DraftKings CEO discusses Sportsbook’s strategy to boost profits
DraftKings is aiming for profitability, and CEO Jason Robins said focusing on higher sportsbook take over time is one of the key strategies for beating the competition.
Robins spoke at a Goldman Sachs conference last week about DraftKings’ plans for the future.
“For the past two years, market share was what we were asked about,” Robbins said. “Now it’s all about profitability.”
“As the market matures, the success rate should increase. I think when you’re in an early stage environment, it’s not the worst thing in the world to give people a few extra winning experiences, rather than trying to maximize the margin we take.
But as sports betting focuses on profitability, Robins says, that goal needs to change. He says he wants to focus on sustainability, a disciplined strategy, and monetizing new users as quickly as possible.
How does DraftKings plan to improve its profit margins?
Robins mentioned a few different strategies for increasing DraftKings profit margins. One of the goals is to limit net actions or high volume betting by elite users. The other is to increase the use of parlays.
FanDuel has overtaken DraftKings in wait rate, mainly due to its hugely popular Same Game Parlays.
“What we’re not trying to do is take money from people by forcing them to make bets they don’t want to,” Robbins said. “What we’re trying to do is intelligently limit the net action and then make sure we have a high parlay mix because people like that. Each quarter, the Parlay as a percentage of the total betting mix increases.
In Daily Fantasy by DraftKings, they managed to increase their profit margins simply by choosing to increase them. The trick, according to Robins, is to “do it at the right time and in the right way.”
“When I say the right way, [I mean] in a way that does not degrade the customer experience. It will not reduce customer experience or cause attrition.
Is DraftKings really aiming for less Sharps?
Robins has come under fire in the past for comments about the type of user DraftKings is targeting.
“It’s an entertainment business,” Robbins said at a conference in November 2021. “People doing this for profit aren’t the players we want.”
He later said he could have “chosen his words better”, but the DraftKings focus on a higher hold fits with the idea that the bookie would like to see a higher win rate for itself.
The Sharps – players who make a profit from sports betting – can reduce the take of a sports bet.
It seems that Robins is interested in balancing competitive betting with odds that give them an edge over these super-betters.
Do all sportsbooks want to increase the queuing time?
Well, not necessarily.
Other sportsbook CEOs have argued otherwise, saying that good win rates for users can increase retention and therefore profitability over time.
Rush Street Interactive CEO Richard Schwartz presented this case at the same conference where Robins spoke last week. However, Schwartz was targeting online casinos, not sportsbooks.
“Online is a hyper-local community. People play often,” Schwartz said. “So we have defined a strategy to make the odds favorable for the players. Because it’s about retaining players and ensuring they have a long experience playing with you. You don’t want to burn out a customer. You want them to be with you for five years rather than two months.
What does the future of DraftKings look like?
Ultimately, Robins gave a positive outlook for the company’s future – which makes sense at an investor-focused conference.
It was responding to concerns about DraftKings’ shaky stock and negative profit margins. DraftKings stock has been down significantly since December 2021, although it rose slightly in early June.
AP Photo/Charles Krupa