In his latest column, Tom Waterhouse discusses the rise of influencer marketing and highlights some companies he believes are leveraging the vertical to great effect.
For the most part, there is minimal product differentiation between betting operators, with minor differences in user experience.
In our January 2022 newsletter, we explained how betting sites have maintained a consistent layout for decades, usually offering promotions at the top, then offering top-level navigation to the most popular sports, then highlighting highlights the “next hop” for the main racing codes.
Therefore, with minimal product differentiation, marketing has always played a crucial role in attracting customers to operators.
Taking the Australian market as an example, there are around 100 bookmakers competing to gain market share online. In Australia, Sportsbet has already gained around 50% online market share. Last year, it generated $820 million in revenue and spent $143.5 million on marketing (17.5% of revenue).
In the United States, commercialization is particularly high compared to mature markets like Australia and the United Kingdom, as in the new betting markets, operators compete for market share. For example, in 2021 FanDuel (Flutter’s US business) spent $775 million (48% of revenue) on marketing, while DraftKings spent $929 million (72% of revenue).
|Company||2021 turnover||Cost to market 2021||Marketing as % of turnover|
|DraftKings||$1.30 billion||$929 million||71.7%|
|FanDuel||$1.63 billion||$775 million||47.7%|
In comparison, companies operating in most sectors spend around 11% of their revenue on marketing, which is significantly lower than that of the betting sector in both mature and new markets.
Over the past 10 years, celebrities have been increasingly used in marketing campaigns. For example, last year Ladbrokes released a TV advert featuring actor Mark Wahlberg. This year, the company has reimagined the iconic racing scene from Rocky II.
Influence of influencer marketing
In recent years, we have seen a sea change in the consumer paradigm towards creator-driven commerce.
The Covid-19 pandemic served to accelerate this trend – when physical retail stores closed, consumers were confined to their homes and the only way for a brand to reach an audience was through digital connection. Creators have played a huge role in this narrative, ultimately providing brands with a new outlet for sales.
Creators bring net new customers to a business and provide a performance-based marketing channel that attracts highly engaged buyers.
Betting companies are slowly taking a new approach when it comes to their marketing strategy, with more and more companies turning to influencers to spread the word.
That’s not to say the value of traditional marketing has been lost; both have a role to play and perform very different but important functions.
Traditional marketing is critical at the macro level to build brand awareness, reach mass audiences, and pursue brand alignment. On the other hand, influencer marketing allows brands to connect more closely with their customers, creating a more subtle and meaningful way for businesses to generate sales.
While betting operators have had sportspeople and celebrities as brand ambassadors for many years, they have been relatively slow to add influencer marketing to their toolbox.
One of the brand ambassadors is basketball legend Shaquille O’Neal, who has a partnership with WynnBET in the US and Pointsbet in Australia. In a combination of celebrity and influencer marketing, Shaq recently danced with “The Inspired Unemployed,” an influencer with 1.5 million Instagram followers. By partnering with The Inspired Unemployed, Pointsbet is able to target a niche audience of mostly young Australian males.
Influencers are considered more credible and authentic than traditional marketing. They have highly personalized audiences and have a unique ability to describe experiences and product journeys in a raw, human way.
Audiences today want to connect with like-minded people rather than celebrities. Consumers are more likely to make a purchase from someone they think they know, whose tastes and interests match their own.
Influencer marketing propelled American company Betr to 116,000 Instagram followers in just 5 weeks. The company relies on the huge following of its influential co-founder, Jake Paul, who has 20.6 million Instagram followers and 16.7 million Tik Tok followers.
As reported in our October 2021 newsletter, Barstool Sportsbook builds on the fame of Barstool founder Dave Portnoy. Barstool has built its brand on the back of authentic personalities and unique content. Portnoy regularly gives his betting advice and publishes his betting slip, often with a link allowing the spectator to copy his bet automatically via his Barstool Sportsbook account.
In a demonstration of how quickly operators must adapt to regulatory changes, this year the UK banned the inclusion of sportspeople, celebrities and influencers in betting adverts due to their appeal to young people. Despite this UK regulatory change, we believe influencer marketing could make a significant contribution to customer acquisition for operators globally by enabling them to target broad niche audiences.
All my wishes,
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Please note that the above information regarding Wynn Resorts, Entain, Betr, Pointsbet Holdings, Flutter Entertainment, PENN Entertainment and DraftKings is based on publicly available information about the company and should not be considered or construed as advice on the financial products. Waterhouse VC has a position in Flutter Entertainment. The information provided herein is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice tailored to their personal circumstances.
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