Sports Gambling, Part II: Industry Size and Projected Growth
There are two types of people when it comes to sports gambling. There’s the guy on FanDuel who places 10 bets on the NFL per weekend. And then there’s the guy who wouldn’t put a dollar down on the game even if the other team forfeit. Both are valid decisions. But no matter which of these philosophies you subscribe to, there’s no denying that sports gambling is a large (and growing) industry with a rich history.
Despite its deep roots, sports betting has had a long, arduous journey to get to where it is now. In fact, the last five years have changed the game entirely. These years have shaped its value, reputation, accessibility, and popularity. If you recall from the first edition of our sports gambling series, legalization was a considerable obstacle to the industry’s growth. Since the 2018 Supreme Court ruling, many states have either legalized or moved to legalize sports betting, which accounts for the five-year surge we’ve seen. However, it is still in legislation in some states and completely illegal in others. If you think sports betting is a big industry now, wait until legislation is complete in more states.
Last year, the sports betting industry was valued at $83.65 billion. By the end of 2023, that value is expected to reach $92.27 billion. Not only is sports gambling growing in popularity, it’s growing in inaccessibility. Now that it is legal or legal processes have begun in several states, new sportsbooks are popping up every day with multiple ways to bet.
There are the traditional, in-person sportsbooks we often think of. These outlets have been the longest-standing ones and do not emphasize convenience or spontaneity. Going to these sportsbooks requires research and careful planning around wagers. However, these sportsbooks generally make a considerable amount of money because of the premeditated bets. Let’s say you’re going on a trip to Vegas for March Madness where you know there are several games to bet on each day. If your intention is to go to the sportsbooks, you’re not walking in there with $5. It’s likely that you’ve set aside decent money solely for this trip, which is why in-person sportsbooks make considerably more money per bet than online alternatives. However, these sportsbooks obviously require more money and more foresight, which attracts fewer bettors, but it includes the ones with the biggest pockets. So, though wagers tend to be higher, can these sportsbooks with a smaller crowd really compete?
The newer sportsbooks do the complete opposite; websites and mobile apps allow anyone 18 years or older to place quick bets on a player or game of their choosing by just linking a bank account. These outlets require no planning and are often centered around live betting on a whim. The convenience and lack of planning likely account for the huge spike in the industry. Nowadays, there are also a million different options and combinations for betting available. You can wager on the color of Gatorade, the length of the national anthem, or a combined performance between any two players. You also have the option for pick ‘ems where you choose the winner, or an over/under that lets you decide if a team or player will go over or under a certain statistic (points, yards, blocks, steals, etc. depending on the sport).
Even better, smaller wagers are popular on these sites. Whether you have a million dollars to your name or $20, you can place a bet (or even a series of small bets). With the new wave of mobile sports betting, the options are truly limitless.
The seemingly endless avenues and low-cash requirement allow the most casual sports fans (or people who know nothing about sports) to get in on the betting landscape and tune into a sport solely to follow their bet. This is why it’s no surprise teams and prominent leagues (NFL, MLB, NBA, etc.) are partnering with sportsbooks. If viewership can increase to include a demographic that wasn’t present until sports betting began, that’s a new business.
And while the numbers are impressive, they don’t really tell the whole story. Some sportsbook partnerships are more obvious than others. For example, the Miami Dolphins’ partnership with Hard Rock Sportsbook has included the naming rights to the stadium. If you go to a Chicago Cubs game, DraftKings has a branded retail sportsbook right at Wrigley Field. Depending on the partnership, you may see a majority of stadium employees sporting the logo of the paired sportsbook. Even when you’re watching a game from the comfort of your own home, commercial spots are packed with competing sportsbooks, all advertising the best odds and highest payouts. If you Google what time a game starts, you’ll be presented with the matchup, game time, where to watch, and, of course, the money line. Regardless of the industry’s net worth, there is no denying that sports betting has infiltrated every aspect of sports.
The sports betting industry is expected to expand at a compound annual growth rate of a whopping 11.7% until 2030. By then, the industry is expected to reach $182.12 billion. As technology continues to evolve, so will sports betting. As we have already seen, new sportsbooks pop up every year across new platforms. Who knows? Maybe soon, placing bets will be as easy as telling Siri or using your Apple Watch.
With wider availability of outlets and further advertising from those outlets, the industry will only grow and become more diversified. We’ve already seen a ton of evolution in sports betting over the past five years since legalization, so I’m not expecting these sportsbooks to remain completely stagnant until 2030. In fact, it’s quite the opposite. Between now and 2030, I expect an almost infinite number of sportsbooks to pull out all the bells and whistles.
Obviously, advertising is a key predictor of growth. The packed commercial spots and team partnerships have certainly accounted for a considerable portion of the growth I summarized above. As I mentioned, you can’t make it through an NFL Sunday without being bombarded with online sportsbook ads. This phenomenon begs the question, how much are sportsbooks really spending on advertising?
Unsurprisingly, the most is spent on marketing during the last three months of the year. From October to December, there’s a lot going on. We have MLB postseason, NFL, college football, college basketball, NBA, and NHL – pretty much a little bit of everything. Overall, from September 2021 to May 2022, U.S. sports betting outlets spent $282 million on advertising.
As with all marketing tactics, sports gambling ad pushes have to be done in a timely manner to get the farthest reach and to be most effective. When is most timely, you may ask? Let’s take the first week of the NFL season for example. We have four major sports betting outlets: FanDuel, DraftKings, Caesars, and BetMGM. Just those four outlets combined to spend $24 million on advertising in the NFL’s first week. FanDuel accounted for the most spent at $13.8 million, then DraftKings ($5.4 million), then BetMGM ($2.6 million), and finally Caesars ($2.2 million). These advertisements combined to account for 4.8% of NFL TV ad impressions.
The Great Tradeoff
Sports betting outlets have become adept at luring in new customers, but can they keep them? Maintaining customer loyalty is one of the biggest challenges sports gambling marketers face. Many casual bettors are looking for a quick payout with low risk. Unfortunately, that combination is impossible (and that’s why they call it a gamble). Even if your bet works out, there is always an element of risk involved. Several sports betting sites advertise great odds and minimal risk, but their outcomes don’t always live up to those promises. Most consumers are smart enough to know that you can never trust a gambling outlet’s word at face value. These companies use the vig to profit from users and carefully set their odds and minimum bets to make money. This inevitably leads to consumers experimenting with several different outlets until they find one they prefer. Sometimes, it’s best to cycle through the sites rather than settling on one. Therefore, it is quite simple for an outlet to gain new customers. But what is their shelf life? It could be a day or a week. At their luckiest point, an outlet may retain a customer for an entire season. However, most people don’t bet on every sport all year round.
This low rate of customer maintenance and satisfaction has led many sports betting companies to reconsider their selling points. You may have noticed that many companies have recently stopped using the term “risk-free” or “low-risk” betting in commercials. Public backlash from these false claims has deterred outlets from making promises that are false or nearly impossible to deliver. Instead, the selling points now focus on higher payouts. But of course, there’s a catch: Higher payouts mean higher wagers. Believe it or not, they’re not going to offer a $100 payout for your $20 wager every time. A company that profits solely off your losses isn’t trying to do you any favors. I know, it’s shocking. Once people realize this, they tend to switch over to a different site, though they’ll all produce slightly different variations of the same outcome.
Another truth bomb that might be shocking to learn is that not everyone gambles for money alone. Many people do it just because it’s fun. This is especially true for casual sports fans who need a reason to tune into the game as much as their die-hard friends. Think about fantasy football: Sometimes money is involved, but most people play because they love watching their fantasy quarterback score. The same principle applies to betting. Regardless of the payout, it’s fun to watch the guy you bet on drop 30 points in an NBA game, and it definitely makes watching the game more fun. If you’re not a fan of a team that’s playing in the NBA Finals, you still have a reason to watch the game as intently as any other fan. The anticipation and fun aspect of sports gambling is often one that is overlooked, but it is another reason why fans experiment with different sportsbooks. Whichever format offers the most entertaining way to bet is likely to be the one they stick with. For these bettors, the money is usually just a nice bonus to an otherwise fun activity.
If you thought the last five years of sports betting have been crazy, you’re not wrong. However, the last five years were not a fad or a trend. In fact, it’s just the beginning; sports betting is here to stay. Odds, gambling, and money lines have already infiltrated every aspect of sports. If you’re looking up the next golf tournament, you’re sure to find a list of players and their associated odds to win the tournament. If you Google when your alma mater plays their college-football rival, you’ll get the money line for the game. Whether you’re attending a game or watching from home, you’ll see a promo for sportsbooks everywhere.
Like it or not, sports gambling is the future. I don’t know about you, but when I think of commercials during football season, my mind turns to iconic Super Bowl ads: Budweiser, M&M’s, Nike, Coca-Cola, Google, Walmart, and Volkswagen. Pretty much anything along the lines of beer, food, cars, or sports brands. But this year might be a little different. The first Super Bowl ad may be a sports betting outlet, seeing how they have overtaken the regular season ad spots. And by the way, you can bet on that too.
Visual Capitalist: The Explosive Growth of Sports Betting
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