FanDuel, DraftKings ads on the rise as sports return

As Major League Sports begin making a comeback after a long coronavirus hiatus, DraftKings and FanDuel ads are becoming more prominent. Yahoo Finance’s Dan Roberts joins The Final Round panel breaks down the details.

Video Transcript

MYLES UDLAND: Over the weekend, NBA getting into full swing. NHL back. Baseball is limping along as it does continue to play most of its games. Golf still happening. Dan Roberts, this means sports betting is finally finding its stride after a very weird spring for the industry, a spring in which DraftKings made its way to the public market. Now trades at a record high like everything is going to be fine, but it's kind of-- it's kind of time to prove it.

DAN ROBERTS: Yeah, it's remarkable how well DraftKings stock did amid a pandemic when there were no sports. And the company, along with its biggest competitor, FanDuel, kept saying, well, just wait. Just wait. It's going to be great. It's going to be huge. When sports finally return, there will be so much pent-up demand. Now, we'll wait to see if their numbers actually prove that out, and later this month DraftKings has its first earnings call as a public company.

But, boy, the sports are back on TV, and so are the ads. I mean, I tweeted this out over the weekend, but I was watching the NBA, and suddenly it felt like it was 2015 again. In one ad break, I saw an ad for both DraftKings and FanDuel.

And I refer to 2015, back when those companies were going head to head and spending notoriously-- infamously a combined $30 million in just the first week of the 2015 NFL season. Remember that? They flooded the airwaves. You couldn't avoid seeing the ads. And it had the positive effect of making both companies household names but the negative effect of, A, annoying everyone and then, B, also getting the attention of lawmakers, most notably the New York attorney general.

This is all ancient history in the industry, but, boy, this story really has changed now, and in some ways it hasn't changed. I mean, here they are again spending a ton on TV ads, going head to head with the same, you know, ad blocks. And yet this time they're advertising their sportsbook operations. They're saying hello. Bet with us. We're betting operators.

And what's remarkable is it wasn't so long ago that they were in court battles with various attorneys general saying no, no, we're not betting operators. But, of course, what has changed is the Supreme Court struck down a ban on sports betting. So now you've had a number of states-- I believe 16 or 17 of them have legalized sports betting in their state.

And so these companies now finally can stop saying, well, yes, sports are down, but we also offer betting on "League of Legends" and esports. Finally they can say, all right, NBA, baseball, hockey. DraftKings even partnered with a tennis tournament, non-ATP.

So, you know, they're off to the races, and it is remarkable. So much has changed, and yet a lot of it remains the same. And I think soon you'll start to see people complain about the ads again, and then the cycle will be complete.

But DraftKings isn't the only betting name that has done very well, the stocks recently. You know, there's Paddy Power, which is the parent company of FanDuel, and there's also Penn Gaming, which, of course, took a majority stake in Barstool Sports. MGM-- a lot of the betting names did remarkably well considering there were no sports for three months.

MYLES UDLAND: And I would just add my own personal frustration. I didn't realize that the sportsbook doesn't actually work in New York yet. I was like, I thought this is legal, but it's still not a thing. And you say 16 or 17 states. It still feels like way fewer than the industry is baking in. When you look at the optimism around DraftKings and Penn and the others, it's that this will be a 50-state sportsbook legalization in short order.

DAN ROBERTS: That's right that the industry said that, but it was never going to be 50 because Utah and a couple others I think will never do it. And I also think that you're right to note that the momentum kind of slowed at some point. Like it was May 2018 that the big ruling came down. People said oh my God. Hurrah, legal sports betting.

Well, A, that didn't mean that it's now legal at the federal level. It just meant that states can choose to legalize in their own state, and a number of states, like eight or nine, quickly moved in the year after. But then the progress kind of slowed, that domino effect.

And you're right. Even though it's at 16 or so-- and I think there are a few other states where it's in the works and they're trying to pass bills. Massachusetts is just about to legalize, I believe. Still, I think to go from 16 or 17 to the next 10-- 27, you know, 30-- is going to be a little bit more slow going. So we'll see about that.

And I also think that, in some ways, the impact of this has been overblown. I think in many places there are people who they were betting before illegally with a bookie, and they're not going to stop doing that just because there's now a physical sportsbook they could go to if they want to drive to the Meadowlands, you know?

So it's also hard to pay attention to the various rules and state lines. I mean, as you said, you can go lay down a bet at the Meadowlands in New Jersey, but you couldn't do it in New York, which is a 10-minute drive away. So I think in some cases it's hard for consumers to do that.

And, lastly, I'm skeptical that a large number of people who weren't bettors before will suddenly now say, oh, well, now that is legal in my state, I'll do it. Because if you were a person who's going to bet on games before, you would have done it before. It wouldn't have really probably stopped you. You could have found an offshore website. Not endorsing that.

But we'll just-- we'll see how big of an impact and how big this industry gets. For these two companies, even though they're pushing their sportsbook apps right now, I believe they're not yet at the point where betting brings them more revenue than the fantasy games do.