FanDuel Rides NFL, NBA Popularity to Biggest Quarter Ever

FanDuel came to play in the fourth quarter.

The fantasy sports startup, which specializes in fantasy contests that last for only a day, posted its biggest quarter ever on Tuesday, bringing in nearly $37 million in revenue, according to CEO Nigel Eccles. That’s up from just $7.4 million in the same quarter last year, and more than $57 million on the year. (FanDuel is still not profitable.)

The simple explanation for the rise in revenue: FanDuel’s user base grew at roughly the same rate. For the first time, more than one million people paid to play FanDuel fantasy sports last quarter. In Q4 2013, that number was just over 190,000.

Eccles says Q4 is always the company’s biggest quarter, buoyed by the popularity of both the NFL and NBA. Still, he was “surprised” by the company’s earnings, and pointed to the rise of fantasy tournaments as another reason for FanDuel’s growth.

Fantasy tournaments have the same draw as the lottery: Big payouts. Instead of facing another player head to head, users join fantasy tournaments for the chance to win hundreds of thousands or even millions of dollars while competing against a pool of competitors.

From a business standpoint, FanDuel monetizes tournaments and head-to-head competitions in the same way. The company makes money by taking a cut — nearly 10 percent — of each user’s entry fee, which can be as little as $1 or as much as $500, depending on the competition. The rest of the money is then distributed as prize money.

More than half of FanDuel’s revenue comes from the major tournaments, says Eccles, revenue that was almost nonexistent three years ago.

FanDuel had a busy 2014, which included a big, $70 million funding round in September. A major reason for the startup’s growth has been its marketing efforts: The company recently inked a four-year deal with the NBA to be the league’s official daily fantasy sports service, and has more than seven partnerships with other NBA teams. As part of the deal, the NBA also became a FanDuel investor and took a seat on FanDuel’s board.

FanDuel pays for these partnerships, which is why the company isn’t profitable — but the benefits are worth it, insists Eccles. “We look at it for brand association and legitimization,” he said, adding that the partnerships benefit the leagues, too, as more fantasy players often means more people watching the games.

As the NFL season winds down, FanDuel will turn toward Major League Baseball. Fantasy games from the three major professional sports leagues — NFL, NBA and MLB — account for 90 percent of company revenue, says Eccles. And while FanDuel has no MLB partnerships to date, they will be on Eccles’s mind.

Note: NBC Sports Ventures is a FanDuel investor, and NBCUniversal is a minority investor in Revere Digital, Re/code’s parent company.

This article originally appeared on Recode.net.

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