” taxes on operators. Robins specifically named New York, where sportsbook operators pay a 51% tax rate and DraftKings has already “pulled back heavily” on marketing and promotions.
iGaming-First and DK’s Golden Nugget
DraftKings acquired Golden Nugget Online Gaming (GNOG) in 2022 for $1.56 billion. Golden Nugget Online Casino is live in Michigan, New Jersey, Pennsylvania, and West Virginia.
Robins reiterated on Aug. 2 that that purchase was a smart choice.
According to the Seeking Alpha transcript, Robins said Golden Nugget helped with customer acquisition in Q1 2024:
GNOG has been a bright spot ever since we migrated onto the DraftKings products and platform, which is a much more positive customer experience, better conversion flows, all those sorts of things. We have definitely seen GNOG spike. So that was a material contributor for sure. It’s still relatively small compared to DraftKings, but we’re very excited about the potential for that brand in growth that we’re going to see there. So more to come there, but definitely an important contributor to the outperformance on customer acquisition.
However, Golden Nugget may see more marketing spend because DraftKings’ data-driven decisions direct dollars to the routes with the “best returns.”
In May 2024, Golden Nugget nearly tripled its market share in Michigan, noted Bonus News Managing Editor Alex Weldon in analysis published by Play USA. Bonus and Play USA are Catena Media publications.
Jackpocket Is Casino, But Mostly Lottery
On May 22, DraftKings finalized its $750 million purchase of Jackpocket. Unlike Golden Nugget, Jackpocket isn’t primarily an online casino site. The brand does have a New Jersey skin, Jackpocket Casino.
The iGaming site launched in January and, when Weldon checked on the site in April, it generated $1.6 million in GGR that month.
Instead, Jackpocket is mostly known as a lottery ticket courier app, available in 17 US jurisdictions.
Robins said of Jackpocket on Aug. 2:
We do plan on integrating those products into DraftKings, as well as integrating DraftKings Casino and OSB products into Jackpocket. … We, long-term, want to have all of our products available through all of our brands. And exactly when we implement those things directly vs. when we have more linkage through brand-to-brand cross-sell will depend on other priorities and how that slots into our product roadmap.
The product integration would further increase customer acquisition, he said.
I also think that in the interim, we continue to see Jackpocket as a great vehicle for acquiring those customers and cross-selling them into DraftKings. But we know from experience that having a fully integrated product is always going to yield stronger conversion and stronger cross-sell.
About the Author
