6 ms·
The implosion of the daily fantasy industry
- exolymph 10y agoFor what it's worth, Fortune writer Dan Primack said on Twitter, "There is an amazing amount wrong with this ESPN piece on DraftKings/FanDuel. Awful." https://twitter.com/danprimack/status/768463010503467009 https://twitter.com/danprimack/status/768463010503467009 Then followed up: "ESPN and @DVNJr write that daily fantasy has 'imploded.' Really? Both leading players are still operating. [...] True neither FD nor DK are profitable. But they are young tech startups. Lack of profitability doesn't mean disaster at this stage" https://twitter.com/danprimack/status/768464361258098688 https://twitter.com/danprimack/status/768464361258098688
- runevault 10y agoWith the way states were blocking them from operating in them at such a rapid pace for a while once FD/DK started advertising like crazy, I don't know if they will ever be able to get back to where they were. Once you are lumped in as gambling the rules change and get much harder online.
- FussyZeus 10y agoLack of profitability isn't their problem, lack of ability to continue operating anywhere legally is.
- dragonwriter 10y ago> Lack of profitability isn't their problem, lack of ability to continue operating anywhere legally is. From the POV of investors, I'd say that the former is the critical problem, the latter is merely the cause of the problem. From other POVs, that might be different.
- hackuser 10y agoDoes anyone know what Primack's axe to grind is? Because it's such a strong, emotional objection, I suspect there's more to it than a dispute over the facts and analysis.
- atombath 10y agoI'm wondering why gambling(except for lotteries and casinos, etc.) was made illegal? Was it a 'we must protect people from themselves' type of law? Or a 'casinos have lobbied for protection of their business' type of law? Or 'this type of industry requires regulation but its too damn expensive to regulate' type of law? I say this as the guy who consistently makes fun of the lottery while also buying video game 'this is totally not gambling either' loot chests.
- dpc59 10y agoWhere I live (Québec in Canada) the government has a crown corporation that has a monopoly on gambling. Competition is illegal because it would make the government lose revenues.
- noobiemcfoob 10y agoPublicly run gambling is interesting. I mean, a bookie is a bookie, but it seems a safer bet if your bookie is a publicly accountable institution.
- caseysoftware 10y agoUntil you realize that the "muscle" coming to collect is your local law enforcement..
- gohrt 10y agoThere's no "muscle" to "collect" if you pay your fee in advance.
- pm90 10y agoYes, also: profits from the operation are going to the state, which presumably puts them to better use than the local gangster.
- oldmanjay 10y ago
- z2 10y agoWith user acquisition costs of "$190 per user for DraftKings and $110 for FanDuel" [0], what, besides long term casino-style gambling addiction, can hope to recover the costs? And unlike casino gamblers, don't 'bro-classic' people tend to grow out of these things after a while? [0] http://www.usnews.com/news/articles/2015/10/30/draftkings-fanduel-and-gambling-on-the-world-of-fantasy-sports http://www.usnews.com/news/articles/2015/10/30/draftkings-fa...
- someone7x 10y agoHonestly, I'm thinking long term freemium-style addiction can hope to recover those costs. I was surprised that they didn't monetize some of the analytics (or whatever utility player scripts were providing) that the big winners were using after banning them from using their own scripts. But then again, a lot of the decisions described in the article were surprising.
- ajamesm 10y agoChange $190 to $500k and I think you just described venture capitalism!
- sverige 10y agoBut without the instant feedback and athleticism, which is why millennials aren't venture capitalists. That, and most don't have $500k.
- gk1 10y ago"User acquisition cost" refers to the average amount a company spends on marketing to acquire one new user. It does not mean the price a user pays to sign up.
- hkmurakami 10y agoGenerally speaking, insurance industries can pay these CAC costs and turn a profit.
- swang 10y agoi don't know how accurate the article is but arguable the dfs industry is shrinking. almost no one other than fanduel/draftkings exists on a scale to possibly make a profit. and then you have state governments trying to ban them or charge them with crimes. the biggest long term problem i see (and the article partially addresses) is all these pros bumhunting the low-stakes games because there's no reason not to. it doesn't take any additional time nor mental focus to join some microstakes games like it would if you were playing online poker. anyone who play dfs, how are money withdrawals from the site? is it relatively quick/easy to get money out of your accounts? otherwise i definitely see that as a huge risk just like it was towards the end of the online poker boom.
- jpindar 10y agoI had no trouble getting my winnings out of Fanduel. I had to provide them with my social security number for tax purposes, but once they had that they mailed me a check within a week or so, and they sent me the appropriate tax info at the end of the year.
- jarrettch 10y agoI've played both, and it's much easier to withdraw from DraftKings than it was from PokerStars/Full Tilt/Party Poker. In the dark days of online poker after they shut down a lot of the payment vendors, I'd get shady looking checks from some middle man that I had to wait weeks for at times(never played/won enough to need wire transfers or fancier methods). That was horrible. I've had withdrawals from DraftKings that take a day or two and go straight to my credit card or PayPal account. FWIW I play in California. Edit: To be fair, paper check withdrawals did get faster as time wore on. Not sure how it is now. I live in SoCal and always preferred the card rooms than online poker anyway, so it's not worth the trouble for me.
- Animats 10y agoIt really is a game of skill. And that's killing the industry. The good players, with a big bankroll and computer support, can win. Everybody else is a sucker. Like the stock market. So the suckers are bailing.
- quaffapint 10y ago> The good players, with a big bankroll and computer support, can win. That's pretty much the key to winning on these. Whenever they interview a 'big winner' they all seem to do the same thing - play a bunch of picks for each bet to spread out their chances. This of course is not what the little guy does or can do. There's so much 'luck' involved that you have to spread it out to have any hope of any sort of consistent winning. That's also why there are more multi picks vs single-only picks available. The big guys can then buy bunches of entries in multi-pick contests.
- sbov 10y agoYeah, but in most games of skill you have some system in place to ensure your best players don't drive away the worst. When money gets involved things become murkier though.
- Spooky23 10y agoWhen you tie an arm around the "skilled" player's back, you can't justify claiming that what you do isn't gambling.
- bradwschiller 10y agoI think what's missing here is that the product is sticky for a number of people and spending on user acquisition costs are likely to go down. Each company essentially takes a 10% rake on every game and I'd imagine these companies will be profitable in the long. I don't think legal issues will destroy these companies as it's really only a matter of time before sports gambling becomes legal across the US and New York is already letting these companies continue to operate this year. I don't believe the issue around small numbers of players making all of the money is important. As someone who uses both platforms for fun, I find I'm willing and many of my friends are willing to lose a bit of money each week as it makes the games far more entertaining to watch when you have a rooting interest. Many of the sports leagues and ESPN realize this which is why you saw them invest in these companies. Fantasy leads to more engagement with the sports and daily fantasy leads to even more engagement. Daily fantasy is not for everyone, but it'll likely maintain a core number of users, many of whom use both FanDuel and DraftKings. Acquisition costs will be less important in the future and provided that fixed costs such as legal fees decrease in the coming years, these companies will become stable and profitable.
- jlgaddis 10y ago> ... it's really only a matter of time before sports gambling becomes legal across the US and New York is already letting these companies continue to operate this year. According to the article we're discussing, NY passed a bill, the Governor signed it into law, and both DraftKings and FanDuel started accepting NY customers again the following Monday.
- ee8aq3g5c6 10y agoThe wheels of power seem to move more smoothly back east.
- robinhowlett 10y agoI haven't read this (long) article in its entirety yet but I did make this presentation[1] last year to satisfy my interest in the space and help me understand where it stood. I borrowed a lot from Adam Krejcik's tweets, who is quoted in this article. See slide 21 for notes about player attrition [1] http://www.slideshare.net/robinhowlett/daily-fantasy-sports-dfs-notes http://www.slideshare.net/robinhowlett/daily-fantasy-sports-...
- jackschultz 10y agoI write my own golf blog, with weekly previews of the tournaments, and as a way to get traffic, I'd post a weekly DFS picks post, and then link to both articles in a reddit comment on the DFS subreddit[1]. The idea being that people would look at the pics, but also read the more interesting preview I'd write. I eventually stopped doing that after seeing weekly posts on that subreddit about how people were losing too much money and had to stop playing for a while. Didn't want to keep messing around helping people lose money. Always that side to an industry based on gambling. [1] https://www.reddit.com/r/dfsports/ https://www.reddit.com/r/dfsports/
- univalent 10y agoGood. I probably saw/heard their ads thousands of times (no exagg.) over a few month period. They annoyed me so much I wouldn't give them any business even if I found their product fun (which I didn't).