Sports betting and PA online casino operators are looking at promotional spend differently in 2023.
Most PA gaming operators spend countless dollars in marketing to attract and retain customers. That has a big effect on why most operators have not been profitable yet.
As the calendar hits Q2 and Q3, two of the slower quarters in sports betting, operators are shifting their marketing focus and decreasing spend. Doing so allows them to be more efficient, while on the path to profitability.
Marketing spend has decreased for certain Pennsylvania gaming operators
During Q1 2023 earnings calls, certain operators noticed a change in marketing focus and spend. Rush Street Interactive (RSI) and DraftKings each mentioned a decrease in promotional spend in recent quarters. Both companies see the trend continuing in the future.
Here is RSI’s recent advertising and promotion expenses:
- Q1: 2023: $49.4 million
- Q4: 2022: $63.2 million
- Q3: 2022: $44.7 million
- Q2: 2022: $44.2 million
- Q1: 2022: $66.3 million
- Q4: 2021: $64.0 million
- Q3: 2021: $45.4 million
- Q2: 2021: $36.9 million
- Q1: 2021: $40.5 million
Q1 and Q4 are usually the highest marketing spends for operators with NFL playoffs and March Madness in the beginning of the year, along with a full NFL slate in the latter stages of the year.
RSI’s marketing spend in Q1 2023 was much lower than Q1 2022. As far as expectations, CEO Richard Schwartz said:
“As forecasted, our marketing expenses came down considerably this quarter as we moved further away from our many market launches over the last couple of years. We expect the spending decrease to continue in the second half of the year as we turn to product and innovation.”
CFO Jason Park said on DraftKings’ Q1 2023 earnings call that the company reduced external marketing spend by “at least” 10% year over year. It’s a trend DraftKings can also see happening going forward.
In DraftKings’ Q1 business update, the company stated:
“Our older states continue to generate revenue growth due to increased handle-per-player, higher hold, less promotional intensity, and less absolute marketing dollars which results in meaningful increases in revenue, Adjusted Gross Margin rate, gross profit, and contribution profit.”
In the report, DraftKings said the promotional reinvestment resulted in a 6% year-over-year increase in adjusted gross margin for the quarter.
PA operators shift to personalized marketing approach
Operators have mentioned that marketing is not a one-size-fits-all strategy. Each customer represents unique needs that must be filled. Gaming providers feel by addressing product innovation, personalized marketing strategies can be achieved.
Penn Entertainment is moving Barstool Sportsbook and its online casino off Kambi’s platform to its own proprietary trading platform in Q3 2023. Snowden said on the Q1 earnings call that Penn is going to be more aggressive in marketing after the migration.
The reason they haven’t been?
“Our product really is substandard today and we know that,” Snowden said. “So you have to think about that as you’re launching and how much money you want to spend to get people on. You may lose some with a bad first impression.”
After the company has experienced major success with the platform in Ontario, Penn Entertainment is certain enhanced marketing strategies are coming to the US, even if it means spending more money.
“Think about what we’ve been able to do to-date on third party platforms. It’s really more shotgun style marketing, not personalized really at all,” Snowden said. “So we do a promotion, it’s kind of a promotion for all. That’s not an effective approach from a CRM perspective. You’re under reinvesting in some customers and over reinvesting in some. So we’ll be able to tailor the reinvestment and the promotions based on what we know about the user.”
He continued:
“We’re looking forward to being able to bring that level of personalization in our marketing efforts and a new promotional engine here to the US soon.”
As Penn Entertainment is taking a different approach with marketing, the company introduced a new loyalty program, Penn Play, to better retain customers.
New Caesars online casino app to help with individualized messaging
Caesars PA Casino is in a similar position after announcing the launch of a standalone online casino app. Caesars wants to focus on the predominant online casino player to enhance slot business. Having the standalone app will help with marketing strategies.
Eric Hession, President of Caesars Sports & Online Gaming, said:
“We’ll be able to have some much enhanced real-time marketing capabilities. So we’ll be able to do some trigger-based responses to customers, which is something that we’re not able to do right now.”
PA gaming operators move marketing dollars to customer experience
RSI was pretty forthcoming with why marketing spend came down for the company. With online casinos not launching in a new state this year, RSI decided to allocate that money to product innovation, which leads to customer retention.
“We have invested and continue to consistently invest resources to build efficiencies and improve the user experience,” Schwartz said. “In addition, we constantly strive to bring new features to market.”
RSI has added multiplayer online slot tournaments and bonusing engines for players, which involves real-time algorithmic bonusing to improve player retention.
DraftKings has also focused on product innovation and customer retention. DraftKings CEO Jason Robins said:
“Better products will create stickier customers. I think customer experience has been a big focus. We’ve had significant improvements in our CX year over year, including the introduction of chat and other things that I think have helped a lot. Our CRM on the marketing front has been optimized for several years now and I think we’ve made a lot of year-over-year improvements in that, especially as it relates to some of the post-Super Bowl retention and cross-sell into iGaming.”
Whether operators increase or decrease marketing spend, player experience is vital to customer retention.
