Online Gambling Operators Seem To Think CAC Is A Dirty Word

In Earnings Reports, Most Online Gambling Operators Omit A Number

Most online gambling operators like to talk about revenue, mergers and acquisitions, and outperforming market expectations during their earnings calls. Sure, they’re required to do so. However, the cheer in CEO voices is evident while discussing those topics.

In general, though, online gambling operators don’t like to talk about the exact figures of their customer acquisition costs (CAC).

It’s not because analysts don’t want to hear it. They all do.

It’s not because online gambling operators don’t have those numbers. They do.

It’s not because the concept isn’t sexy. Well, it’s partly that.

However, analysts do want to hear about that cost. They pepper CEOs with questions about CAC during earnings calls. Those analysts are hammering home the point that shareholders want operators to rein in marketing and promotional expenses.

UPDATE: 05/12/2022

During the BetMGM Business Update today, BetMGM CEO Adam Greenblatt said he expects the operator to have long-term CAC in the US of:

  • $160 for online casino players
  • $90 for online sports bettors

Adding those numbers together, BetMGM still has an overall long-term CAC of $250, BetMGM CFO Gary Deutsch said.

That’s 70% than the CACs of competitors. BetMGM reduced player acquisition costs 19% during the past year.

High CAC can lower stock values

If analysts think operators are spending too much, the blowback from shareholders can be immediate.

So as US online casino, online poker and online sportsbook operators tell the tale of Q1 2022, they’re often omitting CAC.

It’s a figure analysts can deduct on their own by calculating what operators spend to acquire customers by their numbers of added users.

As a result, shareholder blowback for high CAC may take a few minutes as stakeholders do the math.

Meanwhile, the operators willing to provide that sum on their own reveal more than just CAC. In a marketplace filled with so many competitors that marketing, advertising and promotion costs are still in the “cash burn” stage for many operators, stating their CAC is bold.

Perhaps that’s why only BetMGM and FanDuel seem to have done so recently.

After all, BetMGM holds the largest US online casino market share. FanDuel can say the same for US online sports betting.

Here’s a closer look.

BetMGM is the US online casino leader

Jersey City, NJ-headquartered BetMGM will provide its Q1 2022 report tomorrow. Online Poker Report will update this story if company leaders reveal the brand’s latest CAC.

During 2021, BetMGM projected “achieving a long-term acquisition cost” of $250 a player.

Even with that figure, BetMGM isn’t slated to be profitable until next year, according to its Jan. 19 earnings call.

The brand that’s a joint venture between Isle of Man-based Entain and Las Vegas-headquartered MGM Resorts International also reported $850 million in net revenue during 2021.

In addition to operating online casino sites in Michigan, New Jersey, Pennsylvania and West Virginia, BetMGM Sportsbook is available in 14 states and the District of Columbia.

FanDuel is the first profitable US online gambling operator

FanDuel, primarily owned by Dublin-based Flutter Entertainment, turned a profit during 2021.

Part of the reason for that is Flutter says FanDuel’s customers, who cost $290 to acquire, tend to pay back their CAC between a year or 1.5 years.

Flutter reported on May 4:

“It includes all quarterly cohorts of FanDuel Sportsbook acquired between Q3 2018 through Q1 2021.”

During Q1 2022, FanDuel Casino and/or FanDuel Sportsbook were live in 15 states:

  • Arizona
  • Colorado
  • Connecticut
  • Illinois
  • Indiana
  • Iowa
  • Louisiana
  • Michigan
  • New Jersey
  • New York
  • Pennsylvania
  • Tennessee
  • Virginia
  • West Virginia
  • Wyoming 

DraftKings is the most noticeable CAC-omitter

Boston-based DraftKings is far from the only US online gambling operator not to tout its CAC.

At a glance, Rhode Island’s Bally’s Corporation, Las Vegas-based Caesars Entertainment, Chicago-headquartered Rush Street Interactive, Las Vegas-housed Wynn Interactive and Malta-based Kindred Group didn’t present CAC calculations during Q1 2022 for their sites, either. (Some reports did say the costs were “low.”)

Their sites include Bally Casino, Caesars Sportsbook, BetRivers Casino, WynnBet Casino and Unibet, respectively.

However, DraftKings is one of the Big Three operators in terms of market share and is, therefore, quite visible when it omits CAC.

The most recent number available is a $371 CAC from 2020 – the year DraftKings went public. New York City-based financial services firm Roundhill Investments said in 2021 that despite the “great” long-term opportunity of an expected $2,500 customer lifetime value, “acquiring users has dragged down their profits.”

Still, DraftKings grew a lot in two years. During Q1 2022, it generated $417 million in revenue, a 34% increase vs. Q1 2021’s $312 million, according to its Friday earnings announcement.

DraftKings Sportsbook exists in 17 states and DraftKings Casino is live in five jurisdictions.

Regardless on Feb. 18, shareholders were so unhappy with DraftKings’ unapologetic reporting of its Q4 2021 marketing and promotional spend that its stock dropped 22% that day.

This time, DraftKings stock dipped nearly 25% since Friday’s earnings report.

Anyone with a stomach for it can ride the stock rollercoaster with DraftKings. The day it went public on April 24, 2020, DraftKings stock sold for $19.35. So far, its apex price was $71.98 on March 19, 2021.

It sat at $15 on Friday and $11.36 yesterday.

- Heather Fletcher is the lead writer with OnlinePokerReport. She's a career journalist, with bylines in The New York Times, Adweek and other publications. Reach her at [email protected]
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