The reduction in advertising costs has become the driver of DraftKings quotes

Shares of gambling operator DraftKings Inc. (DKNG) rose by 5.59% to $19.63 at auction in February. The reason was a competitor’s statement about reducing advertising costs. One of DraftKings’ competitors, casino owner Caesars Entertainment, plans to cut marketing and advertising costs to control its profitability better. 

It should note that earlier, the company invested heavily to gain a foothold in the online sports betting market, which is gradually by more and more US states. DraftKings investors reacted positively to the news about Caesars Entertainment’s advertising activity reduction. However, competition in sports betting is too fierce, which could complicate attracting customers for companies such as DraftKings. As a rule, online betting companies do not have such financial resources as giant casinos. 

But the fact that large companies will become less aggressive in their marketing may open up a choice for DraftKings: to continue spending on advertising to increase market share or reduce such expenses to increase profitability. Both options are favorable for DraftKings. Recently, the company has invested heavily in expanding its market share, which has harmed profitability. But despite this, management previously assumed that the company would be able to reach profitability at the end of 2023. If the costs of advertising and attracting new users, the return to profitability may occur a little earlier. 

It should note that a severe milestone of the DraftKings business was the entry into the New York state market in early January 2022. At the same time, the companies predicted an increase in advertising costs in this market. Changes in the plans of one of the main competitors in New York may make it easier for DraftKings to expand its presence in the state.