DFS Ad Saturation a Lesson in Era of Legal Sports Betting

DFS Ad Saturation a Lesson in Era of Legal Sports Betting

They were, at the very least, ubiquitous. They were, in the estimation of many sports fans just hoping to watch National Football League games in 2015, inescapable.

There was the DraftKings pitchman in brown tweed, footballs striking him in the head, models in togas twerking at his feet to promote the company’s daily fantasy sports games.

And there was an Ed Norton voice-over and the litany of reputed big winners espousing the bonanza possible from patronizing competitor Fanduel.

So prolific were the spots, offset against each other like pharmacies on corners of a busy intersection, they inspired a line in a John Oliver parody in which a supposed daily player chirped, “I've been using FanDuel since I saw the commercials on TV all the (expletive) time.”

That onslaught could presage the battle for business across the country without restraint from the legal sports betting industry and those invested in its success. Or past lessons might have proved enlightening.

Consequences could make learning from the Great DFS War of 2015 might worth their while, because the public and regulators seemingly have no appetite for a repeat.

Dollars Chasing Dollars for Players Chasing Dollars

The 2015 deluge was verifiable. Ad tracker iSpot.tv reported that the competitors subsidized a national television ad the equivalent of every 90 for three consecutive weeks heading into the National Football League season, with DraftKings pumping $131.6 million into 41,064 spots and FanDuel spending $75.4 million on 22,058 through that period.

The companies bought 8,743 and 14,017 adds, respectively, in 2014.

The blowback was verifiable, too. Data gleaned from social media by Bandwatch revealed that 76 percent of FanDuel commercials and 75 percent of DraftKings’ were regarded negatively by viewers.

“Negative mentions don’t generally concern themselves with the quality of the ads, or the messages within them, but just seeing them repeatedly,” Brandwatch analyst Kellan Terry told DigiDay, making viewers feel “inundated.”

The elements leading up to this flooding of the mass communications zone had begun quietly almost a decade earlier in a provision in the Unlawful Internet Gambling Enforcement Act of 2006 that outlawed most other forms of online gaming, including poker.

The exception left enough space for the DFS industry to root as it asserted legal opinion it felt would prevail in states’ laws governing games of chance versus games of skill. As the matter remained unsettled, it took until almost 2015 for the industry to bloom into a multi-billion-dollar industry worth fighting over every 60 seconds during NFL games.

Gold Rush Possible with Legal Sports Betting

The same environment exists four years later as many states consider either laws to legalize sports betting or establish the regulations to manage it after the Supreme Court repealed the Professional and Amateur Sports Protection Act last May.

Eight states offer legal sports betting.

DraftKings and FanDuel, which leveraged their massive user bases and data apparatuses to plunge into the sports betting market when New Jersey legalized the practice in June, are the key players in a state that has generated roughly $1.9 billion in bets.

But those companies, perhaps enlightened by the experience of the DFS gold rush or leery of the regulatory pushback recently underway in the United Kingdom, have so far tempered their ad push, at least compared to the DFS blitz.

There are television ads aplenty in New Jersey and bordering Pennsylvania, which began taking bets last fall, and billboards connected with casino and sportsbook partners on the Walt Whitman Bridge. It’s ever-present enough, as noted by New York Governor Andrew Cuomo in downplaying the economic impact of legal sports betting.

“Sports betting, first of all, does not make you that much money,” he told WAMC Radio. “New Jersey has sports betting. It’s on TV all the time. You can’t turn on the darn TV without seeing it.”

There is no assurance that purveyors will show restraint when other states, especially populous ones like New York or eventually Illinois, come online.

And the beginning of the end of the 2015 national deluge came when an insider information scandal involving a DraftKings employee prompted lawsuits in New York that heightened scrutiny on an industry whose legality already had many questions – DFS was eventually deemed legal again when a law was changed – and ESPN ended early promotional relationships with both companies.

American Gaming Association senior vice president of public affairs Sara Slane said establishing guidelines for the proliferation of gaming-related television advertising is an area where the trade group and professional sports leagues find “commonality.” A “self-regulatory advertising code of conduct” for its membership is near completion, she said.

“(It’s) critically important to us in learning from the mistakes that we’ve seen around the world when it comes to sports betting and the saturation of advertising and the regulatory backlash that can come from that,” Slane said in a teleconference. “We (wish to work), actually, in partnership with the leagues in implementing that. I know a lot of their marketing codes that they have given to their teams and the league itself do require some form of responsible legal gaming advertising to take place as well.”

Networks Also at Risk of Over-Saturating General Public

This adjustment period might not be confined exclusively to sports betting operators attempting to find a balance between cultivating customers and alienating them.

Media companies trying to ascertain how legal sports betting can bolster viewership or advertising revenue will be forced to do the same, said Charles Gillespie, founder and CEO of Gambling.com Group Plc.

Gillespie predicted that the sports-viewing experience longer-term might not differ much during legal sports betting’s growth. But in its immediate aftermath, Gillespie foresees the possibility of an “unjustifiable upsurge in the amount of betting commentary on these sports, which actually kind of alienates people a little bit.”

Television executives have so far been willing to risk that possibility, with millions to be made in advertising dollars from a revenue stream presented by the Supreme Court repeal last year.

In an earnings call last year before Pennsylvania legalized sports betting, CBS chief executive officer Les Moonves referenced an ad-buying spike at a Philadelphia affiliate and called the new stream “a category that has unbelievable upside.”

FanDuel Group vice president of content business and operations Adam Kaplan said his company "learned from our mistakes.”

“We recognize the DFS category's investment in advertising in 2015 understandably frustrated some consumers,” Kaplan told Gambling.com. “We're excited to invest not just with marketing dollars but with transformative product experiences, enhanced advertising technology, and world-class creative.”

Kaplan said that, in the past year, FanDuel has refocused its business model on “product-driven growth, versus the marketing-driven growth that was dominant in FanDuel’s early days.”

Kaplan said the company now attempts to be “experiential, not transactional” in nature, “socially-powered,” and “empowering and fair.”

DraftKings officials declined requests for an interview.

Google May Be Positioned to Inform But Not Annoy

Google has yet to finalize standards and practices for accepting gambling-related advertising from within the United States, but the global tech behemoth figures to becoming an increasingly influential driver of commerce as more states legalize sports betting.

And it could provide the information would-be bettors want and ambivalent sports fans might otherwise either ignore or find off-putting.

Crucial, Google head of financial trading and egaming Chris Harrison told Gambling.com, is “the intent-based nature of search.”

“If someone's typing in ‘March Madness bet,’ for example, they’re specifically looking for betting information,” Harrison explained. “They're very much there and are looking to place that bet, so we can be quite comfortable that whatever information that FanDuel or DraftKings decides to serve up, you’re going to match the needs of that customer simply because of the keywords that they searched for and I think that’s the power of search advertising.”

Advertising Blitz Not Lone Factor in 2015 Problems

It would be simplistic to suggest that the daily fantasy industry’s legal and legislative travails – which included the industry being temporarily shut down in New York in 2015 - began because of its aggressive marketing. The revelation in October that DraftKings employee Ethan Haskell had won $350,000 in a FanDuel contest raised speculation as to whether employees of the companies could have been exploiting customers.

But in this period of high visibility, with debate still fresh over whether DFS constituted gambling – the Nevada Gaming Control Board subsequently deemed it did and banned the games DraftKings and FanDuel offered – multiple states attorneys general, the United States Department of Justice and Federal Bureau of Investigation launched probes.

The companies ceased doing business in Nevada rather than apply for a gaming license and were shut down briefly in New York when Attorney General Eric Schneiderman issued a cease-and-desist order.

FanDuel and FanDuel each paid out $6 million in settlements in New York in October of 2016 “resolving lawsuits alleging false and deceptive advertising practices by the companies,” according to the state attorney general release.

New York legalized daily fantasy in 2016, however, and is wading through a regulation process to allow legal sports betting in upstate casinos.

“The key issue with DFS as an emerging product was that advertisement brought it to attention of states to analyze whether it was gambling or not,” Jennifer Roberts, associate director of the International Center for Gaming Regulation at UNLV, told Gambling.com in an email. “Sports betting won’t be experiencing that same situation because states will directly address it and there are constitutional protections about advertising of legal products.

“However, I think we should certainly pay attention to the retraction on gambling and sports betting advertising occurring in the UK and Europe. The excitement of finally bringing sports betting into the light with regulation and transparency should not overshadow consumer and community protections, such as responsible gambling measures.”

Consequences of Backlash Evident in England

The current gambling landscape in England provides a real-time cautionary tale.

After a Gambling Commission report revealed a massive underage gambling problem, online gambling companies such as Bet365 and William Hill agreed not to air advertising “whistle-to-whistle" during live sporting events as a pre-emptive measure to possible government reaction.

Regulators, bolstered by public opinion, had hammered gambling companies after they resisted a push to limit maximum stakes on fixed-odds betting terminals. William Hill operates in the United States with Bet365 expected to open in New Jersey by this summer.

“I think there’s a lot of lessons they can learn,” said Jennifer O’Sullivan, an attorney and partner at Arent Fox whose specialty areas include advertising. “Hindsight is always 20-20. But I think if you look at gambling in Europe, where it’s just completely part of the fabric of their culture, I think that’s a place where you can glean and learn more lessons on how not to do something.”

Because getting it wrong has consequences.