USA
Historically, leading online gambling operators haven’t prioritized online lottery ticket sales, but DraftKings is breaking new ground with a recent acquisition of a lottery app to improve its value proposition. In this news recap, I’ll look at that and other interesting news items relevant to players, bettors, and industry professionals.
TLDR: a Bite-sized Overview:
- The betting exchange Sporttrade went live in Iowa, marking its third state, and competitor Prophet Exchange scaled back its operations. Due to a steeper learning curve and fewer features, betting exchanges remain unfavored compared to sportsbooks. Still, Sporttrade is seeing success thanks to a favorable UI and unrivaled user experience over other options.
- DraftKings completed a $750 million acquisition of lottery operator Jackpocket, and two new online lottery apps entered New Jersey. The value proposition of online lottery can’t compete with other gambling verticals for operators. Still, for operators like DraftKings, a lottery product helps maximize the customer lifetime value and cover more ground for customer acquisition.
- As the US sports betting market matured, sportsbook ad spending was 23% lower in 2023 compared to the previous year, where operators emphasized national campaigns more than local state efforts. Growing regulatory pressure and public backlash are other factors that resulted in operators slashing their budgets. A potential positive side effect of the reduced ad spending is that looming gambling ad regulations are less severe, avoiding blanket bans on all advertising. Legislators should also be educated on the rightful place of gambling ads in the public space as it informs consumers about legitimate operators and helps reduce the negative impact of illegal operators.
- Twitch went live with its new Content Classification Labels, further limiting the visibility of online gambling streams on the world’s leading live streaming platform. As advertisers opt out of showing their ads on stream content labeled with CCLs, online casino streamers can expect lower advertising revenue on their channels. As a result, Twitch competitor Kick can continue to capture online casino streamers and improve user growth.
Sporttrade Betting Exchange Reaching More States
Philadelphia-based betting exchange Sporttrade went live with its app in Iowa last month. Iowa became the third operational state following Sporttrade's premiere launch in New Jersey in 2022. Betting exchanges have struggled in the United States historically. Most recently, Prophet Exchange ceased its NJ sportsbook exchange operations on May 28.
Sporttrade's design and user interface give it some staying power. Betting exchanges can be more challenging to navigate than traditional sportsbooks, giving the product a bit of a learning curve that deters some bettors from trying it out. Sporttrade has managed this better than other exchanges, providing a similar experience to regular sportsbooks in its betting exchange. While bettors miss out on odds boosts and same game parlays, the odds are almost always higher at exchanges, allowing for lower margins and greater profitability. The availability of Sporttrade in more states is essential to improve the overall online betting offering across the United States.
Heightened Competition For Online Lotteries in the US
DraftKings has acquired the lottery app Jackpocket for $750 million, aiming to provide its customers with an easy way to buy official lottery tickets across the United States. DK is now working on integrating Jackpocket into its existing product line and leveraging synergies from the rest of its operations to create more value. The acquisition allows DraftKings to improve its user experience by providing a more comprehensive range of gambling products and enhancing customer lifetime value and customer acquisition. DraftKings is live with online sports betting in 25 states, and its online casino is available in five states. Jackpocket is available in 18 states, including Texas, which has been reluctant to legalize online sportsbooks and casinos.
Overall, the online lottery vertical has seen many developments in May. Outside DraftKings' acquisition of Jackpocket, Jackpot.com has launched its online lottery operations in New Jersey, and the lottery app TheLotter received approval to offer NJ lottery tickets online.
Reduced Sportsbook Ad Spending Due to Profitability Concerns, Regulatory Scrutiny and Public Pressure
According to a study by the American Gaming Association and Nielsen Group, US sportsbooks spent 21% less on advertising in 2023 than the previous year, when ad spending peaked at around $1.4 billion. The report corresponds to a trend we’ve been seeing from the latter half of 2023, where operators focus on national advertising campaigns rather than individual state efforts. The reason is that sports betting is available in 38 states, with consumers being aware of the market situation, and the returns on investing in advertising are less than what they were years before 2023, which forced decreased budgets from operators at a state level. The biggest cutbacks were made in TV advertising, which dropped nearly $200 million compared to 2022.
Beyond profitability concerns, the online gambling industry is also facing regulatory scrutiny and pushback from the general public as sportsbook advertisements have dominated the frequent ad breaks in sports television in recent years. One prominent voice in the crusade against online gambling is Democratic Representative Paul Tonko from New York, who has put forward federal legislation as part of his Safe BET Act, aiming to put gambling under the Federal Communications Commission (FCC) control. The FCC controls advertising over the Internet, TV, and radio. If the Safe Bet Act were to pass, it would severely limit how sportsbooks can advertise in the US.
On a state level, Louisiana has a bill in motion to prohibit television advertising for sports wagering and fantasy sports. Kentucky has similarly introduced a bill to prohibit advertising of sports wagering through internet websites and electronic device applications.
The trend of clamping down on gambling ads is similar to what we have seen in recent years in more mature markets in Europe, where regulators have limited operators and, in some countries like Italy, put national blanket bans on advertising. The reduced ad spending from US operators may be a strategic move to nudge legislators to adapt future laws to impose restrictions rather than outright banning all forms of gambling advertisements. There are also potentially negative consequences of banning gambling ads as they’re a necessary medium to inform consumers about legitimate options in the market, which can minimize the spread of illegal alternatives readily available over the internet.
Twitch Doubles Down on Gambling-related Streams
Twitch is doubling down on online gambling by introducing content-filtering features to block streams featuring gambling content. Gambling falls under Twitch’s Content Classification Labels (CCLs), along with six other categories, where users can customize their experience by toggling preferences in their profile settings. Users under 18 have gambling filtered out by default, and as a precautionary measure, Twitch has also opted to block gambling streams by default to site visitors who are not logged in.
The recent changes likely won’t have a large impact on gambling streams on Twitch, as their hard stance on online gambling has been known since they first clamped down on gambling-related content in 2022. Online casino streams may experience lower advertising revenue on their channels, as advertisers will likely opt out of showing their ads on stream content labeled with CCLs. Twitch competitor Kick will remain the primary option for gambling streamers.