Even In Massachusetts, FanDuel Likely To Top DraftKings In Market Share

According to its Q4 2022 report, FanDuel currently holds a 50% market share in the American sports betting industry. They maintain their position as the market leader in nearly all US sports betting markets, with a significant advantage of 10-20% over competitors. Their market dominance remains unchallenged, with no indications of relinquishing their position.

DraftKings is undeniably the second leading platform, following FanDuel as the top choice.

Massachusetts could potentially be the ideal state for DraftKings to dominate as the number one platform. The company originated in Boston and continues to have its headquarters there. It has successfully enlisted prominent figures from the world of Boston sports to promote their product in the Bay State.

But …

There is no reason to expect Massachusetts to deviate from the pattern, as FanDuel is more competitively structured compared to its closest competitor, DraftKings, which has either not replicated or developed these competitive advantages in time.

We don’t think bettors in Massachusetts will consider it significant that DraftKings was established in their own state when it comes to sports betting.

However, their focus will be on the sportsbook brand that effectively connects with them.

Early FanDuel victories 

The online sports betting industry’s structure significantly contributes to FanDuel’s much higher market share compared to its competitors.

During the Capital Markets Day (CMD) presentation in November, Flutter Entertainment CEO Peter Jackson pointed out a recurring trend seen in various digital industries. This trend involves one company dominating the majority of the market share while other companies compete for the remaining share. For instance, Netflix had 3.7 times the market share of Prime Video, Uber had 2.6 times more market share than Lyft, and Spotify had 2.1 times the market share of Apple Music, among others.

Furthermore, FanDuel implemented strategic decisions that resulted in a snowball effect, leading to even greater advantages. The key factors contributing to FanDuel’s dominance in the market are:

• The Same Game Parlay product is being launched ahead of schedule.
• Ability to acquire and retain customers.
• Promotional spending strategy

SGP early launch 

“During our busiest times, particularly the football season, being the pioneers in introducing Same Game Parlay and Same Game Parlay Plus to the market played a significant role in driving our success,” stated Alexander Pitocchelli, director of communications at FanDuel, while discussing the fact that 86% of their active bettors placed a parlay bet last year.

To access additional information, check out: Play MA’s projects on sports betting indicating a potential handle of $5.7 billion.

Sportsbooks profit from parlays because each additional leg reduces the likelihood of the parlay winning, enabling FanDuel to increase their earnings through less probable wagers.

Being the first to introduce SGPs in the market, FanDuel gained an initial edge in terms of profit margin. It outperformed its competitors in a widely favored betting category, resulting in higher earnings. These profits could then be utilized to enhance its risk management strategies, potentially enabling the company to responsibly handle additional liabilities.

After five years of legalized sports betting in the US, being the initial market entrant with this profitable product resulted in a significant increase in revenue.

Customer acquisition and retention

In a previous report, Play MA discussed FanDuel’s impressive success in converting its existing daily fantasy sports customers into sportsbook users. FanDuel’s CMD has now provided further insight into the workings of their customer conversion process.

FanDuel’s initial advantage in customer acquisition cannot solely be attributed to the fact that 25% of their new customers come from referrals, which not only grow proportionally with their customer base but also incur 60% lower costs compared to their other methods of acquiring customers.

Additionally, don’t forget to check out: DraftKings’ upcoming celebration on March 10, taking place right outside their Boston headquarters.

FanDuel’s explanation lies in its increasing penetration rate with each wave of legalization. According to FanDuel, here is the breakdown of the percentage of adults who adopted its app within 12 months of each sports betting legalization wave:

2018-2019	1.8%
2020-2021	3.5%
2022	4.4%

FanDuel’s customer base has not only grown over time, but it has also expanded rapidly. This is a strategic investment that brings compounding returns. By enhancing the speed of customer acquisition, FanDuel gained an advantage in new markets, resulting in a larger customer pool and more opportunities for referrals.

Promotional spending strategy

Many bettors in Massachusetts will be familiar with the standard first bet bonus offered by FanDuel’s sportsbook. However, unlike other promotions, 95% of FanDuel’s bonus offers are automatically sent to users. This streamlined process eliminates unnecessary bureaucracy, reducing the company’s expenditure on staff and the time required to attract customers back to the app.

FanDuel can reinvest the surplus revenue, which is not required for overhead expenses, into enhancing their risk-management systems. This will lead to improved margins and reduced customer retention costs, giving FanDuel a significant long-term cost advantage. This advantageous feature is common among all three strategic victories discussed.

FanDuel’s market position over DraftKings

Jim Collins explains the concept of the flywheel effect in his book Good to Great. He illustrates how incremental victories can gradually amass and lead to substantial advantages over time, much like a heavy flywheel gaining momentum as it is continuously pushed.

For the last five years, FanDuel has consistently maintained its top market position through early successes. However, in Indiana, DraftKings managed to grab the market-leading position initially by launching almost three weeks ahead of FanDuel. Nonetheless, DraftKings’ hold on the top position was only temporary.

FanDuel surpassed DraftKings after a period of two and a half years. The initial strategic successes of FanDuel eroded an old advantage that held significance in the early stages of the industry. Presently, FanDuel’s dominance in the market highlights the essential factors for maintaining competitiveness in the online sports betting sector over the long run.

And this will remain true for FanDuel Massachusetts, even in DraftKings’ own territory.