Weep not. Caesars Entertainment confirmed at its Q1 results last week it has followed through with the plan, cutting expected marketing spend on Caesars Sportsbook by $250 million.
At the same time, competitors’ spend is unchanged, according to Caesars CEO Tom Reeg said. So how did it go?
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 percent market share initially, that has since settled down to 15 percent-20 percent share, in line with other states., according to Legal Sports Report.
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 the scale and effectiveness of the initial marketing campaign.
He explained: “We started this in August with 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.
“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.
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.
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 have 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 is 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.”
