Fantasy Sports Monetization Funnel
Trevor John, co-founder of Underdog Fantasy, on the business model of fantasy sports
The real asset in fantasy sports is not the first contest entry, it is the right to sell the same fan into more frequent and higher margin products over time. A season long draft might mean one payment tied to the NFL calendar, Pick'em can create daily or weekly play, and sportsbook betting adds a much bigger revenue pool. That makes fantasy less a standalone endpoint and more the top of a monetization funnel.
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The economics improve at each step. Fantasy contests usually monetize through a 10% to 15% rake on entry fees, sportsbook users can be worth far more over their lifetime, and online casino products carry the highest margins in gaming. That is why operators design product ladders, not single games.
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This playbook already worked for the category leaders. FanDuel and DraftKings used fantasy to build large user bases before sports betting opened in 2018, then converted those users into sportsbook customers. By 2024, sports betting was generating more than 60% of their combined revenue, while fantasy was only 5% to 7%.
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Underdog's edge is cheaper customer acquisition at the top of the funnel. The interview pegs fantasy CAC at roughly one tenth of sportsbook CAC, and Underdog now has a live sportsbook in North Carolina. If it can move draft players into Pick'em and then into betting inside one app and wallet, it can attack the same lifecycle FanDuel mastered.
The market is heading toward stacked sports fan ecosystems where the winners own the full journey, from low cost acquisition through fantasy, to betting, and eventually to casino style gaming where regulation allows. As more states open sports betting and operators add adjacent products, the companies with the strongest brand habit and lowest top of funnel CAC should capture the most value per user.