According to Patrick Keane, CEO of sports media company The Action Network.
Sportsbooks has made a significant push into content over the past four years by acquiring and investing in sports media companies to add their names and build in-house media. Even earlier this month, casino and gambling operator Penn Entertainment (formerly Penn National Gaming) acquired the remaining 50% of Barstool Sports for $325 million, after first acquiring a 36% stake in the company in 2020.
The action network, on the other hand, was instead acquired in May 2021 for $240 million by Denmark-based sports betting media group Better Collective, which is focused on getting as many sports bettors as possible. enthusiasts as possible for as many sports bets as possible in exchange for a higher cut of profits.
This strategy seems to work financially. The public parent company recently announced its results for the second quarter of the year, showing that revenue rose 40% year-on-year to 56 million euros (currently equivalent to 56 million dollars at the time of writing). In particular also, the earnings call showed the number of New Depositing Customers (NDC), a metric used by the company to track the number of punters referred to sports betting and then depositing money into their accounts through the affiliate links of BetterCollective.
In Q2 2022, NDCs reached 387,000, a 93% year-over-year increase and a 7.5% increase from the previous quarter. It’s also a 45% jump from Q4 2021, which reported 267,000 NDCs.
To keep this on a positive trajectory, Keane said conversations with sports betting have mostly focused on finding the most interesting sports bettor who is ready to play a full season. According to MediaRadar, the gambling and sports betting advertising category increased money spent by 83% between the period of January 1 to July 31, 2021 and the same period in 2022, exceeding $343 million. As part of this, spending on digital formats increased by 77%, while TV advertising increased by 83%.
Below are highlights of the conversation with Patrick Keane, which have been lightly edited and condensed for clarity.
Has sports betting been impacted enough by the recent economic downturn to rule over their acquisition budgets?
Keane: I look at us very similar looking. People talk about how challenging the economy is right now, and what’s a budget that really doesn’t take much out of it? This is your research focused on customer acquisition. Research is at the bottom of the funnel. When someone searches for ‘Volvo rental’, it’s very different from someone seeing a Volvo ad on TV. They are very goal-oriented, and we have goal-oriented users that these books understand. So they continue to invest.
[However] you can see it especially in the public companies that spend a lot to acquire customers – companies like DraftKings and MGM and Caesars and FanDuel – all of these companies have expressed a desire to cut spending and make more conservative acquisitions. [strategies] at the market. But this is also tempered by the reality of many large states becoming legal again. We now have 20 mobile sports betting states, the largest of which was New York. We’ll have Kansas, Maryland, Massachusetts [and] hopefully california next year so even though all these books are trying to be thoughtful and gain customers profitably there is still [a] massive [number of] states to go.
[Also], NFL and NCAA football is really the powerhouse when it comes to sports betting in the United States so we know the pounds are going to spend and they are going to spend aggressively because that september bettor you acquire will be your more profitable bettor because it will stick with you all season. And ultimately, that’s the notion that all of these books are really pushing towards, how do I create a profitable source of acquisition? And for them, it’s really going to be about making sure those users become profitable for them within two years.
What type of bettor will reach this status of profitable bettor within two years?
[Sportsbooks are] try to acquire those users and create the lifetime value, as opposed to just [earning back] the $300 or $400 or $500 [they’re] pay to acquire the customer on a [cost-per-acquisition] base.
We [have] probably the largest and most interested sports betting audience in the United States, when you look at our users. Yes there is Yahoo and ESPN and there are many other places but these are more casual sports bettors and those who are likely to be less profitable for the books than those who are average bettors or sophisticated bettors who [bet at a] higher frequency and [make] higher deposits. These are returning users.
How do you ensure that these high value bettors return to your platform and convert through your content/affiliate links to your sports betting customers?
We had a number of companies talking about acquiring Action 16 months ago [and] some of them were sportsbooks that wanted to lower the cost of customer acquisition and have a more retained user. And the reality is that it was less exciting for us. We want to be Switzerland, we want to be able to benefit from editorial impunity when we offer the customer experience to our users. If DraftKings paid us to own the entire site share of voice, and the only chance we were selling was DraftKings and the only content was directed to DraftKings, that’s a crap user experience.
Another important part of this is technological. [We have] BetSync, where you can place a bet in DraftKings or MGM or some of our other partners, which is automatically synced to The Action app. So that’s a hugely important thing because a lot of people who bet and use multiple books use Google Sheets to try to track their success – or in my case, their failure – of their bets. So those tools and the ability to do that inside The Action platform and the ability to follow experts and friends to see what they’re betting on is a very important part [of keeping audience members coming back as well].
So you have to have great products and great technology, you have to have great content, you have to have great talent. Different books try to make you a user based not just on the deals they are going to give you, but hopefully the best odds and prices. Thus, ratings and prices differ from book to book. Smart bettors are going to go where there are the best prices and odds. Brand loyalty is not very important in the world of sports betting.
Since sportsbook brand loyalty is not a primary consideration among your “sophisticated” betting readers, how do you ever manage to convince sportsbooks to advertise with you?
When you look at the Penn National-Barstool deal as an example, you know, Penn was really thinking two ways. First, the Penn brand really means nothing to the world, people don’t really know Penn as a national or even local brand. So the bar stool was a brand they could invest in that had a user base that people understood, so the brand equity made sense. But remember that the bar stool user is younger, has a lower income and is more [they type to participate in a deal like] deposit $5 and get you $20, as opposed to Caesars or MGM [that say] depositing $100 will get you some sort of $500 thing. So, you know, these users are a little different.
We often do a lot of marketing on behalf of our bookmaker [clients] as well. We will create unique offers and market on Twitter, Facebook, Google Search and Apple to try to really acquire these customers. Again, this is very much a content-driven experience. If you are going to read an article to help you make a decision on how to bet on the PGA Tour Championship starting tomorrow, Action [Network] is where you got to experience this, so hopefully you’ll become an even deeper user of Action, because remember, we also have the Action Network app. And this application has our most engaged users, they are our most profitable users on our platform, and it is the most fertile ground for our customers to acquire these users as well as on the sports betting side. Those who have invested the most with us will get the biggest share of the vote, but we work with all the books.
Has your revenue model changed at all as the sportsbooks you work with change strategy?
The majority of our income remains [comes from] the affiliate model. Subscription is number two, and then number three is this sponsorship-driven display. But also in this category of affiliates, some of our partnerships are not simply [cost-per-acquisition] Where [lifetime value model]. Some components of the media are part of it. So in addition to getting some CPA royalty and some revenue share, maybe DraftKings will own our podcasts for the NFL season. [or] maybe FanDuel will own our YouTube channel. We really analyze our assets that way. So the affiliate model, which is the predominant model for generating revenue, also has a part of what I would call media.
Have you changed the pricing structure to get better returns on a higher value bettor?
Part of our growing business [and] gives books a little more comfort is the LTV model. We actually share the revenue generated by our users which may take time for us to recover as a revenue stream but for them they will pay this CPA which can range from $250 to $500 and you go for enjoy together the value of this user in perpetuity that you are able to generate from your platform. So it gives you the opportunity to take a longer term view and less a short term view if you generate a user as an LTV user compared to pure CPA.
Treat the loss as income. During their bets, the losses of these users [become a] discreet figure who is shared between the book and us. The book generates profit from a user, and we share that.