Yahoo is the newest company to throw its hat into the daily fantasy sports ring, announcing its intention to go live with a DFS product “this summer,” according to CEO Marissa Mayer.
DFS major interest for “our players and our investors”
The news came out of Yahoo’s earnings call for the first quarter of 2015 and was first reported by Eric Fisher.
CEO Marissa Mayer’s comments on the call, courtesy of Seeking Alpha:
Finally on digital content, let’s turn to sports. For more than 16 years we’ve built the best fantasy sports experiences for our fans. Our users spend nearly 30 billion minutes a year playing fantasy sports on Yahoo!. And nearly all of those experiences have involved traditional season-long fantasy games.
Recently there was a rising trend around daily fantasy games. We believe this is an area where Yahoo! can and should compete. Over the past year, we have been working hard to create our daily fantasy offering, a unique take on this game genre to bolster our leadership in fantasy sports.
Normally we do not announce products before launch but this has been such an area of interest for our fantasy players and our investors that we wanted to announce that we have a new daily fantasy offering in the works that will launch this summer.
Interestingly, Mayer was not asked a single question about DFS during the Q&A session that followed the call.
The news comes as somewhat of a surprise, as earlier this year, Yahoo seemed to be pivoting out of the real-money seasonlong fantasy contest market. But to many, Yahoo’s DFS entry makes sense.
Seasonlong to DFS
Yahoo will provide an interesting test case regarding the viability of transitioning season-long fantasy players to DFS.
According to data from Adam Krejcik, Managing Director of Digital & Interactive Gaming at Eilers Research, there are nearly 41 million seasonlong fantasy sports players.
But DFS has little penetration in that market, at about 2.5 percent of all fantasy sports play.
In addition to its seasonlong pedigree, Yahoo has some distinct advantages over its competitors, despite getting a late start:
- A convenient player base. Considered the leader in seasonlong fantasy, Yahoo already has a huge number of potential DFS players it can target, which could allow it to compete with FanDuel and DraftKings right off the bat.
- “Free” advertising. None of the other major DFS sites have this luxury. Yahoo can endlessly promote its DFS product on its own platform, which includes dedicated sports and fantasy portals already.
- Quick transition to mobile. Yahoo already has a pretty dialed in mobile app for both iOS and Android, complete with live scoring. Taking that product to DFS seems, on the surface, to be an easy transition.
What the industry thinks
Interestingly, the Yahoo news broke about an hour before a panel on the daily fantasy sports industry at the Global Interactive Gaming Summit and Expo (GIGse). The panel included Jason Robins, CEO of DraftKings, and Seth Young, COO of Star Fantasy Leagues, and they weighed in on Yahoo’s entry:
- Young: “I think it’s great for legitimacy in terms of our market. It shows that when you have two large companies who are comfortable with the fact that this at the end of the day still gaming, seomthing they are willing to commit to when the market size is relatively small, I think it shows we are all on the right track for running a good long-term viable business here in the USA.” Presumably the other large company he was talking about his Disney/ESPN, which has been reported to being ready to invest $250mm in DraftKings.
- Robins: “I haven’t really had time to dig in. I would echo what Seth said. I think that anytime you see a large company with substantial fantasy assets and a great brand like Yahoo coming into this space, it’s just further evidence that this is a space that people find attractive, that they feel comfortable with from a compliance standpoint, and they want to be a part of it, and that’s a really good thing for the industry.”
- Young: “I would say that with the entry of these groups into the market would come increased scrutiny on the market, so I would hope that most of the fantasy operators have their ducks in a row.”
- Young: “When we’re talking about marketing channels, with the entry of Yahoo into daily fantasy sports, and Amaya coming into daily fantasy sports, the duopoly we’re seeing may change. It’s going to be very interesting to see what happens next, but I would imagine the cost of acquiring customers is going to go up exponentially.”
The impact of Yahoo’s entrance into DFS
The Yahoo news could have wide-ranging ramifications for the DFS industry:
- The marketplace is getting crowded even more quickly than before. Amaya Gaming — the parent company of PokerStars — recently announced its intention of offering DFS for fantasy sports later this year, in time for football season. Two new huge players could mean difficulties for new and small DFS sites trying to carve out market share.
- No one seems to be content to allow DraftKings or FanDuel to run away with the market. The new entrants into the market make it clear that no one thinks the top two’s current status is insurmountable.
- FanDuel and DraftKings take a hit in an advertising capacity. Yahoo’s fantasy players are a ready-made target for the two DFS giants, but it seems safe to say their advertising at Yahoo will be going away. DraftKings and ESPN reportedly have a deal that includes a half a billion dollars in ad buys, but that deal has not yet been made official.
- What will sites do to attract/retain players? Clearly, Yahoo and Amaya can afford to offer absolutely huge guaranteed prize pools, if they want to, when the NFL season starts. There’s also a possibility the entrance of two new DFS sites will force down rake across the industry. Clearly, the cost of player acquisition is going up.