Can PokerStars Compete With FanDuel, DraftKings In Daily Fantasy Sports?

Steve Ruddock September 1, 2015 725 Reads
StarsDraft

With the acquisition of Victiv, Amaya Gaming (the parent company of PokerStars) has officially entered into the daily fantasy sports business.

Amaya is in the process of rebranding Victiv as StarsDraft, and along with the use of the “Stars” part of PokerStars name, StarsDraft has a similar logo and theme to PokerStars; a clear indication Amaya plans to piggyback off the brand and success of PokerStars.

But will that be enough to compete in the DFS industry?

Most likely not.

Hey, big spender

Amaya will be hard-pressed to compete with the current DFS giants, FanDuel and DraftKings, on a dollar-for-dollar marketing basis. Nor would they want to.

FanDuel and DraftKings are on pace to spend an unprecedented amount of money marketing their products this year, which should keep both companies well in the red once again.

For their part, Amaya Gaming CEO David Baazov has already indicated this type of advertising is not in the company’s immediate short-term plans.

According to Baazov:

“I’d also emphasize that this is not a category in which we will be doing any significant investment in… I think the market still has to mature more, it has to appreciate to a size where we would be willing to make a significant investment.

“When you take a look at some of the marketing spend [in DFS], I think there are some companies that are spending four to five times revenue. That’s not something we’re looking at right now…

“To just put up overlay to try and attract customers in the short term and don’t have any return right now, is not going to be a focus for us. I think the focus is going to be leveraging our cross-sell of our database, our brand and our trust, with the fact that people’s money is secure at anytime, segregated, etc. … And we’re going to capture some market share that is going to be meaningful anyway. But I think the time isn’t right now in order to go in and spend on CPA [cost per acquisition]. The market needs to have more players in totality.”

StarsDraft late to the party

A second disadvantage Amaya and StarsDraft will face is FanDuel and DraftKings are already established in the space with:

  • Several years of experience in the market;
  • a plethora of official partnerships with leagues, teams and venues;
  • an established DFS player base to direct market to.

Because of this, both sites will be able to offer larger guarantees than StarsDraft could even dream of during the NFL season. Without established partnerships with professional sports leagues and teams, it will be very difficult for Amaya to position itself as a serious competitor without spending a boatload of money — which the company has already stated it doesn’t plan to do.

How can StarsDraft combat these disadvantages?

Still, Amaya (and by extension PokerStars) isn’t some startup company that managed to raise a bit of capital to try to disrupt the space and slice off a small piece of the DFS market share.

This is an established company with a proven track record. Amaya certainly has a well-formulated short- and long-term plan in place.

While this is mere speculation on my part, here is how I see StarsDraft positioning itself in the near term.

Use THEIR experience to grab some market share

When it comes to DFS, Amaya will likely ascribe to the mantra that a rising tide lifts all ships, and if it plays its cards right, it might be able to ride the wave of FanDuel’s and DraftKings’ marketing blitzes.

If a rising tide will in fact lift all ships, than StarsDraft could use their SEO experience to rank high in DFS searches and perhaps let FanDuel and DraftKings market for them, content to pick off potential customers who are searching for generic DFS terms and not specifically for FanDuel and DraftKings.

PokerStars is also considered the best marketer in the online poker industry, and if they choose to do so, the company could create some enticing ads with its sponsored poker pros and sports celebrities.

However, based on Team PokerStars Pro Jason Somerville signing with DraftKings, it would appear PokerStars contracts are not exclusive of DFS sites. Although, because of the Somerville situation, I’d wager they are from here on out.

Unleash the PokerStars database

One of the top concerns PokerStars’ competitors have regarding their potential return to the U.S. is the company’s player database.

If this asset is as powerful as some seem to believe it is, the database could be used to direct market to a swath of the population that almost certainly possesses a potentially high interest in DFS.

Embrace the DFS is gambling angle

An out-of-the-box way StarsDraft could gain some headlines would be to stealthily market its product by making “news.”

Since the media is currently lapping up the “is it or isn’t it gambling” dynamic of DFS, this could allow Amaya and StarsDraft to create a wedge issue where they could be the lone industry voice willing to say, “of course DFS is gambling.”

If they decided to travel down this path, StarsDraft would be mentioned in a number of mainstream stories about DFS, and would be cited by analysts and regulators discussing the topic.

Amaya is in a unique position to take this position, since unlike FanDuel and DraftKings (which offer DFS exclusively), Amaya is clearly in the gambling business, and makes no bones about it.

What to expect from StarsDraft short-term

Should things go perfectly for Amaya and StarsDraft over the next six months, the company should be able to grab a small but noticeable market share.

Considering the current dominance of FanDuel and DraftKings (purportedly 95%+ of the entire DFS industry) anything above 5% by the end of the upcoming NFL season would be seen as a solid win for Amaya. Although with a group of established mid-tier operators already in the space, as well, that might be an optimistic forecast.

The key for Amaya is to continue to grow past the NFL season, and continue to gain market share year-over-year.

What to expect from StarsDraft long-term

Amaya’s long-term plans are likely far different from its DFS competitors.

With legalized gaming (slowly) spreading across the U.S., Amaya will likely use DFS as one cog in a far larger gambling machine. Amaya will be involved on just about every level of U.S. gaming, from DFS, to online poker, to online casino, and perhaps beyond.

Therefore, how Amaya uses its DFS product down the road is far more malleable than companies offering DFS exclusively, since they are less impacted by future regulation or changing tastes of online gaming enthusiasts.