Penn National’s Strategy: Keep Appealing to Younger Crowd
The Penn National playbook looks like this: Attract a younger demographic, spend less than the competition to do so, and continue trying to wring greater profit from 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 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 world of online sports betting sites and casino gaming as part of a first quarter earnings call and presentation Thursday.
The first-quarter 2021 numbers showed Penn National generated revenue of $1.27 billion and Adjusted EBITDAR of $447 million (EBITDAR is earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs). While revenues declined 6% compared to the pro forma results for Q1 2019 (the last comparable pre-pandemic quarter), Adjusted EBITDAR was up 7%.
Penn National operates or has ownership interests in 41 bricks-and-mortar properties in 19 states and has betting apps in Pennsylvania, Michigan, and Illinois.
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 for sports betting in 8 states by the start of the 2021 football season. 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 earnings call. The major cost for online gambling sites is the money they spend 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 across the industry, 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's 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 competitors, Penn National has a substantial stake in the bricks-and-mortar gambling world through its casino and racetrack operations. 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 Barstool's customer engagement will also help move those customers across the company’s betting options, from online sports wagering to online casino wagering. As part of that strategy, Penn National will be offering a wider variety of online games to promote cross-selling, Snowden said.
