DraftKings’ next big bets, with CEO Jason Robins

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1:38Anything could happen, but it's one of those things that we kind of just culturally are like, this is too potentially disruptive to ignore. We have to invest in this and we have to turn this into an opportunity. Anything that you don't turn into an opportunity, it can turn into a risk for you. DraftKings CEO Jason Robbins is constantly scanning the horizon for the next big opportunity. Prediction markets? Yep. AI? Yep. A big bet on a Super Bowl ad? Absolutely all of the above. For Jason, as for the Super Bowl champions, the strategy to win is simple. Bet on your team. The reality is they know how to do their job.

2:20Some things are going to hit, some things are going to miss, but no one really knows until you actually do it. This is Masters of Scale. I'm Jeff Berman. Your host this week on the show, Jason Robbins. He's the co-founder and CEO of DraftKings. His company is a massive player in the sports betting industry with a market cap of over$13 billion. We spoke with Jason on Super Bowl's Radio Row in San Francisco just ahead of the big game last weekend, covering the rise of prediction markets, the need for responsible gaming, and after starting DraftKings with just a few buddies in the equivalent of a garage, his advice for anyone starting a company today.

3:05Jason, welcome to Masters of Scale. Thank you for having me. Thrilled to have you. If you are in advertising, Can Lions is your Super Bowl. If you're in consumer electronics, CES is your Super Bowl. The Super Bowl is literally your Super Bowl. What is Super Bowl week like for draft games? Well, it's a lot of work leading up to it. We have a ton of things that we want to get ready, everything from new product features to marketing campaigns. So the week of, I'm here for most of the week doing stuff like this, lots of meetings, watching the numbers every day, tracking things against how we expected, all that.

3:40Then by the time you get to the game day, everyone's pretty exhausted, but we grind through. We actually give the company the day off after the Super Bowl because so many people work on Sunday and Saturday. I mean, so you're working for the whole weekend. We have people Monday off. I think the Monday after the Super Bowl should be a national holiday. I agree with you on that. So if draftees can get behind that, that would be great. I agree. That would be a very popular campaign for you guys to run. Let's talk about the numbers. Order of magnitude. How big is the Super Bowl and Super Bowl week relative to an average week in the year?

4:07Well, it's the biggest day of the year for us. It's a single game. So relative to weeks where there's lots of games, obviously it's got to be much bigger on a per-game basis. So just dwarfs any single event that we have. And it's not just big in terms of volume. It's big for us to activate customers, to get new customers. It's just everything is sort of about the Super Bowl. And then the goal for us after that is to hopefully give them a good experience. They want to stick around for things like March Madness and NBA and NHL and PGA and all the other things coming up. How much is actually being bet on the Super Bowl through DraftKings Super Bowl week?

4:44Can't give you a number exactly. Directional. Hundreds of millions. That includes the prediction market? Well, that's pretty new for us. So I don't actually know how that's going to look. I mean, we've literally been doing that for like a month. Yeah. So it's still pretty new. It won't be a big number in terms of our overall this year. Yeah. But I do expect to see a big jump in growth on the Super Bowl for that. We're hoping to get a lot of new stuff in the product for them. We'll see if we get it in on time. I think we will. So I want to come back to DraftKings predictions in a moment. But the challenge of the Super Bowl is it's the biggest marketing platform in America.

5:14And also, it is so crowded, it's really hard to break through. How do you and your team approach that? Well, the good thing for us is our content is endemic. It's basically, you know, so related to the game that it's already something people are paying attention to. People already associate the Super Bowl with betting. They already are thinking about all the novelty bets, like which color the Gatorade will be and things like that. So we're already starting from a place where the mindset of people is already there. It's tough because you never know with creative what's going to resonate. What we try to do is experiment a lot throughout the year and figure out what types of messages, what types of offers, what types of creative will resonate.

5:52But we haven't done a Super Bowl ad in two years now, so this will be a nice one to come back to. I'm really excited. We have a partnership with NBC, so it's a big part of that. What changed? Why did you not do one the last two years and you're doing one this year? You know, the biggest thing is we had just done one for a few years and we decided that looking at the data, it made sense to take a year off. And I think this year with the NBC partnership, we also have more creative things that we're able to do in terms of integrations with the overall broadcast. And I think that will make the creative in the Super Bowl perform better.

6:22Is there a piece of Super Bowl marketing that you've seen that isn't in your category that you just think, oh, my gosh, that's brilliant. I wish we had a version of that or I'm so impressed with that one. You know, it's funny because I never really know which campaigns, like even when I'm watching it, the ones that are like the biggest aren't the ones that I would have thought. Every once in a while, there's a year where you have one that just everybody's like, yeah, that's the ad. But it just it teaches me a lesson. And I always tell people this creative. Everyone has an opinion on. It's not something that you can be that straightforward with.

6:53And I've seen things where I and others like that's terrible and it kills it on performance. And so over the years, learn, just let the marketing team do their thing. Unless I really think we're doing something bad, I'm not out there saying, I think we should do something different. Because they're already hearing that from 100 different people. And the reality is they know how to do their job. Some things are going to hit. Some things are going to miss. But no one really knows until you actually do it. I think if you haven't done this, this is hard to understand that that's the case when most people, I think, my initial instinct was like, I have an opinion on this.

7:24I want to tell you what I think. But I've also been doing marketing a while and I've been working with my CMO, who I think is unbelievably smart and I trust her completely. So I also realized that I got to let her do her thing and there's a lot of trust there. And the Super Bowl ad is so different, right? Because it's one thing. I mean, it's one piece of creative. You're spending probably a good bit of money to produce it. You're spending a fortune to put it on TV. Whereas I go back to when I worked at the NFL, when I ran the digital media group there, our head of marketing would put the top 10, 20 landing pages up.

7:56And we would put our initials on the one that we thought would perform best. And almost invariably, no one would pick the one that would work best. And so I think if you're not in this industry, you don't really understand that it is a lot more art than science. It is. You got to use the science to figure out which of the art forms are working. But 100 percent. And I've just too many times had situations where what I thought happened was not what happened. I'll tell you the other thing about the ad that we're doing a little differently this year. And one of the reasons we took last year off, a lot of our customer activity and getting people, you know, engaged comes before the game.

8:28So we did a lot of advertising going into the game. And then during the game, people are more focused on watching. This year, though, we have made so many great upgrades to our live betting product. And, you know, that's the perfect opportunity for it in the game to try to really take a shot at getting some live betting activation. So that's really what the campaign will be about this year. So that's a new experiment for us. We've actually never really tried something like this before where we're really pushing live betting in the middle of a game. See how it goes, and we'll learn from there. The evolution of this market has been pretty incredible.

8:57And you just launched Prediction Markets. You've got live betting, which is becoming more and more part of the experience. And in a blowout, live betting continues to keep people engaged and interested. It's better for the broadcasters, better for the advertisers. It also presents some real challenges, right? I mean, you've got people who are addicted to the gambling, who are risking family savings and potentially putting the mortgage up. How is DraftKings approaching its role in being a responsible corporate citizen here and not contributing to the problems we've got in the country right now?

9:28Well, we have been a big proponent of responsible gaming. We've invested a lot in it. We have a person who reports directly into me, Lori Kalani, is our chief responsible gaming officer whose sole job is to focus on this. And we made a ton of progress. We actually just released a data sheet, which we could share with you, showing real data and stats behind what we've been doing because it's one thing to talk about. It's another thing to show in the numbers that we're actually doing it. We've had so much engagement with our responsible gaming tools. And one of the things that we're trying to get for people, change the mindset of people, is you're talking about problem gaming.

10:00Those are people that shouldn't be on the platform. And our goal is either through them self-identifying or us identifying them to not have them have access to the platform. But there's a lot of other people that they can play, but they still should be playing responsibly. It's no different than any activity. If you're spending money on something, you should understand how much you're spending. You should have a budget. We have tools that help people do that. So we have stats that show, here's how much you've spent. We have tools that allow you to set limits at all kinds of granular levels, daily, monthly, whatever you want.

10:31We have tools that allow you to see how much time you want to spend on the app and set limits on that. And it's really meant to empower the consumer. And what we want long-term is a sustainable customer base that is responsibly using our products and enjoying them and getting entertainment out of them. It's not good for anybody if you're not having that. So that's really the goal. And I think we've made a ton of progress this year, and it's going to continue to be a core part of our mission. Is this a use case for AI? Can AI help you flag when someone is entering a problem zone and to kind of flag it for them?

11:01Concern about companies being too paternalistic and, you know, telling customers what they can and can't do. And also, this is a growing problem in the country. So how do you think about integrating AI to help address this issue? Well, we've already integrated AI across many of our customer service touch points. And one of the things that AI can do, and I think this is part of what you're alluding to. So what happens sometimes, you have a customer that will interact with various people. They'll interact with a piece of marketing, go right into customer service. They'll talk to their host if they're a VIP customer, various things.

11:31And what AI can do is it could take all the communications, and there's so many of them. So it's really impossible for a human to manually go through all this stuff and comb through very quickly and find any sorts of patterns that we may want to look into. And then we have a dedicated team of people that can review those things and see if there's anything that they think is troubling and follow up with the customer as necessitates. So I think that we're just scratching the surface now. Now, obviously, we've got to be very cautious and responsible in how we implement AI, too. And that's something that's very important to us.

11:59But I think this is a perfect example, what you're raising, of where AI can actually help. So many people are using AI to get people to bet more. And it's like, actually, they're not thinking about these types of things, such as using AI to actually improve responsible game. Is there a concern about AI used offensively against draft games? Are you worried about people gaming your platform using new AI tools? You know, like any new technology, you have to think about those things. And with anything, there's going to be people that are looking to utilize it to win more. And so obviously we want to give people a shot at that.

12:33So we want to make sure that we're using AI, too, to help set our lines and help manage them. And I think it comes down to being on top of new technology and making sure that whoever's on the other side of it isn't using a technology that we're not prepared for. And we should be using it, too. And I think that creates an equilibrium in the playing field. Still ahead, more with Jason Robbins on the rise of prediction markets in sports betting and beyond.

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13:59Welcome back to Masters of Scale. You can find this conversation and more on our YouTube channel. And be sure to check out the link in the show notes to subscribe to our newsletter. One of the interesting things about the category you're in is that we were in kind of a static world until 2018 when the Supreme Court lifted the federal ban on online gambling nationally. And now with the rise of prediction markets and the exploitation of a lot of loopholes out there, it feels like we've gone from a duopoly with you and one other company to now there are multiple players here because prediction markets have entered this space in a more meaningful way.

14:36Is that the right way to view it? And what's it been like over the last year as this has exploded? First, you have to sort of separate prediction markets from traditional betting. It is a different thing. Obviously, I understand the areas that people see similarities, but it's a different regulatory framework. The product experience is different. And so I view it as a space that we can incrementally add more revenue and win in and add more customers, especially in the states that don't have our traditional sports betting product. I think it's a fantastic product for places like where we are now, California, Texas, other states like that.

15:14Because those are states that have not legalized the online gambling. Exactly. And so we look at it more in that way as an opportunity for us. We, for years, had competition. The market structure didn't start this way. And if you look at it, it's not like even by volume, the prediction markets or any more market share, if you put everything together, any more share, I should say, than some of the other competitors that we have that are not number one and number two in the space. And I think that, you know, that could obviously change over time. There's more people, if you want to look at it that way, competing.

15:46But I don't know that that necessarily changes the dynamic. I think we have to make sure that we're developing a great predictions product so that we can compete in that zone. And I like to think that having a bigger suite of products and overall bigger ecosystem of marketing and all the various partnerships that we have, brand that really has been built up with the sports customer over many years. I mean, we're ubiquitous all over the airwaves. And being able to, over time, tell a broader story of all the different ways that you can play sports with DraftKings and having people all over the country drive from that singular marketing versus having to spend incrementally, I think, will be a huge advantage for us.

16:21Are there things we shouldn't be able to bet on in a prediction market? Well, I don't know if I'm the right person to answer anything about what should I ask. You're my shaftings. I mean, who else should I ask? I know, but that's up to the regulators. I think that there's obvious stuff, right, that I just think is probably not necessary. But there's a lot in the middle, too. And so I don't think that's really up to us. I'll obviously have opinions if people ask me about specific things. But in a broad sense, I think things that could very, very easily be manipulated, we should be cautious with.

16:52Or things that are just like negative, like, you know, will this player get injured or something like that? It's just not, I just, I don't view it as the right thing for the industry. And I don't really think there's a ton of consumer demand for it anyway. So stuff like that are some examples I guess I would give. But really, it's so nuanced. And I think that's what's fascinating about it. This is, you know, the rules are about to be written and we'll find out. But there's going to be a lot of different opinions. And some people are in the purest category. We shouldn't restrict anything. And I actually get that viewpoint in some ways.

17:26I think the right answer, though, is probably some sort of restrictions, but in a reasonable way. But I don't think you've got to be careful they don't go overboard there. Yeah, I mean, look, I want to push it on this for just a moment. I was on Capitol Hill for four years. I ran policy at MySpace. That was my entry point to the private sector. My view, personally, is that when you're dealing with emerging industries, the best regulation comes in collaboration with industry. You can't leave it to industry entirely because then it's the Wild West. But also, by and large, regulators, as well intended as they usually are, as brilliant as they often are, are not equipped with the right knowledge, the right understanding of the market, the right understanding of the technology to do this on their own.

18:08It's not to throw shade at either side. It's just the reality of it. And so to me, like there are negative things like a player getting injured. There are also like life and death things. There are things about like national sovereignty where, I mean, someone could be betting on the regime in a country falling and bet so much money that it actually incentivizes certain action to be taken. So it seems to me that DraftKings and others in the industry do have some responsibility to say, there are rails that we are going to set independent of what the regulators do. And we're going to actually encourage the regulators to at least set the rails where we say and not just let it be wide open.

18:43I 100 % agree with everything you just said. Couldn't agree more. And part of why I'm a little cautious about, I'll give you a couple of examples, but really overly expressing my opinion here is I do think collaboration is important. And I think in that collaboration, it's important for industry itself to be collaborating. So I don't want to sit here and opine on a bunch of things and others in the industry may have a different perspective on it. I think the important thing is for everyone to collaborate, as you said, and work together to get to the right answer. And, you know, I've had things where I had an opinion.

19:13And after talking it over with various stakeholders, that opinion changed. I was at the NFL from 2010 to 2013. It was a very different era there. You could not even like say the G word or the B word, gambling or betting. Like it was taboo, completely different universe 10, 15 years later here. And we were starting to see the rise of Daily Fantasy back then. When it was just a couple of you starting this company, could you foresee the world that we're in right now? Did you have a vision for what this would be? No. I mean, when we started, there was three of us, DraftKings, and it was Daily Fantasy Sports.

19:51That's what it was. And I was excited about daily fantasy sports. I was a huge, still am fantasy sports nut. I play in lots of fantasy leagues every year, a little less than I used to these days, just because of time, but I still love it. And, you know, that was what I was passionate about. And I felt like that was a great business to build. And as things evolved and it became clear, which we had nothing to do with, that the Supreme Court was going to take up this case. We looked at it as, well, we have to look into that. And, you know, I think one of the things that if you look at any technology company that has been successful over the years, could be anyone from an AI company to, you know, any of the big tech companies, right?

20:30They've really been aware of what the next thing is and investing in it ahead of time. AI being a great example now. And take Google or whatever. Google's initial business was search. I mean, if they had just stuck with search, where would they be right now? I think we saw that with some others that just stuck with search. So it's really something that it's just been a pattern with every company that you have. Technology and consumer behaviors change and move so quickly. If you're not following that and you're not investing in the next thing, then you're going to get left behind and your old business is going to get disrupted.

21:05So when we saw that the Supreme Court had taken this up, we kind of felt that way about it, even though initially never thought once about that, never. It was all about daily fantasy sports and I love fantasy sports. But one of the things that I think our company has done a good job of, and we are doing it now with investments in AI also, we were the first to mobile. We were not the first to have a website, but we were absolutely the first to get to mobile. And the reason was we looked at the data and I looked at it and said, okay, last year, this is our first year, we had single digit percentage of traffic coming on the mobile website.

21:37That's up to 23, 24 % the next year. And we all looked at each other and we're like, this is going to 80, 90 % pretty quickly. Now it's almost 100%. So being able to use data and just understanding where the world's going has been something I think that's been really beneficial. And I hope we can continue to do it. Predictions is a good example of that now, by the way, I think we're leaning in there. And by the way, who knows how that'll play out? Anything could happen, but it's one of those things that we kind of just culturally are like, this is too potentially disruptive to ignore. We have to invest in this and we have to turn this into an opportunity.

22:15Anything that you don't turn it into an opportunity, you can turn it into a risk for you. It was just a few of you back at the beginning. How many people are DraftKings now? About 5 ,600. Okay. So to your point about turning these moments into real opportunities, when you're 5 ,600 people and you don't have time to play in as many fantasy leagues as you or I would want to because of all the responsibilities of leading a company that large. How do you stay on the cutting edge of innovation? How do you make sure that you don't fall into the traps of being sclerotic the way a lot of big companies get?