America loves its sports. People live and die with their teams, form real-life rivalries, and even shirk work duties to follow the action online. The Super Bowl is the largest advertising event of the year, and March Madness itself is responsible for millions in lost productivity. People love sports so much that fantasy sports became a thing—the thrill of competing against friends with virtual teams only heightened the excitement of watching the games unfold.
Soon, people began upping the ante, requiring buy-ins to ensure people were serious and offering a prize at the end. Naturally, seasoned veterans invited larger and larger buy-ins with the prospect of earning more at season’s end, and the potential for big payouts in turn drew in more and more players. But for some, the idea of waiting an entire season to see a return on their investment was too long, and it was here that sites like FanDuel and DraftKings recognized the opportunity to capitalize.
These sites offer what is referred to collectively as “Daily Fantasy Sports”, though in some cases the games can be a week in length. The idea is simple: if it’s ok to have leagues that last months and pay out money at the end, why not make each day or week a season of its own? The appeal is obvious. Players get to put their money in on one day and get paid their winnings as soon as the tournament is over (either the same day or next). Instant gratification at its finest, daily fantasy can be rather addictive. And with low buy-in tournaments (with some starting as low as $0.25 per entry) and the potential for winnings up to $1,000,000, it’s little surprise that this is a trend that’s picking up steam.
Sites like FanDuel are paying out tens of millions of dollars each week, and of course they’re getting their share of the profits as well. The ROI for these businesses were so good that even a major player like Yahoo! decided to follow suit, lending a ton of legitimacy to what many might erroneously assume is illegal gambling.
So what can we learn from the success of DFS websites? Well, for one, there’s plenty of money to be made in allowing people to gamble. Daily leagues are legal, but they’re not that dissimilar from sports betting, so the margins are huge. Of course, this isn’t really a lesson most of us can replicate, so it’s a good thing there’s another, broader, lesson to be gained.
A critical component of business is finding out what the market is actually demanding. You might have a great idea for how to make an indoor light that doesn’t attract bugs, but that’s not really an issue people run into very often. Take the time to do market research—it’s the entrepreneur’s analog to “measure twice, cut once”. The recent fervor around sports betting and fantasy leagues made it clear that there was a market for DFS websites to cater to, what’s the new trend in your niche going to be? If you’re struggling to come up with ideas, put yourself in your customers’ shoes. What problems are they running into on a regular basis? This is easiest to do if you’re already a passionate member of that target audience, because you likely have already encountered potential areas for innovation in your day-to-day life. Necessity is the mother of invention, so let it be your guide.
Already an accomplished graduate student and a published scientific author, Neel enjoys writing on a wide range on topics for pleasure.