DraftKings, FanDuel merger doesn’t fix all daily fantasy’s problem

The DraftKings v. FanDuel battle is finally over. The companies announced they will merge to form the the largest daily fantasy site in the market. That’s good because they don’t have to compete with each other anymore. They will be able to focus on the customers, and their cash flow issues — and previous legal costs/troubles — can be addressed by one company. Investors are probably happy because this helps the two companies from folding. There are still many issues to address.

The first issue was a question of leadership. It was no secret that DraftKings CEO Jason Robins and FanDuel CEO Nathan Eccles weren’t exactly the best of friends.┬áThat’s what happens with two big successful personalities. Both will have a role in the merged company, but it will be interesting to see if any type of power struggle comes out of it. Sure, everything is fine now, but a few months working together can change that quickly.

The second issue is fixing the rumored cash flow problems. Here’s the main problem with the business. It’s inversely scaled. Spending a few dollars to get fantasy football fans is easy. That’s how they create a customer base. The problem is getting the next player, and the next player, and the next player becomes more and more expensive. The only way to reach these potential fantasy players is through sponsorships and advertising. We know exactly how that went. Usually as a business scales up, production becomes cheaper. That’s not the case with daily fantasy sites. Customer acquisition costs actually increase — unless they are going to rely on word of mouth, which isn’t effective enough.

Finally, they still have customer issues. I incorrectly thought an open game was a closed game between friends. That was my fault. But, there are simple fixes that could make the distinction between private and public games easier to figure out. Have a giant PRIVATE on the screen when filling out lineups. Before someone confirms their picks have a pop up or something — anything — that let’s players know the game won’t be open to the public. If a game is set for 25 people, and 24 sign up, don’t cancel the game. Simply adjust the payouts accordingly. Some money is better than no money. FanDuel and DraftKings lose their rake when they cancel a game because it doesn’t hit minimum number set at the beginning.

It’s very easy to attack daily fantasy sites. The incessant advertising was completely annoying. A lot of people who play simply don’t win. DraftKings and FanDuel were an easy target. That’s unfortunate. Daily fantasy is fun, and can be more fun in private leagues. The merger doesn’t fix everything, but it’s a step in the right direction.