Gambling Competition Drives Need For Pricey Customer Acquisition

  • Stricter state regulations lessen the possibility of competing iGaming brands.
  • Gambling companies are spending millions on marketing campaigns due to competition.

LAS VEGAS - Since sports betting saw its federal ban in 2018 removed, there's been an influx of money directed towards customer acquisition for online casino and sports betting operators. Brands are dedicating millions of dollars to advertising campaigns and incentives in an effort to get more people placing bets on their platforms.

The Role Regulation Plays

State regulations play a major part in dictating how a potential market will fare, and by extension, how difficult customer acquisition will be for a given company.

For example, every state to legalize online sports betting so far has done so with legislative differences that have affected its sports betting market. Nevada offers online sports betting with a 6.75% tax rate, but the bettor must be physically in the same building as a sportsbook to sign up. New Jersey has a 14.25% tax rate for online platforms, but bettors can wager online from anywhere in the state and sign up from anywhere.

The lower tax rate and high number of available licenses have resulted in both states having over a dozen online sports betting platforms for customers to choose from.

Compare that with New Hampshire, a state whose regulations resulted in a 50% tax rate and only one online sportsbook operator. Or Illinois, whose $20 million initial online license fee gave them less than half of the available online sportsbook options of New Jersey.

Why Do More Options Necessitate More Spending For Customer Acquisition?

The less regulated sports betting and gambling laws are, the easier it is for sportsbook operators and online casinos to get licenses. The more online gambling providers there are in a single state, the more each of those providers has to compete with each other for potential customers.

For example, Caesars Entertainment recently launched a new potentially 10-figure marketing campaign that included incentives for players to sign up, such as a risk-free first bet worth up to $5,000.

The more brands that have to compete with each other, the more money they have to spend on incentives for the consumer to choose them.

“It’s hard for these sportsbook companies to differentiate themselves. Legally they’re really all the same, all regulated by the state and licensed," said Dave Edwards, an EVP at marketing agency R3 Worldwide.

How Much Are Brands Spending On Customer Acquisition?

Marketing is an expensive endeavor, but in order to succeed in a market of similar platform providers, brands are willing to pay the price.

FanDuel spent $404 million on marketing in 2020 for customer acquisition.

DraftKings lost nearly $348 million in sales and marketing costs in Q3 2020.

This may seem like a lot of money for these companies to spend on marketing, but long term it's more likely to get online gambling players to see their platforms more than their competitors.