Introducing the Sharks
If you’ve seen any of the combined 25,000-plus FanDuel and DraftKings commercials that aired in September (only 214 hours of airtime), you have been introduced to some of the sharks of daily fantasy sports (DFS) gambling. On FanDuel, Scott H. let us know that he has won $2.1 million on a mere $35 invested. That’s an ROI of 6,000,000%. Or there is David Gomes, who was a $1 million winner on DraftKings. Not a bad day at the office for these sharks.
For those of you who aren’t as familiar with FanDuel and DraftKings, here’s a quick primer. Both recently raised huge new rounds of investments, and are valued at greater than $1 billion. They are also investing heavily in marketing as they try to acquire new customers in mass quantities—they were No. 3 and No. 4 in TV advertising spend in September, behind only Geico and AT&T. In DFS, you have a salary cap that you must allocate to build a lineup of players that you think will perform well on that specific day or weekend. If your players have better statistics than your opponent(s), then you win. You legally invest real money, and win real money.
A study by the Sports Business Journal suggests that there are three core types of players in the DFS ecosystem:
- Sharks: These “pros” are only 1.3% of the pool, but are taking home 91% of the profits.
- Big Fish: These high-rollers are only 5% of the pool, but account for 75% of all losses.
- Minnows: These novices are the mass majority, making up 80% of the pool.
The channel ecosystem is actually quite similar, and there is much to learn by understanding the nuances between these types of players. There are many minnows out there that have a partner program in place, but tend to be more risk averse and that simply conform to the norm. The big fish are willing to invest in their channel growth strategies, but are misallocating their budget by relying primarily on anecdotal data and past investment tactics. The sharks, however, are the ones actively investing in data and analytics to execute on their channel growth strategies and maximize the ROI for both themselves and their partners.
Why the Sharks Win
In DFS, the sharks are winning because they are committed to building plans that are data-driven and executable. Sharks are 100% focused on driving success from their investments, and dedicate the necessary time and resources to doing so. There are three core drivers that give sharks a distinct advantage over the competition:
- Better Data: Sharks build and maintain their own proprietary database on player performance, rather than just relying on commonly available data.
- Better Projections: Sharks rely on predictive models to determine the expected ROI for each player and lineup, rather than just relying on personal experience and anecdotal knowledge.
- Better Allocation: Sharks diversify and optimize their investments across multiple lineups, rather than putting all their eggs in one basket.
How to Become a Channel Management Shark in 2016
As channel leaders put together their 2016 plans, they have the opportunity to become a channel management shark (though we can’t promise a 6,000,000% ROI!). By learning from what makes sharks successful in DFS, channel leaders can identify and execute on the best opportunities for revenue and margin growth through their channel partners.
- Better Data: The first thing to focus on is channel data management. In our experience at ZS, we find that the majority of large high-tech companies are still struggling with channel data gaps and quality issues. This is not a new story. However, what we see is that many companies are focused on gathering and analyzing data that can help determine where channel partners are today, not where they will be in the future. To become a shark, you must build out a more robust channel data asset that goes beyond basic transactional data to include richer partner profile data, such as sales structure, capabilities, strategic investments, service strategy, marketing efforts, etc.
- Better Projections: Next, focus on forecasting 2016 sales performance for each of your partners. By leveraging a more reliable channel data asset, leading high-tech companies are able to more accurately predict the best growth opportunities through their partner channel. You can also analyze your market coverage of target customer segments, geographies or industry verticals based on the capacity provided by your channel partners along with your direct sales team. To become a shark, you must build out these predictive models to more accurately determine which partners are best positioned to deliver on your 2016 strategic objectives.
- Better Allocation: Finally, focus on optimizing your available resources and budget for 2016. Trust the data analysis and projections that show you where the best return on your dollar will be, and resist the urge to fall back on the “old” way of allocating budget based on anecdotes and gut feelings. The big fish in channel management will typically funnel investments to the biggest partners, causing them to miss out on opportunities to support their high-potential partners that are investing in capabilities that are more closely aligned with the strategic objectives of their business. To become a shark, you must diversify your investments—e.g., marketing funds, sales resources, technical support, incentives, etc.—across your partner ecosystem and allocate based on optimized projections aligned with your 2016 strategic objectives.
The year 2016 is right about the corner, but there is still time to ensure that your channel plans are data-driven and to best allocate your resources to enable a successful year. Stay tuned for more research and insights from ZS on about how channel leaders in large U.S. high-tech companies are leveraging data and analytics to identify channel segments that offer the best opportunities for revenue and margin growth in 2016.