DraftKings is an American sports betting and fantasy sports platform founded in 2012 by Jason Robins, Matt Kalish, and Paul Liberman. DraftKings has an interesting and varied revenue generation model. The bulk of DraftKings revenue comes from the sports competitions it hosts. The DraftKings Sportsbook app allows customers in certain U.S. states to engage in sports betting. Under a separate app, DraftKings offers more than 400 casino games. Advertising is also another source of revenue for the company.
Business Model Element
Analysis
Implications
Examples
Value Proposition
DraftKings’ value proposition is to provide sports enthusiasts with an immersive and interactive sports entertainment experience. The company offers a range of gaming options, including sports betting, daily fantasy sports (DFS), and online casino games. DraftKings emphasizes the thrill of competition, real-time engagement, and the opportunity to win cash prizes. Users can participate in a variety of sports-related contests and events, adding excitement to their sports fandom. The platform’s user-friendly interface and mobile app enhance accessibility and convenience for users.
Offers an immersive sports entertainment experience through sports betting, DFS, and online casino gaming. Emphasizes competition, real-time engagement, and cash prize opportunities. Provides a range of sports-related contests and events to enhance sports fandom. Features a user-friendly interface and mobile app for accessibility and convenience. Attracts users seeking interactive and competitive sports-related experiences. Enhances sports enjoyment and engagement.
– DraftKings’ platform provides a one-stop-shop for sports enthusiasts looking for a diverse range of gaming options, creating convenience and accessibility. – The emphasis on competition and cash prizes adds an element of excitement and engagement to sports fandom. – A variety of sports-related contests and events allow users to participate in their favorite sports and teams, enhancing their overall sports enjoyment. – The user-friendly interface and mobile app make it easy for users to access and engage with DraftKings’ offerings. – DraftKings’ value proposition caters to users seeking interactive and competitive sports-related experiences, enhancing their sports enjoyment and engagement.
Customer Segments
DraftKings primarily targets sports enthusiasts, avid sports fans, and individuals interested in sports-related gaming. The platform caters to users across different age groups, genders, and geographic locations. DraftKings offers a range of gaming options to appeal to diverse preferences, including those interested in traditional sports betting, DFS, and online casino gaming. Additionally, the company attracts users seeking real-time engagement and competition, including fans of various sports leagues.
Targets sports enthusiasts, avid sports fans, and individuals interested in sports-related gaming. Caters to diverse demographics, including different age groups, genders, and geographic locations. Offers a range of gaming options to appeal to diverse preferences, including traditional sports betting, DFS, and online casino gaming. Attracts users seeking real-time engagement, competition, and excitement. Accommodates various sports interests and preferences.
– DraftKings’ diverse target audience includes sports enthusiasts with varying levels of interest, from casual fans to dedicated followers. – Offering a range of gaming options allows the platform to cater to different user preferences, from traditional sports betting to DFS and online casino gaming. – The platform’s real-time engagement features attract users looking for excitement and competition, enhancing their sports experience. – DraftKings accommodates various sports interests, making it accessible to fans of different sports leagues and events.
Distribution Strategy
DraftKings operates as an online platform, accessible through its website and mobile app. Users can create accounts, participate in sports betting, DFS contests, and online casino gaming directly on the platform. The company leverages partnerships with sports leagues, teams, and media outlets to expand its reach and promote its offerings. DraftKings also utilizes digital advertising, social media marketing, and affiliate programs to acquire and engage users. The platform ensures secure payment processing and compliance with relevant regulations.
Relies on an online platform accessible through the website and mobile app. Allows users to create accounts and participate in sports betting, DFS, and online casino gaming. Leverages partnerships with sports leagues, teams, and media outlets to expand reach and promote offerings. Utilizes digital advertising, social media marketing, and affiliate programs for user acquisition and engagement. Ensures secure payment processing and compliance with regulations. Prioritizes user-friendly and secure access to the platform.
– DraftKings’ online platform provides users with easy access to a wide range of sports-related gaming options. – Partnerships with sports leagues and media outlets enhance the platform’s visibility and credibility among sports enthusiasts. – Digital advertising, social media marketing, and affiliate programs play a key role in acquiring and engaging users. – Ensuring secure payment processing and regulatory compliance is essential for user trust and platform integrity. – The company focuses on providing a user-friendly and secure environment for users to access and engage with its offerings.
Revenue Streams
DraftKings generates revenue primarily through gaming activities and services. Users place bets and participate in DFS contests, contributing to the platform’s revenue through entry fees, commissions, and rake. Additionally, the company offers premium subscriptions, such as DraftKings Sportsbook+, for enhanced features and benefits. DraftKings earns advertising and sponsorship revenue through partnerships with brands, sports leagues, and media outlets.
Relies on revenue from gaming activities, including bets and DFS contests, through entry fees, commissions, and rake. Offers premium subscriptions like DraftKings Sportsbook+ for enhanced features and benefits. Generates advertising and sponsorship revenue through partnerships with brands, sports leagues, and media outlets. Diversifies income sources to support financial sustainability.
– Gaming activities provide a consistent source of revenue as users participate in sports betting and DFS contests. – Premium subscriptions offer additional revenue opportunities while enhancing user engagement with enhanced features. – Advertising and sponsorship revenue from partnerships contribute to diversified income sources and potential growth opportunities. – Diversification of revenue streams supports DraftKings’ financial sustainability and investment in platform enhancements and partnerships.
Marketing Strategy
DraftKings’ marketing strategy includes extensive digital advertising, social media marketing, and partnerships with sports leagues and teams. The company promotes its platform through online ads, engaging content on social platforms, and collaborations with sports influencers and celebrities. DraftKings actively engages with sports enthusiasts through real-time updates, live events, and sports-related content. The platform also runs promotions, bonuses, and loyalty programs to attract and retain users.
Utilizes digital advertising, social media marketing, and partnerships with sports leagues and teams to promote the platform. Showcases the platform through online ads and engaging social content. Collaborates with sports influencers and celebrities for wider reach. Actively engages with sports enthusiasts through real-time updates, live events, and sports-related content. Runs promotions, bonuses, and loyalty programs to attract and retain users. Focuses on building brand awareness and fostering user engagement.
– Extensive digital advertising and social media marketing help DraftKings reach a wide audience of sports enthusiasts. – Collaborations with sports influencers and celebrities enhance the platform’s visibility and credibility in the sports entertainment industry. – Real-time engagement with users through updates, live events, and sports-related content fosters a sense of community and excitement. – Promotions, bonuses, and loyalty programs create incentives for user acquisition and retention. – The marketing strategy focuses on building brand awareness and fostering user engagement among sports enthusiasts.
Organization Structure
DraftKings operates with a structure that includes teams responsible for technology development, marketing, customer support, legal and compliance, and data analytics. The company places a strong emphasis on data analytics to inform its gaming offerings and enhance user experiences. Customer support teams assist users with inquiries, issues, and responsible gaming practices. Legal and compliance teams ensure adherence to relevant regulations. DraftKings’ technology development teams continuously innovate and improve the platform’s features and offerings.
Employs a structure with specialized teams for technology development, marketing, customer support, legal and compliance, and data analytics. Emphasizes data analytics to inform gaming offerings and user experiences. Provides customer support for inquiries, issues, and responsible gaming practices. Ensures legal and regulatory compliance. Prioritizes continuous innovation and platform improvement through technology development teams. Focuses on data-driven decision-making and user satisfaction.
– Data analytics plays a crucial role in shaping DraftKings’ gaming offerings and user experiences, ensuring relevance and engagement. – Customer support teams are essential for addressing user inquiries, resolving issues, and promoting responsible gaming practices. – Legal and compliance teams play a critical role in ensuring adherence to regulatory requirements and maintaining the platform’s integrity. – Continuous innovation through technology development teams helps keep the platform competitive and user-friendly. – DraftKings’ strong emphasis on data-driven decision-making and user satisfaction is reflected in its organization structure and operational approach.
Competitive Advantage
DraftKings’ competitive advantage lies in its comprehensive sports entertainment offerings, real-time engagement, and partnerships with sports leagues and teams. The platform provides a wide range of gaming options, catering to diverse user preferences. Real-time updates, live events, and sports-related content enhance user engagement and excitement. Partnerships with sports entities increase visibility and credibility. Diversified revenue streams, including advertising and sponsorship deals, contribute to financial stability. The company’s focus on responsible gaming and compliance ensures a secure and ethical gaming environment.
Derives a competitive advantage from its diverse sports entertainment offerings, real-time engagement features, and partnerships with sports entities. Offers a wide range of gaming options to cater to diverse user preferences. Provides real-time updates, live events, and sports content for enhanced user engagement and excitement. Partnerships with sports leagues and teams increase visibility and credibility. Ensures financial stability through diversified revenue streams, including advertising and sponsorship deals. Prioritizes responsible gaming and compliance for a secure and ethical gaming environment. Stands out in the sports entertainment industry with its unique value proposition.
– DraftKings’ diverse range of gaming options sets it apart in the sports entertainment industry, providing users with numerous choices to engage with their favorite sports. – Real-time engagement features create an immersive and exciting gaming experience, fostering user retention and excitement. – Partnerships with sports leagues and teams enhance DraftKings’ visibility and credibility, attracting users and sponsors. – Diversified revenue streams support financial stability and growth potential. – The company’s commitment to responsible gaming and compliance ensures a secure and ethical gaming environment, building trust among users and regulatory authorities. – DraftKings’ unique value proposition and focus on innovation position it as a leader in the competitive sports entertainment and gaming market.
Table of Contents
Origin Story
DraftKings is an American sports betting and fantasy sports platform founded in 2012 by Jason Robins, Matt Kalish, and Paul Liberman.
Robins was known to be a fantasy sports fanatic, participating in over 200 different leagues simultaneously.
Kalish also had the idea to condense the traditional fantasy season into shorter time frames of a week or even a single match.
During the early years, the platform was run from the confines of Liberman’s private residence.
Created to coincide with a Major League Baseball (MLB) opening day, the first product was a one-on-one baseball competition with a cash prize of just $100.
Although a humble beginning, the competition proved the concept was financially viable. This led to MLB investing an undisclosed amount in the company the next year.
By 2014, DraftKings had received millions more in funding and had distributed over $50 million to winners of fantasy sports competitions.
These competitions encompass a variety of sports, including hockey, basketball, football, soccer, and baseball. Official partnerships with the governing bodies of these sports followed soon after.
DraftKings has an interesting and varied revenue generation model.
Fantasy sports
Perhaps rather obviously, the bulk of DraftKings revenue comes from the sports competitions it hosts.
Players must pay an entrance fee to participate, with 10% of that fee going to the company and the remaining 90% comprising the prize pool.
Sportsbook
The DraftKings Sportsbook app allows customers in certain U.S. states to engage in sports betting.
The company generates revenue when a customer loses a bet and also takes a commission for placing the bet – known in the industry as vigorish.
iGaming
Under a separate app, DraftKings offers more than 400 casino games.
Revenue generation is similar to the Sportsbook app: DraftKings makes money when a gambler bets against it and loses.
This model is profitable for the company because it alters the games to ensure it wins more bets than it loses.
Advertising
Advertising is another source of income for DraftKings. Since 2016, it has partnered with companies such as Sprint, Hooters, Jägermeister, and Buffalo Wild Wings.
The nature of the partnership invariably involves the sponsorship of sports tournaments.
For example, Jägermeister sponsored a soccer competition called The Real Shot allowing teams to be picked from 2018 World Cup players.
DraftKings is paid to organize the tournament and likely receives additional remuneration based on the number of participants in the competition.
B2B
We mentioned earlier that SBTech was one of the companies involved in the reverse merger in 2020.
SBTech is particularly important in the B2B space because it runs most of the DraftKings suite of gambling and betting products.
With now full ownership of the B2B product, the company can sell it to other online gambling companies and collect a managed service fee.
Put more succinctly, the managed service fee is likely to be a share of the resultant revenue in the range of 10 to 20%.
Key takeaways:
DraftKings is a sports betting and fantasy sports competition platform founded in 2012 by Jason Robins, Matt Kalish, and Paul Liberman. Kalish in particular was instrumental with his idea of condensing the traditional fantasy sports season into a single week or match.
DraftKings charges users an entrance fee to participate in its competitions. It also manages a betting and gambling app where it generates revenue on losing bets and vigorish.
DraftKings also works with related companies to provide targeted advertising at competitions. After acquiring online sports technology firm SBTech, the company can now sell it to other companies and collect a share of their income.
DraftKings: Key Takeaways
Company Overview: DraftKings is an American sports betting and fantasy sports platform founded in 2012 by Jason Robins, Matt Kalish, and Paul Liberman. The platform offers various sports competitions and has expanded into sports betting and iGaming.
Origin Story: Jason Robins, a fantasy sports enthusiast, co-founded DraftKings. Matt Kalish’s idea of condensing the fantasy sports season into shorter time frames contributed to the platform’s unique format. The platform’s early success led to investments from MLB and significant funding.
Revenue Generation Model:
Fantasy Sports: DraftKings earns a bulk of its revenue from hosting sports competitions. Players pay an entrance fee, and the company takes a portion while the rest forms the prize pool.
Sportsbook: The DraftKings Sportsbook app allows customers in certain U.S. states to engage in sports betting. The company earns from customers’ losses and takes a commission (vigorish) for placing bets.
iGaming: Through a separate app, DraftKings offers casino games and earns revenue when gamblers lose bets.
Advertising: DraftKings generates income from partnerships with companies like Sprint, Hooters, and Buffalo Wild Wings. These partnerships involve sponsoring sports tournaments and events.
B2B: After the reverse merger with SBTech, DraftKings gained ownership of the B2B product suite. It can now sell this product to other gambling companies and collect a share of the resultant revenue.
B2B Aspect: DraftKings’ acquisition of SBTech allows it to sell its gambling and betting products to other companies and earn a share of their revenue. This is likely to be a managed service fee ranging from 10 to 20%.
Key Takeaways:
DraftKings is known for sports betting and fantasy sports competitions.
Revenue sources include entrance fees from competitions, sports betting, casino games, advertising partnerships, and B2B sales of its technology.
The platform’s success and expansion into various gambling avenues have contributed to its market value and popularity.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a businessmodel. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
In a franchained businessmodel (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
