If you can’t offer iGaming in a state, why not turn online sports betting into something that’s a little more like playing the slots? That may be at least some of the thought behind the latest bit of dealmaking by DraftKings Inc.
The Boston-based sports betting and iGaming operator announced on Wednesday that it has an agreement to acquire microbetting technology provider Simplebet Inc., pending regulatory approvals and other closing conditions.
“Live betting represents an area for potential growth for online sports betting, and the proposed acquisition would allow DraftKings to leverage Simplebet’s proprietary technology to create an in-play wagering experience that moves at the speed of sports,” DraftKings Chief Product Officer Corey Gottlieb said in a press release.
In short: DraftKings is going even bigger on in-play sports wagering.
— Geoff Zochodne (@GeoffZochodne) August 28, 2024
Per the press release, DK says acquiring Simplebet would allow it to "create highly accurate betting opportunities during every moment of a game." https://t.co/Z12PESLSWN
DraftKings is already a client and part-owner of Simplebet, which provides the tools for operators to offer bettors markets such as the outcome of the next pitch in a baseball game.
“The Proposed Transaction would allow for the integration of Simplebet’s proprietary machine-learning models into DraftKings’ best-in-class pricing and technology platform to create highly accurate betting opportunities during every moment of a game,” the release noted.
For example, Simplebet said in July that it had handled more than $630 million in action during the first half of the MLB season, up more than 100% over the previous year. Other Simplebet clients include bet365, Caesars Sportsbook, and Hard Rock Bet.
That's so random
However, those other clients lack something that DraftKings has, which is a stake in Simplebet. DraftKings owns 15% of Simplebet, and the two have a partnership that began in 2021. DK is now seeking to own the microbetting firm entirely. A note from Citizens JMP Securities on Thursday said that DraftKings is paying as much as $195 million for Simplebet, with $70 million of that cash coming upfront.
JMP analyst Jordan Bender also pointed out that increasing the opportunity for more in-play wagering, and at a more rapid rate, resembles online casino gambling. In other words, microbetting a baseball game isn’t all that different from some quick hands of blackjack or a few pulls of an online slot machine.
“The rapid, high frequency of micro-betting is viewed as a traditional sports betting product, but could also be viewed as similar to iGaming, with the end result a rapid ‘random outcome,’ much like slot machines,” Bender wrote. “As we think about how M&A will support [lifetime values] and [customer acquisition costs], we believe micro-betting will act as a driver to increase the size of the consumer wallet by keeping players engaged and spending for a longer time.”
Having more control and more ability to nudge customers toward an iGaming-like offering that isn’t technically iGaming could help DraftKings in states where iGaming isn’t yet legal, which is most of them.
Bender said that in-play wagering accounts for around 20% to 35% of U.S. sports betting handle. While microbetting is only a slice of that action, Bender said DraftKings' financial heft could help grow those smaller markets and give it an edge on rivals that use Simplebet, or those that don’t, such as FanDuel, “which is rumored to be developing the product in-house.”
How to stand out from a crowd
DraftKings noted earlier this month as part of its second-quarter financial reporting that it was spending on features and functions intended to "differentiate" itself with online sports betting customers.
Part of that effort is enhancing its live betting experience, as the company said it was planning to pair a "bet-and-watch" feature with live streaming of NFL games. That is in addition to making it easier for players to cash out of certain betting markets and the "automated merchandising of real-time trending bets,” DraftKings’ second-quarter earnings presentation said.
“This transformative acquisition, upon completion, will marry our best-in-class AI and machine learning technology with the DraftKings product offering, enhancing the customer experience for a new era of real-time, in-play gaming,” Simplebet CEO Chris Bevilacqua said in Wednesday’s press release.
