Flush with cash from media-company investors FanDuel and DraftKings
together spent an estimated $500 million on advertising last year,
according to analysts Eilers & Krejcik Gaming. (FanDuel is backed by
Comcast Corp.
DraftKings is backed by 21st Century Fox Inc.,.
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The advertising boom increased brand recognition and the number of users
enormously. FanDuel’s revenue nearly doubled to about $100 million in
2015, from $57 million 2014, according to the company. But the cost of
the ads was enormous—an estimated $174 per new user at DraftKings and
$123 per new user at FanDuel, according to Eilers & Krejcik. —which
meant operating losses at both companies last year.
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Daily fantasy-sports sites generally allow users to create virtual
sports teams using real athletes from a given league. The make-believe
team’s standing rises and falls based on the real-life performance of
its individual members. The site operator makes money from entry fees,
often amounting to about 10%, and doles out cash to users whose teams do
well.
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