Penn National’s Strategy: Keep Appealing to Younger Crowd
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The Penn National playbook looks like this: Attract a younger demographic, spend less than the competition to do it and continue to try to wring greater profit out of customer spend than other gambling operators.
The tactical keys to all of that are:
- Lean on the popularity of its media component Barstool Sports with its intense following (Penn National CEO Jay Snowden calls it “fierce loyalty”) of millions of devotees.
- Continue to grow in-house media outreach.
- Eschew traditional and expensive advertising, such as TV and radio ads, and blend the company’s many gaming components of online and retail sports wagering, online casino play, and bricks-and-mortar casinos.
Snowden talked broadly about his company’s approach in the gambling business at-large and in the hugely competitive online sports wagering and online casino gaming world as part of a first quarter earnings call and presentation Thursday.
The first quarter numbers for 2021 saw Penn National generate revenue of $1.27 billion and an Adjusted EBITDAR of $447 million (EBITDAR is earnings before interest, taxes, depreciation, amortization and restructuring or rent costs). While revenues declined 6% compared to Q1 2019 pro forma results (the last comparable pre-pandemic quarter), the Adjusted EBITDAR was actually up 7%.
Penn National operates or has ownership interests in 41 bricks-and-mortar properties in 19 states and has online betting apps in Pennsylvania, Michigan betting apps and Illinois online betting apps.
Soon, Penn National will be live online in Indiana in time for the Indianapolis 500 and NBA playoffs, and Snowden said his company will be live online for sports betting in eight states total by the start of football season 2021. On the bricks-and-mortar side of the business, Penn National will be opening a “mini-casino” in York, Pennsylvania, in August.
Penn National Efficiencies
However, it was Penn National’s efficiencies that Snowden emphasized during an earning call. The major cost to online gambling operators is how much they spend on acquiring and retaining customers (cost-per-acquisition or CPA) and Penn National has done an excellent job there, Snowden said. That cost has been estimated at $300 to $800 per customer industry-wide but it has been far lower for Penn National.
“Based on our differentiated approach and fully integrated partnership with Barstool, we have the best CPAs in the industry and it’s not even close,” Snowden said. “Our CPAs are running well under $100 (per customer) right now across all three states where we operate in (online).
”That sets you up so well for the long run … we’re going to be a lot more aggressive spending to acquire customers as we head in football season ’21 than football season ’20 because we now have scale. We were launching in one state (Pennsylvania) a year ago … and this year, we’re going to be in eight states.”
Snowden criticized the industry focus on monthly handle figures.
Turning to bottom-line results, he pointed out: “You look at our Q1 results and obviously we generated nice revenue growth from interactive (meaning online) from Q4 (2020) to Q1 and we broke even. Nobody else can say that. … The fact that we’re live in three states and that we’ve ramped up our staff the way we have and all the expenses that come with launching in new states and we can still break even in an entire quarter when every other competitor is burning through hundreds of millions of dollars, I think says a lot.”
Looking to Appeal to Younger Crowd
Unlike some of its online gambling competitors, Penn National has a substantial stake in the bricks-and-mortar gambling world with its casino and race track involvement. And it hopes to capture a younger market, both online and in actual casinos.
Company executives pointed out that Penn National/Barstool customers are more often in their 20s rather than their 30s and that in some instances, at least in Michigan, while the average bet size is smaller (a result of the younger average age), the hold percentage is higher because the betting of that demographic — or at least the demographic that follows Barstool commentary — tends to be on parlays where the bookmaker takes a bigger vigorish.
Penn National expects that it will continue to be the Barstool engagement with customers that will also help to move those customers among the company’s betting options from online sports wagering to online casino wagering. As part of that strategy, Penn National will be offering greater varieties of online casino games to promote cross-selling, Snowden said.
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