It’s too bad there isn’t an app that lets companies change their business models every day.
According to a New York Times report, daily fantasy sports titans DraftKings and FanDuel are nearing an $8 million to $12 million settlement agreement for a false advertising case with New York’s attorney general. The settlement’s cost, along with the fees of PR and lobbying firms that DraftKings and FanDuel have employed to influence lawmakers into legalizing DFS, has created cash flow problems for the companies, who are now struggling to pay vendors. As DFS operators have restructured their finances – a possible merger has been speculated for several months — their ad spend has been in free fall, which is bad news for media outlets who’ve banked on DFS’s massive marketing budgets.
“The financial difficulties facing DFS operators will likely cause them to curtail their advertising budgets,” said Chris Grove, partner at gambling consulting firm Narus Advisors. “Given a choice between continuing to pay lobbyists or running more ads, DraftKings and FanDuel would be facing no choice at all.”
DraftKings, FanDuel and several large sports publishers either declined interview requests or failed to return messages for this story. Data from ad tracking firm iSpot.tv shows that this year through October 23, DraftKings and FanDuel together spent $23.9 million to run 12,307 commercials on national TV this year. In the comparable year-ago period, the companies spent $256.7 million on 73,716 national TV commercials.
The pair had already significantly reduced their mobile ad spend around this time last year. A FanDuel spokesperson called the ad spending decline seasonal. “It peaks at the beginning of NFL season and declines as the season goes on.”
The beginning of the NFL season does provide a boost for DraftKings and FanDuel. Brandwatch data shows that online mentions of the companies peak during the first Sunday of the NFL season. But although DFS activity is greatest during NFL play, their ad spend hasn’t picked up this season. Last year, the two companies ran mobile ads across all 20 networks tracked by Sensor Tower, which measures spending across mobile ad networks. This year, the companies have run ads on just five networks, and the number of ads on the networks have significantly declined (the Sensor Tower data didn’t specify by how much). In September, DraftKings’ share of app install ads on Facebook fell by about 75 percent year over year while FanDuel’s share tumbled about 96 percent in the same period, according to Sensor Tower.
There’s a little blip around the start of the NFL season in September, but otherwise, DFS mobile ad impressions nearly disappear altogether.
“The campaigns were turned off instantly when they got into legal troubles,” said Wes McCabe, Sensor Tower product marketing lead. “Now it may be more financial trouble than anything else” for why the spend remains low.
Data from MediaRadar, which tracks online ad spending, shows that the DFS giants are advertising on few websites this year. Last September, both FanDuel and DraftKings ads appeared on more than 150 websites. Now, their ads appear on fewer than a dozen websites. “The story in the Times isn’t a shock,” said Grove of Narus Advisors. “People have understood for nearly a year that those [ad spend] levels would not be repeated.”
MediaRadar data shows the number of websites where the DFS companies spiked in September 2015 and has been in decline since then.