MARGINS: A CRASH COURSE IN HOW THE SITES MAKE THEIR MONEY

Have you ever wondered how DFS sites make their money?

After all, with the giant sign-up bonuses and huge overlays that can be found at sites like DraftKings and FanDuel, it can often seem like the DFS big-hitters are falling over themselves to hand the user free money. They promise you a bonus when you deposit. You invest $1, they give you $2.

But, as you should know by now, there is no such thing as a free lunch.

You see, these operators have a built-in profit margin for every event that they run. This is the house’s cut – and it ensures that they consistently turn a profit.

Take a 10-player, winner-take-all event. If the entry fee is $10, then $100 is collected from the players (10 entrants at $10 each). Yet the winner only earns $90, meaning that a phantom $10 disappears from the prize pool.

This is the operator’s margin. And – spoiler alert – it is going to have a BIG impact on how profitable you are as a DFS player.

How do I swerve the operator’s margin?

Sadly, you can’t. It is the site’s profit, and it is quite simply the cost of doing business. However, what you can do is ensure that you enter events that offer the lowest margins – or, to put it another way, events that offer DFS players the best value.

A quick glance at our handy SuperLobby is your best bet when it comes to quantifying these margins. We display the percentage that the operator siphons off in every single event. In the image below, you can see that the higher buy-in events offer lower margins, which is attractive to the pros.

The sites can afford to offer cheaper margins in percentage terms, because the fees at higher buy-ins dwarf the low-stakes in real terms. Look at the bottom two competitions in the list: a $215 Head-to-Head with a 7% margin, and a $1 10-Player with a 10% margin. In the $215 H2H, $30 is removed from the prize pool, whereas a solitary $1 is taken from the $1 10-Player event. The cost of offering each event doesn’t really differ; the software remains the same, regardless of the buy-in price. Therefore, DraftKings can afford to entice the high-stakes pros, with their deep pockets and big volume, by offering lower margins at higher buy-ins.

Rakeback – the future for DFS?

Note that even at 7%, the margins in H2H events are notably higher than its closest counterpart: Online Poker Heads-Up Sit N Gos. On Pokerstars, where most online poker pros compete, the Heads-Up margins (or ‘rake’) tend to hover around the 4% mark – and bonuses and rakeback significantly sweeten those rates.

The poker model is likely to influence the DFS world before long. Away from DraftKings and FanDuel, there are up-and-coming DFS sites that are starting to offer rakeback deals to return a portion of the operator’s margins to loyal customers. It remains to be seen whether the rakeback model will be adopted by the bigger operators, as they have vast advertising expenses to recoup. Time will tell.

It is vital that users look after their bankrolls by seeking out the best value. As players become better at decision-making when making their DFS picks, it will become increasingly important to maximise value in areas such as identifying overlay and seeking out the lowest margins. SuperLobby is the perfect resource to help you adopt a more professional approach to Daily Fantasy Sports.