PointsBet sacrifices sports margin for customer acquisition and scalability
Majority of marketing spend in Q3 geared towards launching in operator’s “biggest” market of Illinois
PointsBet saw sports margins sacrificed in favour of high promotional spend in Q3 in an effort to acquire new customers, particularly in newly launched states.
Group CEO Sam Swanell told investors and analysts that this was the firm’s strategic approach in the US, as significantly low margins in Indiana and Illinois brought the average down to 2% for the US business.
Swanell said the operator had ramped up its promotional spend in July on the return of professional sports and ahead of launches in Illinois and Indiana.
“You go through a period of wanting to ramp up your client numbers and get some scale to capitalize while there are less competitors,” Swanell said.
“In the early months our strategy is to give way any gross margin in promotions because you want to scale up,” he added.
US sports margin is typically in the 5-6% range over the long term, with Las Vegas books having averaged 6.01% throughout 2019.
PointsBet’s marketing spend reached $11.8m in Q3, with the majority invested in launching its betting product in Illinois, as Swanell expects it to be the operator’s biggest US market.
“Logically we’d be spending two-and-a-half times more in Illinois than Indiana. We have probably even over-emphasized this state because of its potential,” he told investors.
Having gained 18,000 new active users during the period, PointsBet’s average CPA was $600.
PointsBet’s US business recorded net revenue of $2.2m in Q3 compared to a $570m loss the previous year.
The vast majority (93%) of PointsBet’s $7m gross US revenue for Q3 came from New Jersey, as the firm’s US handle increased by 130% year on year to $117.1m.