DraftKings raised a lot of eyebrows when it spent $750 million to acquire lottery courier Jackpocket.
Apparently, DraftKings could be the one laughing all the way to the bank.
During last week’s Q2 investor call, the online sportsbook and casino indicated that Jackpocket’s performance was doing better than anticipated.
Because of that, the company was able to report 26% revenue growth for the quarter.
It also modified financial expectations, planning on adjusted positive EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2025.
So while its sportsbook product may be having to go to a surcharge in select states, its lottery business is booming.
Customer growth up 80% at almost half the cost
The Jackpocket purchase was announced in February by DraftKings. In May, the acquisition was completed.
Acquiring the US’ largest lottery courier was intended to secure a large new player database while creating an omnichannel gambling platform that featured sports betting, casino, and lottery.
Last week, DraftKings reported that it had grown new customers by 80% year over year in Q2. It also managed to do that with 40% less in customer acquisition costs.
That was one of the big selling points of the Jackpocket purchase, as acquiring lottery customers was going to be a business-friendly option.
DraftKings CEO Jason Robbins commented on that during the Q2 call:
“As a reminder, they have an extremely low CAC. So while we are investing more in, we get a lot of customers for that. So, definitely makes a big difference in their revenue ramp as well. So, I think, all signs point towards them being a positive contributor to adjusted EBITDA in 2025 and beyond.”
This big growth in customers has led DraftKings to change revenue guidance from $4.8-$5 billion to $5.05-$5.25 billion for the year.
DraftKings to also get integrated into Jackpocket
Jackpocket is available in 17 states, Washington D.C., and Puerto Rico. Some of those states include locations where DraftKings is not available for sports betting or online casino.
But, in the states where they overlap, it allows DraftKings to be visible across all gambling platforms, as Robbins noted:
“We do plan on integrating those products into DraftKings, as well as integrating DraftKings Casino and OSB products into Jackpocket. Timing, we haven’t quite determined yet. I think, in the past, what we said, and I kind of echo is, we long term want to have all of our products available through all of our brands, and exactly when we implement those things directly versus when we have more linkage through brand-to-brand cross-sell will depend on other priorities and how that slots into our product roadmap. But we definitely do plan to do that at some point.”
Robbins was asked if these customers DraftKings was pursuing were really new to its database. He clearly stated that the Jackpocket customer is not typically one DraftKings has been able to acquire with its other products:
“No, we definitely haven’t acquired all those customers. So I agree it would be (a catalyst for greater business revenue), and that’s the reason we’re planning to do it. I also think that in the interim, we continue to see Jackpocket as a great vehicle for acquiring those customers and cross-selling them into DraftKings. But we know from experience that having a fully integrated product is always going to yield stronger conversion and stronger cross-sell. So, no doubt you’re correct that that will be a boost.”
Lottery couriers earning major partnerships
The DraftKings-Jackpocket deal was one of the first big chips to fall thus far in 2024 for lottery couriers.
Along with many expanding into new states, Google announced it would begin permitting lottery courier ads starting July 15.
Jackpot.com, another leading courier in the US, secured a partnership with the Associated Press to become the official lottery results supplier for the media outlet. On top of that, the AP can offer lottery purchases through Jackpot.com in states where the courier is operational.
The gambling world is watching closely to see if any other big names decide to make a move similar to DraftKings. FanDuel and BetMGM have large customer bases that could also benefit from a direct lottery partner.
In the meantime, expanding on scratch ticket services is a focus for couriers at the moment, according to Jackpot.com CEO Akshay Khanna.
Couriers are mostly limited to selling tickets for lottery draw games currently. Adding scratch services would open up a larger market, as scratch sales make up the bulk of US lottery sales.
Photo by Talaj via Shutterstock
Graphics from Jackpocket and DraftKings
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