Daily fantasy sports operator Monkey Knife Fight this week acquired rival FantasyDraft, with the company declaring, “Already the third-largest DFS site in North America, this acquisition will solidify MKF’s position in a select category of three.”
Of course, given that the other two in that “select category of three” are billion-dollar behemoths DraftKings and FanDuel, this seems analogous to the current third-place U.S. presidential candidate gaining the endorsement of the one polling fourth and declaring the November election to be a “three-man race.”
But Monkey Knife Fight CEO Bill Asher has always tended toward the unconventional, and he claims he can beat the two giants at a somewhat different game.
Both DraftKings and FanDuel made massive media splashes five years ago as they spent a fortune on advertising to lure sports fanatics to a game that makes you a virtual NFL franchise general manager trying to build a better a salary-cap-limited roster than your rivals.
Investor capital flew in by the hundreds of millions, and today both companies are thriving as they have branched out into legal, regulated sports betting in the U.S. and more recently to online casino gaming.
For all the hype, DFS companies struggle to be profitable
Many in the industry will tell you that the original business model of salary cap games has never been profitable for either company, because the cost of customer acquisition exceeds the net revenue provided by that customer.
Why?
Because, according to Asher, no matter how much time and effort an amateur DFS player puts in to entering a large-field, high-stakes contest, such a player inevitably gets annihilated by professionals who have all sorts of algorithms and full-time analysts who, despite allegedly making up just 1% of the player pool, win up to 90% of the money. Most losing DFS players will give up before they return a positive spending value compared to the acquisition cost.
It’s like if a weekend duffer took up Tiger Woods on an offer to play a big-money round of 18 holes. Sure, the amateur might win one hole. But overall, that player is doomed.
That’s why Monkey Knife Fight doesn’t focus on salary cap contests.
“The typical daily fantasy sports way is that you spend an entire day trying to fill out a roster, and you need to know who is the Philadelphia Eagles’ third-string wide receiver,” Asher told US Bets on Thursday, with a rhetorical flourish. “What’s fun about that?”
Not your father’s DFS approach
Instead, Monkey Knife Fight — a name invented four years ago after a brainstorming session with friends that Asher said “involved a bottle of tequila” — focuses on individual player prop bets.
The customer also risks money against the house, not other DFS players, many of whom hold advantages over the average player. Asher said his patrons choose which game they plan to watch, then pick whether a beloved — or despised—- prominent player in that game will go over or under various key statistical benchmarks.
In 2017, FantasyDraft acquired Fantasy Aces, giving them third-place status behind the two market leaders, who by then had gobbled up more than 90% of the industry users.
But as football season began in 2018, Asher says consumer interest in Monkey Knife Fight’s alternative offerings had company officials feeling “as if we were drinking from a fire hose” as the base grew from 1,000 players a day to 100,000 almost overnight.
Now comes the acquisition of FantasyDraft and its significant base of DFS players.
But Asher notes that for every DFS customer on a list, there might be 10 times as many “inactive” players as active.
Still, these are sports fans willing to risk some money to back their beliefs of what will happen in sporting events — hence the acquisition of FantasyDraft’s consumer list.
Taking the “work” out of games
Offer such fans an alternative to the salary-cap games some of them have struggled with, Asher says, and they will be receptive.
“We make our games fun, and our whole brand fun,” Asher said. “It’s a silly name, and customers buy our merchandise and our concept. Typical DFS just isn’t fun.”
MKF operates in 35 states, Asher said, mainly in the same ones that FanDuel and DraftKings do.
As for his two rivals, Asher said that they have lost their focus on DFS in favor of lucrative expansions into sports betting and online casino gaming.
So will MKF reject that path in favor of keeping a focus solely on DFS?
Not at all, said Asher. “In the next few years, we’ll have gambling and everything else across the board — casino and all,” he said.
Inertia is MKF’s best friend
Asher added that the lack of action on legalizing sports betting in the four biggest U.S. states — California, Florida, Texas, and New York — gives MKF time to grow its brand versus DK and FD before the inevitable legalization.
By that time, Asher said, his brand will have its own large customer base that prefers his products.
But if MKF succeeds in gaining more than 10% of the DFS market share with these player prop games, why can’t DraftKings and FanDuel simply counter and do the same? Both companies already offer prop wagers in their sports betting products in those states where it is legal, after all.
Asher replied, “That would be them changing who they are in midstream — and trying to appeal to customers who already have decided they don’t like their product. They are known for what they are known for.”
In spite of — or because of? — the silly name, MKF has managed to gain official partnerships with numerous franchises such as the San Diego Padres, Milwaukee Brewers, Miami Dolphins, and Los Angeles Kings.
The achievement is all the more impressive given that the teams apparently have not flinched at Asher’s background in the adult film industry as a former Playboy executive and co-owner of Vivid Entertainment.
“Nobody seems to care,” Asher said, adding that he has not lost potential endorsement deals from sports franchise executives fearing a ticketholder backlash.
Photo by Luis Molinero / Shutterstock.com
