FanDuel’s Fantasy Sports Games Are Generating Tangible Revenue

FanDuel, a fantasy sports site with daily competitions and cash prize payouts, unveiled its quarterly earnings Thursday and the results were a home run — or a slam dunk or whatever else you’d like to call it.

The New York-based fantasy sports website, which isn’t publicly traded but still bothers to share its user stats and revenue figures, nearly quadrupled its paid-user base since last year, and more than tripled its revenue, according to CEO Nigel Eccles.

FanDuel generated $8.9 million in sales for the three months that ended in September — a rise of more than three-fold compared with the $2.6 million in sales it had in the same period last year. The startup isn’t yet profitable and its losses widened this year as the company spent more in marketing to draw in more users, says Eccles. FanDuel had more than half a million paid users last quarter — people who pay money to play one of the site’s daily fantasy games — the largest user count in company history. Compare that to just 130,000 paid users it had at the same time last year.

FanDuel makes money by collecting entrance fees for fantasy contests, keeping a small percentage and paying out the rest to winners; it shelled out more than $100 million in the most recent quarter alone.

Thursday’s earnings report capped off a busy quarter for FanDuel. The company raised $70 million in funding in early September, and launched its first mobile app at the beginning of August, which has been downloaded more than half a million times already.

Daily fantasy sports has taken off as an industry over the past year, and not just for FanDuel. Another daily fantasy site, DraftKings, also raised a big funding round last quarter, and a number of other competitors have cropped up. TradeSports, another daily fantasy site, even encourages users to trade potential game outcomes back and forth on a stock market-like exchange.

Fantasy sports have always been a big market — more than 41 million people spend $1.7 billion each year on league fees alone in the U.S. and Canada, according to theFantasy Sports Trade Association — but single-day fantasy contests are the new kid on the block. Traditionally, users draft a team of players and wait an entire season, sometimes as long as six months, before a league winner is crowned. It’s a long wait, and if your best player gets hurt or has a bad year, it can be six months of frustration, explained Eccles.

Daily leagues allow users to draft a new team each day or week, keeping people more engaged, he said. Prizes also help. FanDuel will pay out more than $500 million this year and over $1 billion next year, said Eccles. DraftKings, for comparison, will pay out roughly $200 million this year.
FanDuel’s growth is due to a number of factors, none more important than its increased marketing push, Eccles said. The marketing budget is one of the only figures Eccles declined to share with Re/code, but marketing spend is the only thing keeping FanDuel from profitability, he said. FanDuel has paid partnerships with sites like Yahoo and CBS, and if you watch ESPN you’ve likely seen commercials during breaks in Saturday’s college football lineup.

Next for FanDuel — an IPO, although Eccles says it’s still a few years away (2016 is a target, he added). Still, the thought of being a public company is one of the main reasons FanDuel is so open about its figures right now. “If we expect [to be a public company] in two years, why don’t we just get into the discipline now,” he said.

FanDuel investors include Shamrock Capital Advisors, NBC Sports Ventures*, KKR, Bullpen Capital, Comcast Ventures, Pentech Ventures, Piton Capital, Scottish Enterprise and Richard Koch.

* NBCUniversal is a minority investor in Revere Digital, Re/code’s parent company.