EGR Power 50 2021: 4. DraftKings
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4. DraftKings (11)
FINANCIALS: Revenue for the first nine months of 2021 was $822.7m, up 181% YoY. However, net losses for Q3 amounted to $545m, or an eye-watering $182,000 per hour
STRATEGY & IMPACT: Using DFS to acquire users at attractive CPA rates and cross-sell them into sports and casino is the playbook. Embracing the NFT frenzy hints at wider pivot
GEOGRAPHIC REACH: DraftKings has dabbled with DFS in other markets but remains a US-centric operator. Venturing overseas with RMG seems inevitable and necessary to sustain growth
INFLUENCE & LEADERSHIP: The fact the three founders – Jason Robins, Matt Kalish and Paul Liberman – are still there, and in similar roles to when the firm launched in 2012, speaks volumes
Elbowing its way up seven places to gate-crash the Power 50’s top five is US heavyweight DraftKings. Some may question why a business that continues to haemorrhage cash (net losses for the first nine months of 2021 were $1.19bn) has never turned a profit in its nine-year history, and is almost exclusively a US operator, can command such an elevated spot. And those are all reasonable points.
Admittedly, there is a lot of hype around DraftKings, yet very few firms could table a $22.4bn proposed bid for Entain and be taken seriously. A concrete offer never materialised, and the Boston-based operator carries on trying to hunt down US online betting’s market leader and long-time adversary FanDuel.
DraftKings has also been diversifying beyond sportsbook and DFS; its swoop for Golden Nugget Online Gaming in a deal worth $1.56bn provides a reliable revenue stream while targeting customers disinterested in sports.
Meanwhile, the launch in August of DraftKings Marketplace – billed as a “digital collectibles ecosystem” – taps into the NFT craze and delivers new customers; a third of Marketplace users are new to DraftKings. Regardless of whether investors consider this a frivolous distraction, CEO Jason Robins sees the intersection of sport and digital collectibles as one DraftKings should embrace if it is to achieve his lofty ambition of reaching a $1trn valuation by 2032. Yes, $1trn.
On the product front, DraftKings has made the long-awaited migration of its sportsbook onto its own tech platform. And the in-house capabilities have been put to good use with Flash Bet, which lets customers wager on in-game micro-markets, like the outcome of the next drive in the NFL.
As for gaming, DraftKings has had notable success with proprietary titles, and the recent launch of DraftKings Rocket (players must exit, or cash out, before the rocket stops rising) set a new record at the firm for most gross revenue by an in-house game in its initial month.
Getting to the top in the US and staying there requires cash. Lots of it. The Nasdaq-listed operator shelled out $703m on sales and marketing in the first three quarters of 2021, up from $303m in the same period last year. It’s partly why the firm’s share price is down 56% from its 2021 high in March, wiping a whopping $16bn off DraftKings’ value. But you’ve got to speculate to accumulate, right?