If you watched any football during the first week of NFL action this past Sunday, you surely saw an advertisement for DraftKings or FanDuel.
The two companies, which run daily fantasy sports games and are handing out millions of dollars per week to users, spent a combined $27 million on TV advertising during the past week according to data from Seattle-based iSpot.tv, a real-time analytics service that tracks specific TV advertising campaigns.
On its list of “top 10 spenders in TV advertising this week,” iSpot.tv reported that DraftKings ranked No. 1 with $16.3 million (and counting) spent on 5,363 national airings — it actually was spending even more earlier this month. FanDuel, meanwhile, ranked No. 7 with $10.8 million spent on 2,599 national airings.
Other companies in this list include the likes of Warner Bros., AT&T, Universal Pictures, Verizon, and Geico.
At first glance, DraftKings and FanDuel don’t exactly fit in with these other corporations. But this speaks to the massive growth of the two new companies and the capital they are working with.
In July, FanDuel raised a $275 million round from investors like KKR, Google Capital, and Time Warner that valued it at more than $1 billion. A few weeks later, DraftKings raised a $300 million round led by Fox Sports, which valued the startup at more than $1.2 billion.
DraftKings, founded in 2011, brought in $30 million in revenue last year, the Wall Street Journal reported. FanDuel, founded in 2009 — it spun out of news startup HubDub in 2010 — made $57 million last year. The companies make money by taking a small commission from each entry fee; FanDuel said that it takes about 10 percent from each fee.
Both companies, which also have investments from professional sports leagues and sponsor several pro teams, went on an all-out advertising blitz this weekend as millions around the country watched the inaugural week of the 2015-16 NFL season. It seemed there was an ad for either company multiple times during each televised game, and not just on Sunday. After Michigan State’s win over Oregon on Saturday, my TV was left on ABC after the game and an extended informercial that lasted at least ten minutes was playing for FanDuel.
You may see more DraftKings and FanDuel ads than actual football this NFL season.
— Awful Announcing (@awfulannouncing) September 13, 2015
While fantasy sports have been around for a while, these new daily games are becoming more popular as of late. Rather than a typical season-long fantasy league that forces users to keep the same roster for months, FanDuel and DraftKings let people compile different lineups each week and pick from an array of money pools that have some serious payouts to top finishers. For example, a DraftKings pool for this past NFL weekend featured an entry fee of $20 for each lineup, with a top prize of $2 million.
As these sites become more popular with NFL fans, they are also drawing scrutiny from both traditional sports betting operators as well as those the legal side. The Washington Post noted on Monday that a ranking member of the Energy and Commerce requested a hearing to discuss “how participation in fantasy sports differs from gambling, as well as the relationship between professional leagues, teams, and players and the fantasy leagues.”
“Anyone who watched a game this weekend was inundated by commercials for fantasy sports websites, and it’s only the first week of the NFL season,” Rep. Frank Pallone, Jr. said in a statement. “These sites are enormously popular, arguably central to the fans’ experience, and professional leagues are seeing the enormous profits as a result. Despite how mainstream these sites have become, though, the legal landscape governing these activities remains murky and should be reviewed.”
DraftKings, which inked an exclusive partnership with ESPN in June, calls itself a “U.S.-based skill games company,” and says that its contests are legally operated under U.S. and Canadian law.
“The legality of daily fantasy sports is the same as that of season long fantasy sports,” the company notes. “Federal law and 45 of the 50 U.S. states allow skill-based gaming. Daily fantasy sports is a skill game and is not considered gambling.”
Residents of Arizona, Iowa, Louisiana, Montana, or Washington cannot participate in DraftKings contests due to state-specific regulations against cash prize awards. The same goes for FanDuel users.
On its FAQ page, FanDuel has a similar answer to the question of “Is FanDuel legal?”:
Yes, Fantasy Sports is considered a game of skill and received a specific exemption from the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA). FanDuel uses exactly same rules as season long fantasy sports game, the only difference is that our games last only a day. Thanks to fantasy sports being specifically excluded from laws affecting online sports betting, FanDuel is not illegal in any way. Trust us, our lawyers drive very nice cars so that we can keep it that way. We’re also members of the The Fantasy Sports Trade Association (FSTA).
FanDuel and DraftKings are the top daily fantasy sports sites, but others are also trying to compete. Yahoo entered the daily fantasy sports arena this summer when the tech giant announced it would offer a new daily games platform. There’s also AlphaDraft, which runs daily and weekly contests for eSports and received investment from ex-NBA commissioner David Stern and star player Carmelo Anthony in May.
The New York Times noted that “the business of daily fantasy sports is only a few years old, but it has become a nearly ubiquitous presence.” The Fantasy Sports Trade Association reported 41.5 million fantasy sports players in 2014 who spent an average of $111 on games and league costs.
