Shutterstock/Gwoeii To spend or not to spend, that is the question.
Wynn Interactive’s abandonment of its plans to go public have had the gambling world pontificating on that question for the past couple of weeks. In announcing that it was pulling out of the deal, the company cited the desire to scale back WynnBet marketing expenses and work on a more tightly focused strategy .
Wynn is running against the overall trend of the US market . For years now, companies like DraftKings have set the tone for the industry with a maximalist approach to spending . Companies looking to succeed in this explosive market have been shoveling money into mergers and acquisitions, product development, and most of all, marketing.
Revenue for these companies has soared, but in many cases, spending has outpaced in. DraftKings pulled in $644 million in revenue in 2020, up nearly 50% year-over-year. At the same time, it spent nearly $500 million on marketing alone. This year’s revenue should be higher still, but after three quarters, the company is already more than $1 billion in the red as far as the bottom line goes.
DraftKings has assured investors that this is the nature of new markets and that it will soon be profitable. It seems, however, that Wynn feels that this isn’t the correct strategy. Based on the performance of DraftKings stock lately, it looks as if skepticism might also be setting in among investors.
It wasn’t that long ago that we saw a similar story play out in another corner of the online gambling world. In the early 2000s, online poker was growing explosively. The story for the past decade has been quite the opposite. It’s therefore probably worth looking at similarities and differences between the poker boom and what’s happening now with US online casinos and sports betting. Trying to predict the future
On the surface, marketing math seems easy. Spend X dollars on advertising and promotions, revenue goes up by Y. If Y is more than X, then your strategy is good, if not, then it’s bad.
In practice, however, it’s never that simple. One particular problem […]
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