Can ‘No Rake’ Daily Fantasy Sports Sites Survive?
Can no rake daily fantasy sports sites survive long enough to actually make money? Can they survive long enough to get acquired by big name players? Can they even survive long enough to pay out their own players?
These are all very serious questions that are popping up along with the meteoric rise daily fantasy sports sites. They’re also questions that any casino affiliate who is thinking about promoting a fantasy sports should be considering. as well.
Why Do DFS Sites Go ‘No Rake’?
Most DFS sites use a rake model like you’d find at any online or land-based poker room and take a cut of the total prize pot from each game.
Over time, that adds up to a lot of cash and is how sites like DraftKings and Fan Duel are able to post such impressive revenue each quarter. But some sites, particular those that are interested in getting acquired by big name sports sites like Yahoo! and CBS Sports choose a different operating model.
The operators of these sites would rather throw their venture capital money at marketing and player acquisition in order to make themselves attractive to buyers. That’s what Dan Ziernicki, owner of FantasyUp did.
Ziernicki, who funded his site with $3.5 million he earned playing at FanDuel, shared his strategy with Gambling911 saying:
The big vision in this industry is that the players like ESPN, Yahoo! and CBS, are going to enter this space once legalities of online gambling clears up. What we’re really focusing on is being the technological company for the future. To be able to process large amounts of data in real time. We are not there yet, but we are already able to handle the biggest daily fantasy sports day ever.
Unfortunately for Ziernicki, CBS and Yahoo! weren’t interested in his site and now his players are saying he’s late with tournament prize payments.
In short, the no rake DFS model is a high risk, high reward proposition that could leave operators and affiliates either very flush, or simply holding the bag.