Friday, March 27, 2009

Lessons In ROI

I started this post once already and it turned into a long rambling math-fest. I put away the slide rule and I'm going to try and put all of the relevant points below:

My lifetime ROI is NOT my return on what I deposited on the fantasy sites; it's the return on the TOTAL entry fees I've paid on all the contests entered.

If you only play HU (heads-up) contests, your ROI will never reach +100% because of the rake. Example: Play ten HU at $11 each, win them all ($200). Your ROI is +81.81%.

You need to win over 54% of your HU contests to be profitable, again because of the rake.

If you play multis (multi-player contests), You can achieve an ROI well over 100% because you can win multiple buy-ins in one contest. While this is possible, it is unlikely (over time) because of the volume of opponents.

The good news about multis? You don't even need to win 50% of the time to be profitable.

The bad news about multis? More opponents equals more variance, meaning you will run hot and cold. Wild swings requires more bankroll to avoid going busto.

If you are an above average fantasy player, there will be more value (dead money) in the multis. While they have the best risk/reward ratio, that is no indication you will have positive results.

In other words, sometimes we run bad. I have, plenty of times.

Finally, the most important point:

The daily fantasy market, while growing each year, does not yet have enough real money traffic to support a multi-player specialist. And that is where the "serious business" money (aka "the cheddar") will be made.

What I mean is that I cannot play as many multis (especially at higher buy-ins) as I would like.

This is what limits my ROI. And it will limit anyone's ROI.

Until that changes, daily fantasy will be stuck in the lunch money/beer money category. I'm still waiting for the "baller" money to show up.


Alex said...

Good post. 100% correct. We're working on getting the 'baller' money flowing. Hopefully daily contests will reach some sort of tipping point this year.

Blinders said...

You would need to run like a god in multis to earn a higher ROI than heads up. In theory you could win 100% of your 10 player multis, but that would imply that you are infinitely better than the average player. I don't think that anyone is close 2x better than the average fantasy player, so the larger ROI of multis in theory is irrelevant. Is your ROI above 81% in multis for example? If you assume that the average multi player is worse than the average heads up player (I will buy this to some extent), you still need to offset the higher rake of a multi vs. a high dollar heads up. I think that will wash away the edge, and you could be balling right now in the HU at Fantasy Sports Live dot com. Keep in mind that $50 ten player leagues will probably invite players just as skilled as now play in the $200+ HU leagues for the same reason you would want to be there.