DraftKings Carving Into FanDuel And Other Competitors' Market Share

In the exciting world of American sports betting, two names stand above the rest: DraftKings and FanDuel. The CEOs from these leading sports gambling companies—Amy Howe of FanDuel and Jason Robins of DraftKings—will be joining CNBC moderator Contessa Brewer at the Global Gaming Conference in Las Vegas, Nevada, to talk about the growth of the industry and challenges that still lie ahead. Those who are interested can livestream the discussion on CNBC Television's YouTube channel, which is scheduled for 9:00 a.m. PT on October 11.

Part of the discussion will likely cover the Boston-based DraftKings seeing its stock price nearly triple this year. The rally has been fueled by strong fundamentals and positive Quarter 2 results. With a larger market share still in reach, DraftKings expects significant revenue growth and expanded earnings before interest, taxes, depreciation and amortization (EBITDA).

This article will explore the latest performance of America's second-largest sports gambling company and offer insights into the online gambling market.

Open Secrets to the Success of DraftKings

In a press release following DraftKings' second quarter 2023 financial results, the company credited "healthy customer retention and engagement, efficient acquisition of new customers, product innovation leading to increased parlay mix and thus higher hold percentage and improved promotional intensity" for its outstanding second-quarter results.

Here are some of the highlights of DraftKings' continued success:

Focused Marketing and Increased Brand Recognition

With sports betting and iGaming, in general, becoming legalized in additional states every year, sports gambling operators fiercely compete for new customers as states are on-boarded into the sports betting revolution. New Jersey boasts one of the most saturated gambling landscapes, with over 27 legitimate gambling websites and casino applications vying for recognition and a piece of the market. According to NJ.bet, the online casino guide for New Jersey, the total revenue from all gambling activities, encompassing both casinos and racetracks, saw a 13% YOY increase, rising from $470.7m in August 2022 to $531.6m in August 2023.

In the past, the leading operators engaged in a contested marketing competition, saturating audiences with advertisements to the tune of hundreds of millions of dollars.

Following a marketing blitz in 2021 and a reduced ad spend of 270% in 2022, DraftKings increased their $197.5 million marketing costs in Q2 this year by a modest 5% to $207.4 million. The toned-down advertising campaign contributed to DraftKings capturing a gross gaming revenue (GGR) market share of 32% compared to its GGR of 28% in Q1 and just 20% of the industry, which the operator controlled last year.

A Healthy Growth in Revenue and Player Acquisition

Perhaps the brightest highlight of all is the fact that DraftKings reported revenue of $875 million for Q2. Compared to the $466 million revenue during the same period last year, the company enjoyed an incredible 88% increase in revenue. Thanks in part to the expansion of its sportsbook and iGaming products into newly legalized jurisdictions, the number of monthly unique gamers increased by 44% from a year earlier to 2.1 million in the quarter.

FanDuel, which is primarily owned by the Dublin-based Flutter Entertainment, increased its Q2 earnings by 63% YOY and, at a 47% market share, controls nearly half the industry. The two industry-leading behemoths have been described as a duopoly, effectively controlling three-quarters of the U.S. market.

Nevertheless, DraftKings continues to carve an increasingly larger slice of the gambling revenue pie, mostly at the expense of other online sports betting companies that make considerably less to begin with. BetMGM, for instance, is down from 11% to 10, while Caesars and Barstool are down from 6% to 5% and 2.6% to 1.9%, respectively.

Positive Momentum

On the heels of posting its first-ever positive Adjusted EBITDA in Q2, DraftKings co-founder and CEO Jason Robins said the company is well on its way "to achieving positive Adjusted EBITDA again in the fourth quarter of 2023 and for fiscal year 2024 and beyond." Robins spoke about how the company "captured additional GGR share in a cost-effective manner," in the Q2 press release.

Despite losing nearly 7% of its stock value over the last month, at a share price of around $32 at the time of writing, DraftKings has been pegged by several analysts as an undervalued stock. But with great growth fundamentals across the board, overall market sentiment is positive and additional gains are anticipated for the operator.