Thursday, February 24, 2022

Churchill Plays the Hand They're Dealt

CDI announced the iGaming and sports betting space is too much for them, and they are discontinuing investment in that particular vertical. 

“Many are pursuing market share in every state, with limited regard for short-term, or potentially even long-term, profitability. Because we do not see — for us — a path in which this business model delivers predictable and acceptable margins for at least several years, if ever, we have decided to exit the B2C online sports betting and iGaming space over the next six months.”

We all like to poke fun, or at times get angry at CDI (seriously guys, you sold Arlington, we can't be happy). And I ain't a CEO - I didn't even stay at a Holiday Inn Express last night - but this was the right course of action for them. They're a smart company. 

Back in 2010 I was working with a company who created a type of Facebook for music. It was an interesting idea, and had some backing, and although the budget was small ($10,000 per month) I began marketing it. Half way through month one, the owner called and said, "can you spend more, my budget is now $100,000 for May." 

They had financing lined up and budgets meant pretty much nothing; growth meant everything. This type of system did occur in the 90's with dot coms and we'd seen it before, but this was my introduction to the post-2009 world of easy money through easing. 

That system has only increased. Investment, in the US especially is going bonkers. There is so much money out there, with simply nowhere to put it. They've found it in one spot of many: With sports betting companies. 

These companies have so much money to burn, it's absolutely staggering. 

With this capital you can concentrate on customer aquisition at almost any price. If you and I run a SaaS or CRM company, we have to bring in a CAC (customer acquistion cost) of say $1,200 or we go broke. Sports betting companies can have a CAC of $2,000 for a $300 LTV (lifetime value) and they don't give a crap. 

CDI, unlike these companies, does give a crap. Unless you have an edge on technology, there really is no other choice, as big as CDI and others are. 

It'll be interesting to see how many sports betting companies exist five years from now (maybe sooner).

It truly is a world the financeers of the last century would be woefully unfamiliar. And a world which older, established companies like CDI can have trouble navigating. 

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