DraftKings Co-Founder Discusses Early Sportsbook Hurdles, Plans To Innovate

Juan Carlos Blanco August 7, 2018 1739 Reads
Matt Kalish

The guys at DraftKings know a thing or two about jumping into unfamiliar territory with both feet. They also pride themselves on nimbly adjusting in concert with regulatory requirements, customer expectations, and market demand.

They’re banking on all that experience to shepherd them through their initial foray into sports betting. Although the momentum has been building for months, that era officially began Monday for DK with the full rollout of their DraftKings Sportsbook in New Jersey.

Co-founder and Chief Revenue Officer Matt Kalish put it quite succinctly in a conversation with TheLines.com: “It’s a huge day being able to launch to every single person based in New Jersey and take bets.”

Proactive approach, calculated risk pay off

According to Kalish, the first serious sports-betting seeds were planted towards the end of 2017, when DK initially started building its sportsbook product. There naturally was plenty of risk in devoting too many resources too soon – the eradication of the Professional and Amateur Sports Protection Act (PASPA) was still an iffy proposition, and as it would turn out, months away.

DK doubled down soon after the calendar flipped to 2018, however, creating a Head of Sportsbook position and filling it in late February with experienced iGaming executive Sean Hurley. That acquisition brought some much-needed experience to the table. Essentially, the company envisioned a PASPA-less landscape at some point. And they didn’t want to be left out when it came to pass.

“We wanted to be ready in the event that legal, regulated sportsbooks in the US became an option in terms of a product that we could offer,” says Kalish. “We wanted to be ready to go as close to day one as possible with the launch of that product.”

The fact that DK beat several other established casino and sportsbook operators to the punch – cutting the proverbial ribbon on mobile sports betting in New Jersey as a new operator in the industry — is a feather in the cap of a few entities, Kalish emphasizes.

DK’s Technology, Product and Operations teams certainly head the list, having feverishly built the front end of Sportsbook’s platform from scratch. Partner Kambi Group has been essential in “oddsmaking and market creation,” along with enabling key functionality like in-game betting.

And Garden State regulators get their share of attaboys as well – Kalish lauds their professionalism, consistently open lines of communication and ability to provide prompt feedback on DK’s product platform while simultaneously carrying out the promulgation of “the first cut” of online sports betting regulations in the country.

Initial money lines raise eyebrows

So the hard work and persistence of multiple parties were clearly integral to DK’s first-to-market achievement. But who’s taking the hit for some questionable MLB money lines in last Thursday’s soft launch?

A side-by-side comparison posted by ESPN.com’s David Purdum on Twitter that day was quite revelatory – it shined a light on the fact DK was taking a much higher vigorish on average compared to the likes of established bookmakers William Hill and MGM, as well as to the consensus numbers for Nevada and offshore books.

Even fellow sports-betting upstart and old rival FanDuel – which has already experienced a snafu or two of its own with pricing in the first few weeks of its Meadowlands Racetrack sportsbook – had more appealing numbers.

Leave it to the DFS guys to go contrarian.

But Kalish explains that DK simply embraced that as a teachable moment of sorts, making the appropriate tweaks to their numbers by the following day. The fact that there were only “a handful of users” (the product was only available on a limited basis last week) at that point certainly helped. And the importance of keeping competitive lines certainly isn’t lost on New Jersey’s first online sportsbook.

“Our strategy is we want to be the best total value operator in sportsbook. We want to be the best place to go play for anyone,” Kalish said. “Odds and payouts are a massive, massive chunk of that. We’re constantly assessing that. Any time that there’s anything that might undermine our ability to be the best place to play, we’re going to want to make an adjustment there.”

“We’re never going to want to be out of line where the market is.”

Built-in customer base, user-friendly platform offer substantial leverage

If DK does indeed keep their pricing dialed in relative to the rest of the New Jersey online sports betting space – one that they’re poised to get plenty of company in by the start of NFL season in a few weeks – they’re positioned to be an appealing destination for Garden State bettors.

And they may find a particular niche with those newer to wagering, or with the true sports-betting novice. It’s highly likely they have a robust captive audience of both.

Along with FanDuel, DK technically walks into the sports betting industry as a newbie, but with no shortage of experience offering “real-money sports products for American customers.” That, of course, refers to DK’s extensive existing DFS customer base, which Kalish approximates to currently be in the range of 10 million.

Legal Sports Report’s Eric Ramsey provided a detailed walk-through of DraftKings Sportsbook’s interface recently. He makes a strong case for it offering the right mix of ease of use, speed, time-sensitive, highly relevant data, and for existing customers, a certain synergy with DK’s DFS side. That has the potential to be a winning formula for connecting with the New Jersey resident that’s drawn in by all the hype around plunking some cash down on a game or two, but who’s a bit intimidated and risk-averse about delving into it.

Company’s innovative streak expected to continue 

Now in their sixth year in the DFS industry – the last several as pacesetters — the folks at DK have also become pretty seasoned product developers. In Kalish’s view, that, along with plenty of support from experienced partners and suppliers as the company’s sports-betting arm matures, will be key to disproving any skeptics who don’t give the new kid on the block much of a chance.

“The need to constantly keep it fresh and add to the experience and to innovate on the offerings that you have just to keep the product fresh and interesting — I think we’ve done a good job engaging a group of customers for five-plus years now and steadily retaining and keeping their business,” he observed.

Although DK is cognizant that there’s already largely a tried-and-true formula for sportsbooks worldwide, they don’t see the space as being maxed out on innovation. To that end, while they don’t plan on tweaking for the sake of tweaking, there’s certainly a possibility of some crossover elements from DFS.

Noting that DK can bring some of their “core competency to the table”, Kalish alludes to formats such Pick ‘Em and Survivor that have been successful in daily fantasy possibly emerging as Sportsbook offerings over time.

Cross-promotion, specialty events part of marketing strategy

The company will naturally do plenty of cross-promoting to their existing DFS users in states where they’re able to implement DraftKings Sportsbook. Their past customer acquisition experience is expected to help, although Kalish acknowledges there are likely adjustments to make for the sports betting market.

An efficient, user-friendly platform combined with an enticing introductory offer – New Jersey residents can currently take advantage of a first-bet match of up to $200 by DK once they make an initial deposit in Sportsbook – is a good way to start, in Kalish’s view.

Riding the coattails of intensely popular one-off or short-term sporting events – high-profile UFC bouts serving as a prime example – is another strategy DK is excited about implementing.

  • Exhibit A: Last August’s Conor McGregor-Floyd Merriweather extravaganza, which netted multiple $1 million bets and massive overall handle. DK plans to be front and center in capitalizing on similar circumstances moving forward.

As they did five-plus years ago, the company is setting out to conquer a market. Kalish feels the ingredients that have made for a winning recipe over time – creativity, consumer sensitivity and a dash of risk-taking when warranted – will translate just fine to sports betting.

“I think it’ll be a steady stream of that kind of pushing-the-envelope and trying to innovate on the product while doing a great job running the core experience that everybody expects.”