How Investing FOMO Played Into The Daily Fantasy Sports Craze – Forbes

CHICAGO, IL – OCTOBER 16: The fantasy sports website DraftKings is shown on October 16, 2015 in Chicago, Illinois. DraftKings and its rival FanDuel have been under scrutiny after accusations surfaced of employees participating in the contests with insider information. An employee recently finished second in a contest on FanDuel, winning $350,000. Nevada recently banned the sites. (Photo illustration by Scott Olson/Getty Images)

It’s been 18 months since our TVs were inundated with ads for Daily Fantasy Sports (or DFS).

According to the Wall Street Journal, DraftKings and FanDuel – the 2 leaders in DFS at the time who have now announced they will merge – spent about $500 million on TV ads in 2015.

For this spend – and let’s assume that it was evenly split between them – FanDuel increased its 2014 revenues of $57 million to $100 million in 2015. So, $250 million spent on marketing to generate an additional $43 million in revenue (and probably less than that if 2014 customers had simply increased their spend in 2015).

At the time, these two companies argued that the “lifetime value” of the new customers would pay off for the blitzkreig of TV ads. Today, we see that assumption as deeply flawed and there is basically no market for DFS any longer.

Yet that didn’t stop all the professional sports leagues, individual sports teams, and even sports broadcasters jumping in to the DFS frenzy with equity investments, partnerships, and various branding agreements.

There were some things that were unique about DFS which killed it. When a state attorney general starts investigating whether the whole premise of your game is fair, that’s a killer.

Yet, 18 months later, it’s instructive to think back on how many smart people were sucked into believing in DFS. All sports leagues are fat and happy these days. If you own a team or you’re a player, you’ve never been richer. And that means you’re likely to suffer from a particularly damaging affliction: FOMO – or Fear Of Missing Out.

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