Can DraftKings Win the Sports Betting War?

Where do I stay?

Right here.

Well, first of all, what a... I will never forget that. What a memory. I remember we did that shoot and you didn't tell me that you were going to put me on the cover and then all of a sudden I was on the cover which ended up being a good and bad thing. Got a lot of attention but certainly my mom liked it. So, but I appreciate that and I appreciate you for many years taking an interest in DraftKings and it's been great to have you along and watching us evolve. So what's changed? I mean, as you noted, back then, we were a daily fantasy sports company, and we do still have that product, as you also noted, but it's not the main product people talk about. They think of us more as a sports betting company, and now predictions. We also have iGaming, of course. We have lottery, we have other things, too, but we're mostly probably known for sports and specifically sports betting. So that's a big difference. Obviously, back then, not that many people knew who we were. We had a, you know, smaller audience of players. I think that was the season where we spent, you know, a little bit of money on marketing and ended up...

Just a little. Ended up getting, you know, pretty big but then also, you know, got a lot of regulatory attention as you know from that as well. But, you know, that's really taken us down the path to be a regulated operator starting with fantasy sports and now into the other things that we offer.

I mean, would we have liked to have been eight, nine months ago when, you know, all of this started to get bigger? Sure. But I don't think we're that late. I think we're a little late, but not that late. And there's a lot of new competition still coming out and, you know, making a name for themselves now. So, it's not going to be a market that slows down anytime soon. I think it's going to be very competitive and there's going to be a lot of opportunity, I think, to engage customers. But if you put it in perspective relative to sports betting, we were so much farther behind in sports betting, it's not even close. And it took us years. We had to, you know, obviously go through a journey where we brought our tech in-house through an acquisition and then built out all of our own internal models and everything else that we've done. But now we're pretty much neck and neck for number one in online sports betting. So, I think that's a good sort of demonstration that it can be earned over time if you execute well, if you have a great product and you do right by your customers.

Well, first I'll start with we have a track record. What you just said about predictions can absolutely also be said not just about sports betting 2020, 2021 time frame but also about daily fantasy sports right around when that picture was taken. It felt like literally every day there was a new one coming out. Do you remember that? And there were so many that already existed. In fact, we were three years plus behind FanDuel and we came back and became by far the largest daily fantasy sports operator. Took years but we did. So we have a track record. We've also done that in sports betting. Now about, you know, four years ago or so, we had under 20% share and now we are in the mid-30s. So I think that, you know, that is a playbook and a track record that we have demonstrated that we can perform. And the reasons why are, first, starts with the product. We have a great product and engineering team. I think over the years that has been our number one differentiator that we can develop high-quality product faster than others and we just ship so much which allows us to really make improvements to the product rapidly. And now with so much of our code being written by AI, it's even faster. The amount we can ship and the pace that we can do it at and still maintain the high level of quality is absolutely extraordinary right now. Second, we've been doing this for a long time. So we understand the sports fan. We understand how to market to them. We understand from the years and years of data that we have what works, what doesn't, and how to effectively get customers to join the platform and then how to retain them through effective CRM treatments and things like that. This has been something that over the course of now nearly a decade we have optimized and it has been very data-driven. So, you know, really time and data is the only way for someone to catch up to us on that. And then lastly, we have a brand that is very identified with sports. I look at us and, you know, whether it's predictions or sports betting, I think the customer thinks of us as somebody that has a right to win and will offer a great product in that category. So I do think that because of our brand, both the association with sports and also just the association with building quality products and customer experiences over time, I think people will trust that we're going to do a great job here. And what I love is that we are going to be able to show such rapid improvement in product at this point. And if you look at where we were, you know, just prior to the Super Bowl last year versus where our product is now, it's night and day. And same thing by the end of this NFL season, night and day. I mean, we're going to have so much that we are doing through the course of this season to improve the product.

Well, not only that, there's obviously litigation that's happening, too. So, even beyond any potential changes from future administrations, you have the whole Supreme Court, likely where this will end up is in the Supreme Court. You have the looming Supreme Court decision that will also have a say in how this ultimately plays out. So, lots of hurdles for sure. As far as do I worry about it? I mean, we can't worry about, I guess, can't control what you worry about. We try not to worry about what you can't control. We focus on the things that we know we can control, which is to build great products and customer experiences and all the things we just talked about before this. So, that's where we're focused and we're just going to have to be, you know, patient like everyone else and wait for that all to play out. But importantly, we also, and this has been a core part of our strategy, have to make sure that we are well positioned either way. And we like to think that we have put ourselves in that spot where if prediction markets goes away, we are still very well positioned just as we were before all of this. And if it continues, we are well positioned to be a big beneficiary of the growth of that new industry. So I think we have put ourselves in that spot and therefore we have the, I think, fortunate position of feeling like, yeah, obviously we'd like for it to stay around, but we'll be okay if it doesn't too. And we're going to be all right either way. So, you know, that also helps you worry about it a little less too when you feel like either outcome is an acceptable outcome for you.

Well, one of the great things about being able to now have nationwide sports is we can market that. So there are certainly times we market predictions or sportsbook if we're doing local marketing, for example, in a state or if we're doing it through a particular partner channel where it makes sense and is appropriate to do one or the other. But a lot of our marketing now is just national marketing focused on driving across the entire country regardless of whether it's in a state that has predictions or a state that has sportsbook. And so that actually I think was a huge benefit to us of this whole thing is that we already were spending a lot of money on marketing. It's not like we have to... all incremental dollars are not what we're spending. We were already spending a lot and by repurposing the message from DraftKings Sportsbook to DraftKings Sports being available everywhere in the country, we are now getting that much more leverage out of the same dollars that we're spending. So, you know, we've talked about that in the past with new sportsbook states coming on, how each new sportsbook state makes the marketing that we're already doing more and more effective because the audience is now a larger addressable audience and this was kind of that on steroids. I mean, this overnight almost doubled our addressable audience.

I was just talking with Jacob about it. I mean, there was certainly one that caught a lot of attention. They got some eyeballs for it. So, you know, you got to try different things and seems like that one, you know, they certainly seem to have gotten attention for that.

Well, by the way, did you see our Barstool parody of that?

That's pretty good, too. I mean, respect to Novig, but I thought our parody, you know, I thought it was pretty good, too. So, hopefully people will check that out. It was posted by Barstool and X. But then, sorry, were you asking about other ads? Yeah, the slew of prediction, you know, Polymarket got a bunch of athletes and celebrities into the room. LeBron, Eli Manning. Better went with an Entourage ad with Jeremy Piven.

What do you mean by that?

In some ways, yes. I actually think of it a little more like 2021 sports betting. And I'll tell you why. I think when fantasy sports, the whole 2015 period when that suddenly hit the airwaves, people generally hadn't heard of it before. It was pretty new. It was like, what is this? I mean, the people were playing it had, but it wasn't mainstream. I think predictions have already had so much press and have been so covered by mainstream media that even the casual person kind of knows at least like, oh, there's this thing out there called predictions and it's sort of similar to, you know, sports betting but it's not and like all that kind of stuff. So like I feel like that's already a known thing and maybe people were not expecting the number of different competitors advertising, which again I think looks a lot like 2021 sports betting when you had Caesars and Wynn and all these others that were, you know, advertising. And I think it looks a lot like that but I don't think it's like the same impact that fantasy had where everybody was like, I've never heard of this thing before and now all of a sudden it's everywhere.

Last year or the year before last, sorry.