FanDuel

Background

FanDuel was launched by Hubdub, a web-based prediction market game company, on July 21, 2009, after taking in $1.2 million in venture capital funding from Pentech Ventures and Scottish Enterprise. In 2010, FanDuel held its first "FanDuel Fantasy Football Championship (FFFC)." The event consisted of 10 users who won entry into the event by winning a qualifying league throughout the NFL season. First place was awarded $25,000 and the total prize pool was $40,000.

On January 30, 2013, FanDuel announced that it had closed an $11 million Series C funding round. The round included new investor Comcast Ventures (the venture capital affiliate of Comcast Corporation), along with previous investors Piton Capital, Pentech Ventures, Bullpen Capital and serial investor Richard Koch. In September 2014, the company announced $70 million in Series D funding. The round was led by Shamrock Capital Advisors with participation from NBC Sports Ventures and KKR. Previous investors Bullpen Capital, Pentech Ventures and Comcast Ventures also participated. In July 2015, FanDuel announced a Series E funding round of $275 million leading the company to be valued at over a billion dollars. Shortly after announcing the fundraise, FanDuel acquired sports analytics company numberFire. In September 2015, FanDuel acquired the e-sports focused DFS service AlphaDraft.

As of April 2016, the company employs 400 people, with offices in New York, Edinburgh, Glasgow, Orlando, and Los Angeles.

Marketing

FanDuel is using a marketing strategy that was adopted in the 1900s by a small drugstore in North Dakota, Wall Drug. The Wall Drug Marketing Strategy, taught in almost every marketing textbook and college marketing classes, is all about showing the consumer an overwhelming amount of advertisements until it is so engrained in their minds that they act. FanDuel has been showing so many commercials on television that ispottv, a company that tracks the amount spent on television commercials and the amount of commercials shown, has FanDuel listed as number one in market spending. This marketing strategy is directly related to the considerable amount of revenue FanDuel has made. Up until the legal trouble that FanDuel encountered, it was one of the fastest growing companies in America.

FanDuel and DraftKings spent a combined $150 million on TV and internet advertising in the third quarter of 2015 which included the beginning of the football season. In the late summer of 2015 before the start of the NFL season there was on average a commercial every 90 seconds.

Partnerships

On November 12, 2014, FanDuel announced a strategic partnership agreement with the National Basketball Association (NBA).

As of 2016 FanDuel has partnered with 15 NFL teams and 16 NBA teams. These teams include:

NFL:

NBA:

Awards and recognition

FanDuel has won multiple awards for its spin on the traditional fantasy sports model, including:

2016

2015

2014

2013

2012

2010

Legality

There is controversy regarding whether or not daily fantasy sports constitutes gambling. In most US states, fantasy sports (including daily fantasy sports) is generally considered a game of skill and therefore not considered gambling. However, some states, such as Arizona, Montana, Louisiana, Iowa and Washington, either use a more restrictive test of whether a game is one of skill or have specific laws outlawing paid fantasy sports. Despite not being considered as gambling in most states, in 2015, the NCAA banned student athletes from participating in daily fantasy sports, while the NFL limited the amount of money its players could win from DFS.

Many states have ruled that FanDuel and DraftKings do not operate within the state’s gambling laws. As of May 4, 2016, any residents of Arizona, Iowa, Louisiana, Mississippi, Montana, Nevada, New York, Washington and Idaho are not allowed to register on their sites. The most recent of these being Idaho. The Attorney General Wasden said, “The concern I have is that the paid daily sports offerings provided by these companies constitute gambling under Idaho law,” however, they are still allowed to offer free-to-play contests, but most users are registered for the chance to win big. Texas will be the next state to make a decision. FanDuel voluntarily stopped offering its services in the state in May 2016, but DraftKings is still moving forward with court hearings. With the loss of Texas, and most recently Idaho, FanDuel now operates in only 75% of the U.S. population.

Up until now online gambling has been thought of as a game of skill, therefore it was deemed legal. Each individual state will rule on whether or not they believe online fantasy sports gambling to be legal.

At a US federal level, fantasy sports is defined and exempted by the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The bill specifically exempts fantasy sports games, educational games, or any online contest that "has an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events, including any non-participant's individual performances in such sporting events..." However, all prizing must be determined in advance of the competition and can not be influenced by the fees or number of participants. To be compliant, fantasy sports must follow the rule that: "prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants."

Daily fantasy sports websites have also faced legal challenges.

Controversy

FanDuel has been the target of accusations over insider trading in the daily fantasy sports industry. In October 2015 The New York Times reported that an employee of DraftKings inadvertently released data before the start of the third week of NFL games and won $350,000 on the FanDuel website. It was later released that DraftKings employees have made $6 million on the FanDuel website. DraftKings has stated that the employees could not have used their information to make decisions about FanDuel lineups, but data shows that DraftKings employees have won 0.3% of the $2 billion of prize money that FanDuel has given out. Also, 91% of the player profits at DraftKings and FanDuel were won by just 1.3% of players on the website. FanDuel and DraftKings have since prohibited their employees from playing in contests for money on rival websites.

The scandal brought more attention to the lack of regulation in daily fantasy sports and forced big investors like Major League Baseball to distance themselves and ESPN to cut down daily sponsor ads from its news shows.

Acquisitions

In May 2015 FanDuel hired 38 of 42 employees that were laid off by Zynga 365 sports. The vice president Mike Taramykin became Fanduels VP of product in order to help more than double Fanduel’s staff over the next year. After raising $275 million in July 2015 FanDuel made its second acquisition in app developer Kotikan. Kotikan developed FanDuels mobile app, and it was decided that they would be brought in house to help further develop mobile offerings. The preceding month (August 2015) FanDuel acquired sports analytics company numberFire. While NumberFire will continue to operate independently, they were brought on board to help provide more data to players. CEO Nigel Eccles jumped at the opportunity to, “educate sports fans”. Shortly after the acquisition of numberfire, Fanduel went onto acquire the fantasy E-Sports company AlphaDraft(September 2015). Fanduel moved very rapidly from not acquiring any companies its first five to six years, to acquiring three in a matter of a couple months. Fanduel continues to look for future acquisitions as their valuation has gone over $1 billion.