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The Fastest Growing Segment of Online Gaming Isn’t Sports Betting

Sports betting gets all the headlines. In terms of stadium sponsorship, the celebrity ambassadors you see on television for this type of gaming, as well as the prime time TV advertising that surrounds it; sports betting also receives a great deal of coverage from media when another state decides to legalize its use. While by almost every measure of media attention, sports betting appears to be the most popular form of online gaming today, the fact is that the media coverage it receives and its actual growth have very little to do with each other. Growth-wise (new users), the area of gaming growing the quickest, attracting new customers at the largest rates, and developing the strongest user base is not sports betting.

The Numbers Tell a Different Story

Sports betting and top sweepstakes casinos online have strong revenue growth since 2018 when PASPA was overturned. This is not a point of dispute. But, with sports betting maturity developing in early states where the market first developed, there are slowing revenues. Major operators have seen their user acquisition costs increase to a point where they are openly discussing timelines for profitability that extend into years. Several of the largest names in the industry have already pulled back from states where economics did not work. Sweepstakes gaming on the other hand, is still in an earlier part of its growth curve than sports betting. And although sweeps gaming may be growing at a steeper rate than sports betting, platforms that barely existed three years ago now count millions of active users. The newest entrants are continuing to arrive, and established players continue to post consistent month-to-month user growth without the crushing acquisition costs that define sports betting economics. Additionally, the growth of sweeps gaming is less noisy and more sustainable than the growth of sports betting.

Why Geographic Reach Changes Everything

Sports betting is legal and operational in 38 States. To put that into perspective; it’s quite broad until you add in the regulatory requirements for each market. Licensing fees, tax rates in excess of 50% of gross gaming revenue in some markets, mandatory responsible gaming tools, and ongoing compliance overhead. It takes an enormous amount of scale (and only the largest operators have this) to make money on a national level with all those markets.

Sweepstakes gaming platforms and best paying us online casinos can be accessed by many states. In fact the Model used by sweepstakes gaming platforms was created using the AMOE principle which allows them to give prizes back to winners without being considered gambling by state statute. This results in no licensing fee per state, no handle taxes, and no geo-fencing required beyond a small list of excluded states. As such one platform team can serve a national audience that would require dozens of separate regulatory approvals for sports betting.

Head to Head: How the Segments Compare

Factor	Sweepstakes Gaming	Sports Betting	Real-Money iGaming
States available	45+	38	7
App store listing	Yes	Restricted	Very restricted
Free entry option	Yes (AMOE)	No	No
Deposit required	No	Yes	Yes
User acquisition cost	Low to moderate	High	Very high
Revenue model	Coin purchases	Handle percentage	House edge

The User Acquisition Advantage

User acquisition is one area where the structural differences between sports betting and sweepstakes become clear. It’s common for sports bookmakers to invest large sums (in excess of $500) to acquire each individual customer as part of ongoing sign up bonuses. A significant portion of the budget is tied to handing out “free” bets with values of $200+, so that the customer will use them and ultimately be able to cover the cost of acquiring the customer through their subsequent bets. Unfortunately, many customers don’t meet this threshold.

In contrast, sweepstakes platforms acquire users through different methods. Users are allowed to register on an app and begin to play with free Gold Coins right away, because there is no need to input any payment information. This approach offers several advantages:

• A lower cost-per-install is achieved because no match-bonus funds need to be provided to the user.

• There is higher conversion rates of casual visitors into actual registrants.

• The user demographics are broader than sports betting users; in fact, sweepstakes sites tend to attract users who have indicated they would never make a real-money deposit.

• Users remain in the platform longer during the initial session period when most of the users of sports books drop-off.

• Furthermore, word-of-mouth referrals occur due to the fact that players are actually able to engage in free gameplay as opposed to being incentivized solely by promotional pressures.

As such, the user base of sweepstakes platforms tends to grow organically while the user base of sportsbooks also grows via paid acquisition. Ultimately, this results in the overall cost per active user for sweepstakes platforms declining more quickly over time than it does for sportsbooks.

What the Next Phase Looks Like

The difference in growth rates between sweepstakes gaming and sports betting should increase before decreasing. In the largest and most lucrative areas for sports wagering we can see saturation happening at an alarming rate. At the same time there is growing margin compression on the bottom line. Sweepstakes gaming is continuing to improve both the quality of its platforms as well as the quantity and diversity of games available. Simultaneously, this company continues to grow its pool of players.

While sports wagering will continue to be an extremely large and prominent area of the gaming space, television advertising and high-profile sponsorship deals are here to stay. However, the area which is experiencing the highest rate of new user acquisition, the area with the highest scalability to add new users, and the area where the growth economics are scalable is also the one most people are greatly underestimating.

Responsible gambling is key to safe and enjoyable online gaming. Please seek immediate assistance if you believe that gaming has negatively impacted your finances, relationship(s), or mental health. Call 1-800-522-4700 (free, confidential, 24 hours/day) or visit www.ncpgambling.org for information on how to get help.

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