Market share. It is one of those metrics that the industry obsesses over and yet simultaneously insists is not the primary indicator of success. Many industry pundits decry the “spray and pray” approach as an expensive and not always successful way to acquire customers, even if it can help pad the market share numbers in the short term.
As the U.S. sports betting and online gaming market continues to mature and the geyser of new state launches slows to a trickle, it is true that market share hardly tells the story of a brand’s success. Operators are increasingly trying to bring down the cost of acquisition as well as develop an audience of players with high lifetime value, since the spray and prayers inevitably recruited a wave of bonus hunters who hit and ran once the sign-up offer was done.
Can small operators earn meaningful US market share?
And yet market share still dominates the conversation. Two operators hold the majority of the national online gambling market share and the top eight operators hold all but around 5% of the pie. The list of operators, large and small, that have thrown in the towel continues to grow, which casts doubt on whether or not small, local players can possibly compete.
The common sentiment may be that the Davids stand no chance against the Goliaths, but the industry is not without its success stories.
In Arizona, the list of operators is shrinking by the day, with Betway, Unibet, SaharaBets and Superbook all exiting the state this year. While those brands flailed though, a local operator continues to post numbers that rival Hard Rock Bet and BetRivers.
During February, a busy month for sports bettors, Desert Diamond sportsbooks ranked seventh of the 17 operators in the state with not quite 1% of total handle. It may sound like a small amount, but it trounced competition from national brands like BetFred, Bally Bet and the now-shuttered WynnBet.
Those numbers also only account for mobile wagering and not the betting done at Desert Diamond retail sportsbooks, which are not required to report revenues to the Arizona Division of Gaming.
Desert Diamond’s Director of Sports Betting Laurel Pittman thinks some of the brand’s success came, in part, because there were so many competitors in the space.
“When you had what we had in Arizona, with so many operators going live at the same time, it could be, especially if you’re a new sports bettor, a little overwhelming,” she observes.
Desert Diamond offered a “sense of comfort and familiarity”. Founded in 1993, the casino brand has been a known entity in the state for some time. With a wave of new apps that seemed no different than the ones offered in neighboring Nevada, Pittman notes that “there was no local feel” when online betting rolled out in the state in 2021.
Desert Diamond leaned in to its local reputation
Desert Diamond Sportsbook opened on properties in late 2021, then went online at the start of 2022, offering residents a local option. Initially though, the brand didn’t make much of a dent amidst big names spraying and praying customers with Super Bowl offers. In its first revenue report, the operator took just $100,000 in wagers, a mere .02% of the state’s handle that month.
Slowly but surely, the app gained popularity, but that wasn’t purely through on-site activations and brand recognition. The Tohono O’odham Nation knew it understood how to operate tribal retail casinos, but it realized its limitations as a digital operator.
Thus, Desert Diamond Mobile was born. Staffed with a number of experienced players in the online gaming space, the new company imported the necessary knowledge in to compete as the only Arizona-owned and operated online sportsbook. Though the team brought in experience from other brands, they made a point not to copy the big operators and developed a playbook focused on never straying too far from what the Desert Diamond brand is known for.
PlayStar knew the pitfalls before opening in NJ
As a late mover in New Jersey, PlayStar similarly saw what the big national brands were doing and knew what to avoid when entering the marketplace two years ago.
“They might have had huge amounts of market share, big actives, huge brand awareness, but it was costing them an absolute fortune to get players in, and the road to profitability was so long,” PlayStar CMO Jon Bowden recalls. “Brand preference was around who shouted the loudest.”
Seeing the marketing and acquisition budgets of some competitors, Bowden and his team asked themselves a fairly straightforward, albeit difficult, question:
“Can we give players something they can’t get anywhere else?”
The answer was Star Rewards. The rewards program is essentially a “digital stamp card”, where all range of customers can earn rewards that can be redeemed for things outside of the PlayStar brand. That could be discounts at local stores, free products or even unique experiences at New York Giants and New Jersey Devils games.
This localized rewards program was designed for everyone, but Bowden notes it is especially popular with VIPs. By offering players a chance to use their points on brands they engage with every day, PlayStar managed to build a loyal following and broke into the top ten New Jersey online casinos based on market share.
It is quite a feat for a company that only came into the most mature online market in the country in 2022.
“I wouldn’t say it’s a surprise because I think we’ve been doing all the right things for a long time now, and we’ve stayed really consistent in our approach,” Bowden says. “But obviously it’s very nice to be ahead of where we thought we’d be around our market share.”
The market share bandied about as PlayStar launched was 5% and Bowden and his team are pleased to be hitting those projections, but it isn’t the only measure of success.
“Success for us is really around us hitting our targets, achieving profitability, and then, from a player perspective, achieving the really high retention rates that we’ve set ourselves.”
Moreover, the PlayStar team is focused less on maintaining numbers and more on continuing the initiatives and service that got them to this position in the first place.
“You focus on the journey, not the destination,” Bowden cautions.
Not all small brands should outsource their opportunities
When it comes to advice for new entrants, Pittman similarly encourages local operators, particularly tribal operators to think less about an instant fix and more about the long-term.
Most tribal operators in Arizona and other states chose to outsource their gaming licenses to experienced digital brands. The overhead of developing a new product compared with the revenue that came from market access agreements didn’t seem worth it. Some ended up with big brands like bet365 and Fanatics, but many others partnered with operators that are now out of the market.
“If you have the ability to do this yourself, if you have the ability to keep your license and operate this yourself, you have to do it, and you have to lean into that brand and the local identity that you’ve already established in the market,” Pittman encourages.
It probably helps to have aspirations beyond just a sportsbook. For example, Desert Diamond hired a team with not just extensive digital sports betting experience but online casino experience as well. Even though there isn’t movement in Arizona to regulate iGaming yet, Desert Diamond is prepared and ready for when it happens.
PlayStar is also prepared to take its localized success and replicate it in more states. Bowden didn’t have names and launch dates, but he thinks the idea of Star Rewards is easily replicated even if some of the more local rewards cannot.
For now, they are small-scale success stories but their growing market shares indicate that there are other ways to find success in the States beyond spraying and praying.