More people are using sportsbook apps than ever before. Just look at the latest news out of New York. That doesn’t mean that those businesses are printing money right now. in fact, according to Axios, the opposite is true.
The site reports that many of the top mobile sportsbook operators have seen their stocks take a major hit as the industry reevaluates how it does business. Previously, sportsbooks spent major money on advertising and offered incentives to open accounts that included promotional bets that didn’t require players to use their own money. It was a cost the books were willing to eat as they focused on customer acquisition.
During that time, the stock prices of sports gaming operators Penn National and DraftKings were outperforming the S&P 500.
In recent months, a spotlight has been shined on just how much that is eating into potential profits. As a result, the industry is shifting to a focus on customers’ lifetime value. According to Axios, that means a lot of the advertising money is drying up.
Last month, Caesars CEO Tom Reeg said that ads for his company’s sportsbook app will “largely disappear from screens”. The comments were met favorably and the price for Caesars rose 6%.
It should be noted that several industry analysts think unsustainable inflation is coming for some of these companies. March Madness is expected to drive the use of apps and investment in sportsbooks over the months of March and April.
No one doubts that there is still massive growth potential for mobile sports betting. In order to reach that potential though, the companies have to show some profit. That means cutting costs, and it seems like advertising and promotions are the first areas to take hits.
