The chief executive officer of data-and-analytics company Genius Sports Ltd. says online sportsbooks shrunk their promotional budgets during the second quarter and shifted some spending towards advertising their internet-based casinos instead.
Genius on Tuesday reported its financial results for the second quarter, which ended June 30. And the company, which says it “powers the global ecosystem connecting sports, betting and media," reported a much-improved bottom line due in part to a strong performance from its media business.
Co-founder and CEO Mark Locke said during a conference call for analysts and investors that their media revenues “far outpaced” the company’s guidance for the quarter.
“Despite sportsbook operators scaling back their overall promotional budgets in the quarter, we have not seen a slowdown in our business,” Locke said. “Our ability to consistently deliver favorable results on performance-based digital advertising has led to higher average spend per customer. Even in a quieter sports calendar in Q2, we've seen sportsbook’s customers shift advertising spend from sports betting to casino, showcasing the breadth of our advertising solutions.”
The comments come as legal sportsbooks such as BetMGM and PointsBet have cut back (or plan to cut back) on their spending to acquire customers, with players potentially seeing fewer free bets and weaker sign-up bonuses as a result.
Operators have been making those noises to chase profitability amid a rough year for stock markets, although another burst of promo spending is expected with the upcoming NFL season and the launch of new markets, such as legal sports betting in Ohio.
The road to revenue
Another path to profitability for online gaming operators is the casino side of their businesses, with higher-margin games like blackjack.
Genius’ fortunes are closely linked to those of the sportsbooks as well. Among other things, the company acquires rights to official league data and then supplies services related to those feeds to bookmakers. For instance, Genius is the exclusive distributor of the National Football League's official sports betting data feed to media companies and gaming operators.
And, according to its latest results, Genius is moving closer to profitability, with the company's net loss for the second quarter of 2022 improving by 99% year-over-year, to a shortfall of just $4.8 million. The reduced loss for the company was driven by better results out of its betting, sports, and media technology divisions, the last of which saw revenue grow 87.8% to almost $15 million for the quarter.
The profitability push continues at Genius. Locke even discussed on Tuesday's call the additional opportunities that the company has to make money, including when new states launch legal sports betting.
“When New York launched in January, or Ontario in April, or, when Massachusetts hopefully launches next, along with California, Ohio, or any other market in the coming months and years ahead, Genius’ revenue-share arrangements mean that we start to receive revenue the moment wagers are placed on any of the roughly 200,000 events Genius provides to sportsbooks,” Locke said. “Whether we are supplying data to a handful of states, or to all 50, our costs remain relatively fixed, meaning no additional rights fees, no sales, and marketing dollars, no increase in data-collection costs.”
Getting in the in-game
The media business at Genius gets a bump as well when new states open up, Locke added, as the company’s customers will use Genius’ advertising services to acquire new customers.
Genius also remains optimistic about the prospects for in-play betting, for which the company provides real-time data to the books and receives a greater share of revenue (which itself comes from the winnings of operators).
The guidance Genius has offered to investors on live betting assumes that it will make up around 13% of all gross gaming revenue from National Football League games.
“Over time, we have every expectation that, like mature markets, the U.S. will ultimately move towards a greater shift to in-play betting,” Locke said.
