The offer was simple: Bet up to $7,500 on your first wager, and if you lose, you get a “free bet” back for the amount lost. It was the typical “risk-free” (read: not risk-free) offer, for an atypical maximum amount.
— Peter Went (@Bank_Risk) May 3, 2019
Fast-forward less than a year later, and the Sports Illustrated-branded sportsbook is currently offering new users … $100 in free bets after they make their first $20 bet.
And SI Sportsbook is far from alone in slashing its welcome offers.
Even the hyper-aggressive Caesars, which was offering a $10,000 risk-free bet this time last year, is down to offering a $1,250 risk-free bet.
In fact, most sportsbooks have severely curtailed their sign-up bonusing in the last few months, a move that doesn’t surprise many observers.
“As you get deeper into the player cohorts they become less valuable, so bonusing becomes smaller,” said Alun Bowden of Eilers & Krejcik Gaming. “Early adopters might be worth throwing $500 at, but your Johnny-come-lately, $10-a-game bettors aren’t.”
Bowden, who mostly covers the European markets, was certain the American market would mimic what happened in Great Britain, Spain, and everywhere else across the pond: Bonusing would slow down as the market matured.
But he didn’t expect it to happen so quickly.
“The U.S. is basically the European sports betting sector on fast-forward,” Bowden said, noting that sign-up bonuses in Europe now generally linger in the $30-$35 range. “I’m not surprised to see it, but I am surprised to see it so soon.”
Wall Street pressure
And while diminishing returns on new players is certainly one reason for the bonus offers to come down, a more black-and-white issue has presented itself to the sportsbooks.
“Shareholders want to see an accelerated path to profitability and more marketing/promotional discipline,” said Ryan Sigdahl, a partner and senior research analyst at Craig-Hallum Capital Group. “All of the major operators are targeting positive EBITDA at some point in 2023, so they need to start rationalizing spend now to work towards those targets.”
A quick look at sports betting stock prices — compared to their 52-week highs — are vertigo-inducing.
DraftKings is trading at $17.88, off a $64.50 high. Flutter is around $62.50, down from its $108.90 peak. MGM is at $35 and change, down from over $51.
DraftKings will be an interesting stock to watch. Traditionally gambling companies spend big for a few years but cut back substantially after that. Wondering if this is a casualty if market timing + misunderstanding of industry standard spend schedule — bear case is evident tho https://t.co/YMsEzXlLwD
— samhcarter.eth (@samuelhcarter) May 11, 2022
“Also, New York’s high tax rate of 51 percent is burdensome, so operators need to rationalize quicker than states with lower rates and thus more dollars to spend on the player versus giving to the state off the top,” Sigdahl noted.
In fact, the 51% rate in New York is so burdensome that FanDuel and BetMGM have completely ditched their New York sign-up offers. New users who sign up get bupkis.
Another reason for the bonusing slowdown? Operators are collecting gobs of information on their users and are now starting to tailor offers and events to keep them coming back for more.
“In addition to receiving pressure from investors and the macroeconomic climate, operators now possess more user data than ever before and are optimizing their marketing mixes to reflect learnings surrounding unit economics,” said Lloyd Danzig, the founder and managing partner at Sharp Alpha Advisors, which specializes in sports betting and online gaming.
No bonus for you!
A partial rundown of the diminishing state of bonus offers across the industry (in no particular order) …
- Sports Illustrated: From a $7,500 risk-free bet to “bet $20, get $100 in free bets.”
- Caesars: From a $10,000 risk-free bet to a $1,250 risk-free bet.
- FanDuel: From a $1,000 “no sweat” first bet (“risk free” by any other name) to “bet $5, get $150 in free bets.”
- WynnBET: Has transferred to a “bet $100, get $100” offer, down from a “bet $10, get $200 offer.”
- FOX Bet: From a $500 risk-free bet to a $50 risk-free bet.
- BetRivers: Had been offering a $250 deposit match bonus with a 1x playthrough, now replaced it with a $500 risk-free bet.
Not all operators, however, have seen their bonus offers go down.
BetMGM, for instance, has been offering a risk-free $1,000 bet since August, up from a $600 offer previous to that. But in addition to nixing its New York bonus, it also wiped Pennsylvania — with its own 36% tax rate — off the bonus ledgers for a few weeks before reinstating it.
California, Florida, and Fanatics
While it’s clear bonus offers are down across the industry, Danzig, for one, thinks the downward pressure will hit a speed bump at some point in the future.
“It is true that sign-up bonuses have largely declined across operators,” Danzig noted. “However, this trend is likely to be interrupted by the launch of sports betting in populous states like California and Florida, as well as by the entrance of heavyweight contenders such as Fanatics.”
And while legalization in California and Florida are not quite foregone conclusions, Fanatics’ entry into the sportsbook world is. It is coming, with plans to launch by year’s end.
What potentially sets Fanatics apart in its desire to acquire customers is the cross-selling potential it has. After all, Fanatics is, at its heart, an apparel company.
I'm pretty sure they could pay the man in apparel and he'd be cool with that.😂
— Captain Jack Andrews (@capjack2000) October 27, 2021
“It’s all an extension of the game,” Las Vegas-based gaming consultant Brendan Bussmann of B Global told Sports Handle over the summer. “If I have someone betting in the middle of a game and they are a Nebraska fan, I can sell them a T-shirt while they are in-game wagering. It’s the Holy Grail of being able to sell memorabilia as well as engaging people in the game.”
But even with Fanatics’ eventual entry into the space, and despite Florida and California still on the sidelines, big bonus offers for new customers are eventually going to go the way of the dodo, the woolly mammoth, and pitchers batting for themselves.
“We think this is a natural evolution for the industry in the early innings of maturation and a good thing for the differentiated operators,” said Sigdahl. “Ultimately, product will win the customer long term.”
Note: Hours after this story published, FanDuel brought back its “no sweat” bet promotion, up to $1,000 for new users.