Buying Customers Can Be Risk On or Risk Off

 I saw this tweet today:

JUST IN: Penn has completed its 100% acquisition of Barstool.

THREE years ago, they bought 36% for $163 million, acquires rest for $388 million.

To buy Barstool for $551 million is a ridiculous steal, though Penn's strategy of converting by advertising less hasn't proved out.

— Darren Rovell (@darrenrovell) February 17, 2023

$551M, according to this tweet, is not a whole lot of money, and in the practice of buying potential customers it really isn't. With low interest rates and inflationary markets, return on investment for this kind of purchase can be positive in the space. 

But what does $551M buy you? Access to a pool of customers that might wager with you (or might not). None of it is remotely a given.  

Flipping the layers of the onion back to around 2008, there was much discussion regarding betting and exchange giant Betfair. This company, at the time, reportedly had $3B on account - not for Barstool shenanigans but on account, being bet and churned. Not only did racing entities not even approach them, they resisted even speaking with them when they advanced ideas for partnerships. 

Some in the business began to see strategic partnerships over time. I remember presenting at a gambling conference in 2010 with a Betfair founder, and after the session some were discussing presumably exactly that. But from what I heard, it never went anywhere and just withered on a vine. 

Customer acquisition techniques are sometimes completely boneheaded. Overpaying for customers, especially in a new market sorting itself out can be a feature not a bug. But racing groups tend to never even partake in discussing them. Customer acquisition for thee and not for me? One thing for sure with that strategy - you'll end up with fewer customers. 

Notes:

The time you've been waiting for starts tonight - well for CJ and his lovely wife and maybe four others of you - the Women's Curling Championship! The field is stacked and I could see some betting value happening in this nascent betting market. Remember, prices are priced before last rock is awarded. In the women's game, hammer first end wins at about a 64% clip, not appreciably lower than tied with the hammer in the last end (69%). Curling is fun!

The NFL coaching carousel tends to make me chuckle at the end of the season. The staff from teams who win are always sought after, while great coaches on teams that overachieve (or who won last year or the year before) aren't even talked about. The NFL wants Chad Brown to coach their team because Chad won at 25% with stock who should win at 25%. When we pick trainers we are looking for those guys or gals who do more with less, or in mathy talk, win over expected. 

I have not watched the Derby trail closely (and to be honest, I rarely look at it near as deep as most). However, I think sports betting has played a role in this for me. I wager football, and now with the Masters around the corner I have begun to look at a little golf. I know most people will be ready for the NCAA's next month (I don't wager that), so there's lots to play now. Has horse racing lost market share? Probably, but handle is still decent. It's resilient that's for sure. 

Have a nice weekend everyone.