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How Did Caesars Sportsbook $250 Million Cut To Marketing Affect Share?


How helpful of Caesars to test the importance of marketing spend in US sports betting.

The casino giant announced last quarter it was essentially done with sportsbook marketing.

And the company confirmed at its Q1 results Tuesday it followed through with that plan, cutting expected marketing spend on Caesars Sportsbook by $250 million.

Good news for Caesars?

At the same time, competitors’ spend is largely unchanged, according to Caesars CEO Tom Reeg said. So how did it go?

“We’ve seen no degradation in handle share, other than our planned retrenchment in New York,” Reeg said.

The exec admitted Caesars Sportsbook came out a little too hot in New York sports betting with its $3,300 promo offer. That led to a 40% market share initially, that has since settled down to 15-20% share, in line with other states.

Reeg added: “That is the only material movement in share even though we’ve cut over a quarter of a billion dollars from marketing.”

Comparing share in maturing states

State-by-state data outside New York seemed to confirm that, spiking in September when the ad campaign started and holding steady since:

But how did Caesars do this?

Analysts understandably asked Reeg how this is possible, given rivals are still spending enthusiastically. Reeg pointed to two issues:

  • The scale and effectiveness of the initial marketing campaign. He explained: “We started this in August with very little recognition from the average consumer that Caesars was associated with sports betting. And certainly after the New York launch, there’s very few possible sports bettors looking for an app that didn’t know Caesars was a choice. And so it was really just a job well done in terms of getting our customer recognition up.”
  • New signups are added in to the Caesars Rewards program which “creates a stickier customer.”

“We’re seeing the benefits of that since we pulled back on mass market spend,” Reeg said.

Of course, it remains to be seen if that share remains as sticky when the ad campaign fades from minds.

Path to profit?

Regardless, Caesars is focused on profitability. The Digital business posted revenue losses of $53 million (largely because of promos) and EBITDA losses of $554 million in Q1.

Reeg said that marked the high-water mark for losses, driven by launches in New York and Louisiana. Cumulative losses for Digital are now around $1 billion out of an expected total of $1.5 billion.

“About two-thirds of our cumulative EBITDA loss is now in the rearview mirror,” Reeg said. “Our losses will come down considerably as we move forward.”

The Digital business should inflect to EBITDA positive some time in football season 2023.

Eye dropper or fire hose?

To reach that goal, Caesars will also fine-tune its promo spend to target high-value customers. In other words, do not expect more $3,300 bonuses for every new signup.

As Reeg explained:

“What you’ve seen us do repeatedly in the brick-and-mortar business is target spend to our most valuable players and not waste money on unprofitable players. That’s the task in front of us in digital. So you’re going to see us segmenting our marketing as we move forward. And that’s going to be a dramatic improvement in profitability.”

Reeg said the “Wild West” days of such bonusing were “already in the rearview mirror.”

Other nuggets from CZR Q1 call

  • Caesars expects to migrate all states to the William Hill Liberty platform by the end of 2022.
  • Caesars acquired 1.4 million customers into its Rewards program via the digital business. Digital customers are also adding around $200 million of new casino revenues per year.
  • Caesars does not have grand plans for Ontario sports betting given the strong competition from gray-market firms. ”We are building our capabilities in Ontario, but you shouldn’t expect us to throw a lot of money there,” Reeg said. “That’s not going to be a big needle-mover one way or another for us.”
  • Reeg said he did not expect Maryland online sports betting to launch in 2022.

Caesars stock was last up 3% to $70 immediately following the Q1 report.

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