FanDuel plays in the major leagues

By.
Douglas Fraser

Business/economy editor, Scotland

If your dream is to develop a billion dollar business, why not create it out of dream?

That's what Nigel and Lesley Eccles have done as co-founders at FanDuel.

It's a storming success that's grown out of Edinburgh University. Alongside Skyscanner, the travel search website, it's the big customer hope for the Scottish tech sector.

Yet few have heard of it close to home. All its clients remain in the USA and Canada, which's where they have actually been for the 6 years given that it started.

Online users play day-to-day and weekly dream sports, across American football, baseball, basketball and ice-hockey.

They can be in public leagues, or having fun with good friends, and pay stakes proportionate to the prizes.

The concept is to research study gamers in your selected league, using the wealth of data in US sports, developing up a team with the constrained budget plan you have actually been set. That research study and choice of team is what is considered to make this promotion code a game of ability.

Then the genuine gamers take to the field, and you score points depending upon how well the real gamers do, when their efforts are awarded to your dream group.

FanDuel has sponsored partnerships with 13 expert basketball league groups and 16 Football groups, and is official partner of the National Basketball Association. So it's a brand that's recovering understood in the nation's sports arenas and its sports websites.

Giveaways

There are reckoned to be more than 40 million gamers of dream sports online in North America. FanDuel leads the field in day-to-day plays. By last year, it had actually hit a million routine active users. Since last summer, the variety of active users was up four-fold.

One step of engagement by users is the number of edits and entries they take into their video gaming profiles, and that can run to 200 per second.

When I last went to its modest Edinburgh base 20 months ago, one of the things that struck me was that it didn't measure its success by earnings (it wasn't making any), but by just how much it hands out in rewards.

In 2012, it had offered away a $50m (₤ 32m), which seemed quite a lot for a little team in an Edinburgh office block. In 2013, they were on track to hand out $135m (₤ 87m).

But since I last checked, it's moved into swankier environments and that number has grown rather. In 2015, the reward fund totalled $560m (₤ 360m), and this year - get this - they intend to distribute more than $2bn. That's ₤ 1.3 bn. And a rough general rule is that for each ₤ 9 offered away in rewards, ₤ 1 is taken as revenue.

American dream

FanDuel had actually already needed to put its corporate brass plate into the US, as it needs to keep on-side with lobbying and guideline. And its customer base likes to be all-American with those World Series of theirs.

It was a loophole in 2006 US legislation that offered FanDuel the space to grow, by excusing online fantasy sports from gambling law.

But it still keeps its roots in Scotland. The business is recruiting staff for its Edinburgh Quartermile workplace, and opening a Glasgow city centre base next month. By the end of this year, FanDuel anticipates to have 90 staff members in Scotland, and 160 in the US.

It has workplaces in New york city and Los Angeles, and recently set up a Florida development website with 40 personnel, dealing with all things online sport and gaming.

Branding clout

With that kind of development, it's not a surprise that others are moving into the exact same dream sports field.

Its primary competitor is DraftKing. Yahoo has vast online sports neighborhoods, but is just now getting into the lucrative everyday play market. Sports channel ESPN has its branding influence behind this too. Nigel Eccles expresses surprise that they have been so sluggish to spot what FanDuel has actually been doing, and to relocate to that turf.

The New york city Times recently reported analyst quotes that the daily play market is worth $2.6 bn in income, and will increase at 41% per year to reach $14bn by the end of the years.

The essential to future success in keeping a share of that market is partly to keep the bet9ja's welcome offer fresh. FanDuel has to encourage its young group to stay sharp. With day-to-day plays and the capability to alter your fantasy team regularly, it keeps people returning often.

The important challenge is to keep attracting, or "getting", users. That's where much of the $363m (₤ 233m) of recently-raised capital is to go.

FanDuel has actually just announced the last part of that package, with investments totalling $275m (₤ 176m). That is from a few of the blue chip financiers of the US tech scene, led by Kohlberg Kravis Roberts and consisting of investment arms of Google, NBC, Time Warner and the Disney family.

It's easy for marketers to find sports fans, but not low-cost to market to them. The benefits, however, can be outstanding. Very few online websites can declare more than eight hours of eyeball time per month.

FanDuel raises ₤ 176m for expansion

14 July 2015