A positive week for DraftKings on the back of Q1 earnings report sees its stock up almost 12% over the past five days to $25.52 (£18.76). A strong showing in sports betting, plus a near-9% jump in igaming revenue was also positive to see. Macquarie’s Chad Beynon has hailed DraftKings as “one of the most compelling structural growth stories in gaming” thanks to its “scaled leadership in OSB/igaming and comprehensive product ecosystem, which now includes predictions”. Up to $300m will be spent on DraftKings Predictions this year, with CEO Jason Robins aiming for a leadership spot before the year’s end. News editor Joe Levy sifts through Robin’s recent comments and DraftKings Q1 performance as EGR’s Q1 coverage continues.
Making markets, making money
Prediction markets remained the pertinent issue on the call, with DraftKings Predictions on course for annualised trading volume to exceed $2.3bn. Robins said he wanted the brand to take a “leadership position” in sports predictions by the end of 2026, and that between $200m and $300m of investment was to be deployed this year to ensure that aim. Remember, Flutter is likewise planning to spend close to $300m on FanDuel Predicts this year.
Robins used his quarterly letter to shareholders to highlight the market-making opportunities for DraftKings, which the CEO described as an “additional layer of the value chain”. Flutter also made similar claims in its earnings call last week, too.
On the call, Robins elaborated, adding: “Our market makers stood up in the last couple of months. So far, so good. We’re making money. It’s one of our fastest to profitability business lines we’ve ever launched. We think there’s a lot of opportunity to scale it.
“We should theoretically have one of the top two or three market-makers in the world, arguably the best given our modelling capabilities. t least on the sports front, I don’t see how anyone is going to be able to match that outside of maybe one or two of our big sportsbook competitors that also have really strong pricing models.
“It feels like we can capture a big chunk of that. I do think that will involve being on third-party platforms. We will obviously focus on our own exchange as well, which is launching in the coming weeks.
“I think for us to really maximise the market-making opportunity, we want to be able to participate in different platforms, not just to have more volume, but to be able to manage risk across a much wider canvas.”
More to do
While there were strong year-on-year (YoY) gains in the sports betting arm and igaming revenue rose by almost 9%, Robins said there was more to be done across the business. The CEO specifically focused on igaming, despite in February Eilers & Krejcik Gaming ranked DraftKings as the top online casino app in the US for the fourth consecutive time. Sister brand Golden Nugget was ranked second, showing the breadth of the operator’s online casino talents. Former bet365 head Christian Bogstrand was brought in as igaming general manager late last year.
Robins noted: “We still have a lot we can do to improve the offering. We have a number of things on the product roadmap which will definitely deliver value. There’s a clear line of sight to generating incremental retention and better value for the customer lifetime.
“There’s a real opportunity in the igaming side. We’ve lagged the market a little bit there. We’ve been very focused on sports naturally with the predictions and everything else going on. We beefed up a lot of the team and effort on the igaming side and I think’s a lot of opportunity to grow that as well.”
The boss pointed out any potential product shifts would be accelerated and catalysed by DraftKings’ continued uptake of AI. He added: “AI-first execution and streamlined teams are driving higher productivity than ever, with some teams operating at two to three times last year’s output.”
Direct to source
Sticking with igaming, Robins said direct-to-casino customer acquisition remained a lever DraftKings could be making better use of. Comparing DraftKings’ igaming uptick of 8.9% versus FanDuel’s 19%, the rate of growth means there is scope for improvement for the Boston-based business. Flutter directly cited its “expansion of our direct casino player base” and improved frequency offset the reduction in online sports betting (OSB) players shifting to the vertical. That process, it seems, is one Robins is keen to replicate.
He said: “We overly focused on the OSB cross-sell and did not focus enough on the icasino-first, particularly the slots-first, player. We really increased out focus in the last several months.
“We’ve also developed a lot of new marketing assets and have tested some things that are working much better and have significantly reduced our CAC [customer acquisition cost] a lot. I think there’s still a lot more we can unlock. We know there are areas of opportunity we haven’t yet discovered and unlocked in igaming. I think there’s a huge opportunity to grow that in the back half of the year.”
World in motion
The World Cup is due to kick off across North America in a month’s time, with Mexico hosting South Africa in the first game of the tournament at the Azteca stadiumin Mexico City. And while football remains way behind the major US sports in terms of betting intrigue stateside, the prospect of the tournament being on home soil plus the prediction market offering has made the World Cup a more enticing prospect. The CEO also pointed to the DraftKings Spanish-language app, which he said could act as a “differentiator” for the tournament.
Robins said: “I have very high expectations for the World Cup when it comes to customer acquisition and engagement. I’m not as sure it’ll be a huge revenue opportunity. I’m guessing the amount wagered on some [of the games] won’t be quite as high as maybe you’ll see in NFL or NBA.
“I think it’ll be absolutely tremendous for customer acquisition, starting with these prediction states. About half of the US, including large states like California, Texas and Florida, we have never had a major marketing event like this in those states. We’re going to really go for it. If the numbers are not supporting that, we will back off.”
Pay up, pal
Often reduced to the butt of the LinkedIn joke, payments, and the costs associated with the service, is rarely spoken about on earnings calls. Benjamin Chaiken from Mizuho changed that during the DraftKings session, asking what benefit the new ‘Super App’ could derive for the business from a payments perspective. Without multiple apps, and multiple wallets, and multiple deposit and withdrawals processes, the singularness of the Super App should shave off some of the costs. DraftKings Sportsbook also offers crypto deposits in certain jurisdictions, which would also reduce payment cost burdens the operator faces.
The on the implication of the Super App and payments, Robins said: “One of the results of that could be better retention of money and less movement of money on and off the system, which is a lot of what drives the payment costs is people depositing and withdrawing.
“That’s something we will definitely keep an eye on and could be a benefit. I think beyond that, there is a lot of room to optimise. If you look at our overall payment costs, they have been coming down.
“That’s been through a number of changes we’ve made internally, but also through renegotiating rates as we’ve ramped up our volumes. Payments is an area we have looked at at this year and see definite opportunity to decrease that cost, and certainly in 2027 and beyond.”
The post Five things we learned from DraftKings’ Q1 earnings first appeared on EGR Intel.
News editor Joe Levy unpicks the Boston-based giant’s latest report and call, as prediction markets remain the talk of the town and payments get a rare analysis
The post Five things we learned from DraftKings’ Q1 earnings first appeared on EGR Intel.