Conversion Corner: Lessons learned from 2021

As the final numbers for 2021 are coming in, the sentiment in the market about customer acquisition has altered significantly from this time last year. In fact, sentiment has changed significantly over the NFL season alone here in the US. Reflection on the year-end figures allows us to critically look at customer acquisition and the challenges that operators continue to face. First, we will look at the states that are noteworthy and discuss the overall trends that have emerged. In particular, we will look at the handle and hold for the year and how it compared to previous years. In total, both handle and hold grew by more than 100% over the past 12 months. There are some challenges with taking those figures at face value, but we will explore the year-end profitability and bonusing in a select few states. Lastly, many operators have shed light on their customer acquisition efforts and profitability in recent quarterly reports. We will explore these in more detail and summarise their 2021 efforts and focus points for 2022.

Nevada

Nevada had three straight months of $1bn in handle to end the year with more than $8bn wagered. With a 5.5% hold, that was an increase of almost 70% from 2020. Without prevalent bonuses and mobile registration, as well as challenging mobile apps, these figures are incredible. We are only two years removed from Nevada hitting a record handle of $5.3bn in 2019 and I can’t help but think that casual sports bettors are coming to Nevada educated and/or willing to learn how to bet far more than they have in the past.

New Jersey

New Jersey recorded an impressive $11bn in handle for 2021. That represents a 100%+ increase from the previous year. Hold in New Jersey has also increased by more than 100%. Driving this has been an increase in the hold on parlays, which have been marketed pretty hard and are a key point for most books as they start to acquire casual bettors. The most important figure that I see is that the 2021 New Jersey sports betting was approximately 17% of all gross gaming revenue generated in the Garden State. And when both online casino and sports betting are combined, they account for 46% of total GGR. This certainly demonstrates that betting can be a much higher percentage of GGR than exists in Nevada (less than 2%). It certainly isn’t an enmity with New Jersey gaming increasing 64% from 2020 and more than 30% increase from 2019.

Indiana

Even in a state like Indiana both handle and hold more than doubled from 2020 to 2021, showing great progress that doesn’t seem to be slowing down. While 2021 only saw one additional mobile operator go live, the state saw more than 26% of betting handle on parlays. By comparison, New Jersey percentage of handle is only 22% for 2021. This certainly makes me think that parlay revenues may account for 60% of all sports betting GGR in Indiana.

The tactic of bonusing

The customer acquisition tactic of bonusing continued to be front and center of marketing efforts in 2021. Aggressive bonuses are prevalent in states that recently opened and football season is always a time for operators to acquire and re-activate players. As such, they bonused heavily during this time:

• Pennsylvania saw bonuses of 30% of sportsbook GGR in 2020 and that increased to  33% in 2021 while handle and hold doubled
• Arizona operators bonused 84% of sportsbook GGR after the first and second months of operations
• Michigan sportsbooks bonused 52% of betting GGR back to players in 2021, the first year it accepted online/mobile sports betting
• Colorado’s rate was 56%. That may have something to do with the fact there are 25 books targeting a smaller population state than Michigan.

Many operators are reflecting on 2021 and the spend they deployed to achieve their market share. Earnings reports and public comments from last year suggest varying degrees of success and perspective on the challenges of acquiring customers. Some operators have publicly taken the stance that the market is a difficult and expensive one and that a considered approach is required. Recent reports from Bally’s indicate it will postpone its New York launch on account of the fierce competition to spend on marketing and promotions. The operator has indicated that it will wait until at least April to let the dust settle in the Empire State before considering its next move. PointsBet’s financial reports from 2021 indicate that it increased active players to 211,000. Between October and December, it added 26,000 more players to its database. Bonuses were approximately 55% of GGR and the operator spent an additional $30m on marketing campaigns to acquire these players. Penn National just recently released its figures for 2021 and is utilizing its acquisition of Barstool and theScore to acquire players. The operator is only spending 18% of GGR on marketing whereas other comparable books are spending closer to 70%. These figures don’t include bonus money. WynnBet pulled back on marketing spend after a large campaign with big-name sports stars and actors probably didn’t yield the results it was hoping for. 2021 was a year of great growth for the sports betting industry. Many states really got into their strides and bettors are certainly more educated about sports wagering in general. We are certainly seeing growth in the industry as a whole and at the state level, but growth that is focused more on mobile and online than retail. Customer acquisition is fiercely competitive and operators in states with more than 10 brands are competing aggressively with offers and marketing spend as they fight for their share of the market. Whether this continues at the same rate over the next 12 months remains to be seen.