Former VP at Parx Casino and Head of Business Development at FanDuel
Geoff has over a decade of experience working in the US sports and casino gaming industry. He is the Former VP of Interactive Marketing at Parx casino for both sports and casino betting where he was responsible for converting and retaining users to Parx land and online products.Geoff joined Parx in 2018 and spent 2 years helping transform Parx to serve online sports and casino bettors in Pennsylvania. Geoff was previously Head of Business Development at FanDuel, the leading Daily Fantasy Sports player in the US, where he spent 6 years building and understanding DFS players before Flutter purchased FanDuel. Read moreView Profile Page
Geoff, it’s a pleasure to have you with us today. Can you step back and provide some context to when you first joined FanDuel, over 10 years ago?
I joined FanDuel extremely early on. I was one of the first full-time US hires. The company had fewer than 10 employees, at that point and was largely working out of an incubator, at the University of Edinburgh. I had found out about FanDuel, based on the fact that the start-up that I was working on, in San Francisco, was actually starting to explore the Daily Fantasy space. This was back in 2009 and I was physically tasked with finding all the sites, taking a look at the products, to see how we could, potentially, build ours.
The one that just really blew all of them away was FanDuel. It was just a good, easy to understand product. I remember my first game on it. I played a guy called Mojo, for $5. I can’t remember if I won or not, but I just remember the product experience being really seamless and it was just really clear to me what was going on. My first three immediate thoughts were, firstly, this is amazing and a fantastic product. Secondly, how is this legal? Thirdly, how can I find a way to go and work for these guys?
The company that I was at, at the time, was really having a difficult time, figuring out how to make the product operational. I think a lot of people don’t really realize that, for both Daily Fantasy and for sports betting, there’s a ton of data that goes through the products and platforms. It’s very difficult to build, because you’re constantly getting in all this live data and everything else. That was true for DFS, as well. By seeing how difficult it was, for us, to build a product, it just made it all the more clear to me that I really wanted to try and find a way to work with FanDuel. As that company was circling the drain, I was introduced to Nigel Eccles, the former CEO of FanDuel. Basically, I was like a wolf scratching the door, eager for an opportunity. I kept hitting him up with emails and at one point, when he was in San Francisco, I met up with him, for brunch. My pitch to them was, basically, at the time, since they were a Scottish company, they didn’t really know the US market well. I had spent a lot of time in the US sports media landscape, so I knew a lot of people there and ways to, potentially, get FanDuel in front of audiences, at that time, of Sports Illustrated, Bleacher Report and numerous blogs, where they could start to gain a foothold.
At that point, I think they had only raised about a million or so, in funding. They had actually pivoted from a previous company that was called HubSpot, which was kind of like betting on the news. It was a freemium version in the United States because, at the time, you couldn’t bet on things like elections and things like that. They were at a unique point and they needed to quickly show that they could get traction in the United States. So my pitch to them was, hey, I’m willing to work for peanuts and I think I can help you guys, a lot, on that. That’s really how everything started and they brought me on. Within a month, they realized that I was somebody who knew the space quite well and I was, basically, full time from that point on.
How would you describe the DFS user, in terms of demographic, frequency of use, spend?
It’s overwhelmingly male. I remember a point in FanDuel, where we did user surveys, and it 97% or 98% male. The demographic was overwhelmingly younger, so it was mostly 35 and under. If I remember correctly, I think it was over 60%, maybe 62%, who were 35 or under. In terms of what you call user value, it’s certainly much lower than it is for sports betting. When FanDuel and DraftKings were really getting to scale, which was really around the 2014 to 2015 time period – you could also look at 2016, but that was caveated by the fact that there were a lot of regulatory issues and things like that, going on – the average user, say during football season, which was when 80% to 90% of all acquisition was going on, those guys were worth, usually, between about $55 and $65, per year. Typically, you were seeing retention, year on year, of about 50%.
One of the classic challenges which, in the early days of DFS, I don’t think anybody was really paying a lot of attention to, including investors, was the churn rate of these players. Why were they churning? One of the big reasons – and this was a classic, double-edged sword, for the DFS space – was that really attracted players was the big prize pools. It was a bit like the lottery. I’m a guy that knows that my odds of winning the lottery are extraordinarily low, but if you get to a point where, all of a sudden, like when the lottery went over a billion dollars, here in the United States, everybody was playing. Why not? I can throw $2 down and win the lottery. There is a similar type of logic with DFS where, with large-scale tournaments, when we started to hit a million dollars or more, you would see floods of people. It was a very good marketing tool, as well.
But the issue that you would have is, if I come in 480,000th place, wow, I don’t know what I’m doing; I don’t really belong on this site. There’s also the skill element, which was always an issue, and is an issue, for any skill-based game. You have to constantly feed the beast with minnows, basically, because the sharks are eating. If, at some point in time, that stops, the sharks wind up eating themselves. It just becomes, increasingly, more difficult to play. So if I’m an average, casual person, coming on, I’m really going to get my clock cleaned, when I come on the site.
There was a point in time what that was the focus and we were starting to work on that. How can we solve that? There were various tests and everything else, such as, what’s the best first-user experience? Should we not have them in tournaments? Should we put them into 50/50 contests, which means that half the people will win and half the people will lose, but you at least know that you were closer to winning? We also knew that people that won their first contest, historically, were 10% more valuable than people that didn’t. There was a lot of that going into the experiment phase. But all of that got blown up by the regulatory issues that hit us, in late 2015, where, literally, the only thing was trying to figure out how you survived, at that point.
There’s a clear economies of scale and feedback loop, for the biggest players, for Draft and FanDuel, where the more players, the more competitions, the bigger the prize pool, the attractive the platform, the more your friends are on there, versus smaller fantasy and sportsbook? It seems as if those DFS players are going to own a huge portion of that US sports market.
I think so. I guess the right way to think about it is, in a skill-based market, like DFS, where economies of scale are very, very important, yes, there were only going to be a handful of winners. If you could make an argument that there wasn’t even enough space, in the US, for FanDuel and DraftKings and we were competing against each other, so heavily, that honestly, had PASPA not been repealed, both companies, almost certainly, would have gone bankrupt. The issue with that is, there were smaller DFS players, and I remember one of their issues was that they told us that they would bring guys in who would, inevitably, just move over to FanDuel or DraftKings. The reason for that was because, yes, they’d bring them on, but they had smaller prize pools, where they had tournaments that were for $100,000, versus FanDuel, who were running tournaments for $1 million. We were running multiple ones of those, so those guys would, inevitably, switch over.
I think the difference with the sports betting market is, there is nothing like that. The economies of scale don’t work anywhere near the same way, when it comes to sports betting. FanDuel and DraftKings are leading the US market, by a wide margin, right now, because of the fact that they created these massive databases across all of the states, in the United States. It’s a perfect lead gen tool. Even if those businesses, right now, are losing money, it almost doesn’t matter because they’re 80% or 90% self-funded, if not profitable. For example, if I am William Hill right now, yes, I have retail stuff that I do or things like that but, let’s say, talking about California, I have no footprint in California. Whereas, FanDuel and DraftKings have been serving California since 2010, for FanDuel, and 2012, for DraftKings. They probably have email lists that are a million plus, in the state of California. When that state opens for sports betting, they can pound that list and, at this point, it’s free advertising, basically, for them; it’s free acquisition.
On that end, that’s where those guys have a major advantage, in the United States and everybody is playing catch up to them. But in a world where everything was flat, at this point, in the United States, yes, brand would matter. But unlike economies of scale in DFS, which were super important, that doesn’t exist in sports betting. All our odds are probably going to be very much the same. That’s really where the secret sauce is, for FanDuel and DraftKings, in the United States and where people need to catch up. If you’re just looking at it from a product perspective there, honestly, is not much of a difference between all of the major players.
But these two DFSs can, basically, bid as much as they like or outbid any of the William Hills, for the customer?
Yes, they can. This is a perfect example of this. FanDuel and DraftKings have worked with affiliates for years. One of the things that they are telling affiliates is, we will not pay you for an existing player, who is already in our database. If they go and work with affiliates, and affiliates are also trying to make money, the affiliates will be collecting a bunch of guys, in states where they’ve already got customers for FanDuel and DraftKings. FanDuel and DraftKings may end up getting 25% to 30%, or 40% of their customers back, through their affiliates, who they’re not going to be paying. Whereas somebody like a William Hill has to pay for 100% of it. As a result of that, a FanDuel, for instance, could go to a Catena Media and say, I’m willing to pay you $300 or $400, for an acquisition because, realistically, for them, the cost is, honestly, about half that. If they’re getting 40% or 50%, I can’t pay that, if I’m William Hill; but FanDuel can because, to them, it’s like paying $225 for a guy.
It really gives them enormous advantages, not just from a user database perspective, but also, fundamentally, from a marketing perspective. Particularly, in sports betting and DFS, this is not rocket science; it’s really about, how much can I acquire a guy for and then how much value can I get out of him? If you have somebody that has a 50% advantage on you, in many of these things, from acquisition costs to user value, in the sense that they don’t have to pay as much as you do, for guys, it’s not game over, necessarily, but it certainly puts them a lap or two ahead of you.
I’m curious as to how we can look at the lifetime value or the cost of acquiring a betting customer and whether you see the betting at DFS as separate or you just look at the one customer, right now?
I think the right way to look at it is that there are trends that are already there, from DFS, that I believe will, ultimately, play out the same way for sports betting. Even though we’re two years in, in the United States, that’s two years for New Jersey and it’s less than a year, for Pennsylvania. There’s many states that still to come, at this point in time. I’m using New Jersey and Pennsylvania as the two large states. Obviously, there is West Virginia, Indiana and some others, but those are the big ones that have the most data.
In DFS, what you can see from the early days is, when those players came in, they were very valuable, which is not uncommon. It’s very common, for any product or industry, that you have what’s called early adopters, where those people are very sticky. They play a lot or use your product a lot and are, henceforth, very valuable. The way we thought about it at FanDuel was that it’s levelling up. You start out with a base of going out to these really hardcore fantasy sites and bring in those guys. Then you go next to the more casual fantasy player, then it’s super casual, then it’s general sports fans. What you see, over time, is that customers just, inevitably, get less valuable. As you go to a wider scale, value decreases. I think sports betting, in the United States, is still at a very early stage where, what has been interesting to see is that the players here appear, so far, to be really, really valuable and, at least right now, are significantly different from Europe.