“The biggest challenge is cash, right?” PointsBet Chief Strategy Officer Eric Foote said in a recent interview with Gaming Today. “Everyone is spending at a very rapid rate.”
PointsBet offers one of the largest betting bonuses in the industry, with new users receiving up to $2,000 in risk-free bets. Foote was asked if he could envision a day soon when there would be no sign-up bonuses for new users.
“Honestly, they’re already starting to be reduced significantly,” he said. “You look at it on a state-by-state level, depending on what tax rates are, what the situation is. Each state, for us, is like a new country. It’s a new business model.”
BetMGM, in fact, has paused new-player bonuses in New York, a state with an extraordinarily high tax rate for sports betting operators.
Captain Jack Andrews is a professional bettor, industry watchdog, and co-founder of the sports betting website, Unabated. Andrews is an advocate for bettors seeking sign-up bonuses.
“They’ve been a large incentive even for those that were familiar with sports betting because the numbers were eye-popping,” Andrews said. “It was an incentive to come in from offshore. Without the bonuses and promotions, I think a lot of players would still be playing at their standard offshore (sportsbook).”
Andrews expects bonuses to keep getting smaller, though.
Caesars was offering $5,000 in any state it operated in last September. DraftKings and FanDuel were both offering $2,000 in bonus money for new users. All three books are down markedly at $1,500, $1,050, and $1,000, respectively.
“I will be surprised if there’s anyone offering $1,000 (this September),” Andrews said. “And they’re going to structure it in a way where it’s not really $1,000. It’s more like $500 in EV (expected value). I think we’re going to see more and more of the ‘certainty boost’ where if your team scores one point, you win $100 if you bet $1. That caps out that bonus at $100.”
“I think this NFL season is probably the last gasp for the big new user sign-up promotions,” he added.
‘Three Months Arms Race’ for State Launches
When a newly legalized state launches, bonuses are typically higher as sportsbooks do all they can to entice new users. Foote likened it to a “three months arms race” in the bid to acquire new customers.
“We’re really looking for the quality of the customer versus the quantity,” he said. “The more aggressive you get with those offers — customers are getting smarter, they’re more intelligent, they’re shopping around more — what’s the churn rate, how do you retain that customer after giving such a large bonus or deposit match? You have to retain them. You’ll continue to see those offers being probably reduced.”
Publicly-traded companies like PointsBet and DraftKings declare how much they’re spending in new customer acquisition. Customer Acquisition Cost (CAC) is the critical component to examine, particularly when it comes to companies hemorrhaging cash during state launches.
Andrews noted that commercial sportsbooks are trying to reduce their CAC of over $300 per person to below $200 in a year’s time.
BetCasts Help PointsBet Attract New Customers
Foote stressed the importance of doing things differently. To that end, PointsBet is also focusing on local and regional initiatives that include being involved in alternative sports broadcasts called BetCasts.
Live sports are critical to the company’s continued success, given its increased emphasis on in-play wagering. PointsBet CEO Johnny Aitken recently penned an op-ed in Sportico and addressed the success of BetCasts in Chicago.
On average, the 2022 Chicago Bulls BetCasts we presented along with NBC Sports Chicago delivered 107% more in-play unique bettors and 81% more in-play total bets, Aitken wrote.
Foote noted that BetCasts also help PointsBet to attract new customers organically.
“You’re getting a combination of not only the experienced bettors but also the new bettors,” he said. “It’s a friendly way to dip your toe into introducing more odds and data and having talent talk about it.
“Our goal is to educate and introduce. Secondly, it’s to attract new customers. But the last and most important is to increase our handle over the course of a specific game.”
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