Yahoo’s net revenue from daily fantasy sports this year is likely to be about $5 million, according to a research report just released on the DFS industry.
The predicted numbers for Yahoo
The report from Eilers Research makes several predictions after Yahoo’s entrance into the DFS market on Wednesday. The most interesting part of the report was the numbers it projected for the rest of the calendar year:
- Bull scenario: $50 million or greater in entry fees collected
- Based on that projection and Yahoo’s current rake structure, that would create approximately $5mm in revenue.
- Bear scenario: $20mm or under in entry fees.
By contrast, both FanDuel and DraftKings expect to award $1 billion in prizes this year while potentially reaching nine figures in revenue. Granted, that includes six more months of the year, but all three will be competing during the biggest portion of the daily fantasy calendar, NFL season.
Why so low?
There have been varying opinions on Yahoo’s year-one potential, from the idea that it could compete for the No. 1 spot in the DFS space to it will be an absolute failure.
The report from Eilers’ Adam Krejcik straddles those two distant vantage points. Krejcik questioned Yahoo’s commitment to spend money to compete with the industry’s two giants, FanDuel and DraftKings, right off the bat.
Also unknown is how successful Yahoo will be at converting its large, existing seasonlong fantasy user base to its DFS contests.
How Yahoo could beat the projections
What factors could play into Yahoo exceeding these projections? Here is a sampling:
- Conversion percentage: While the exact number of Yahoo fantasy players is unknown, there are lot of them, possibly exceeding 10 million. If Yahoo is more successful at converting these players than Eilers and others project, this could result in more entry fees and revenue. Players using Yahoo’s fantasy app and web platforms — or just visiting their sports home page — are going to see the link for daily fantasy regularly. And the barrier to getting someone to click it is likely lower than for a FanDuel or DraftKings external ad.
- Promotions: Right now, Yahoo is doing little to promote its product, other than saying “hey, here it is, come play,” along with the initial wave of media coverage on Wednesday. There is no sign-up bonus, bucking the industry standard. Could we possibly see a huge opening weekend football promotion, with a massive guaranteed prize pool, to activate seasonlong users and pull in casual fans? That’s been a formula that has had mixed success for DFS startups, but it could build momentum at Yahoo.
- More innovation: Right now, Eilers notes that Yahoo is basically copying the salary-cap model in the DFS space, and looks pretty much like a FanDuel/DraftKings clone. Yahoo has a development team that’s capable of more, and that could make a difference. Will that come in time to have an impact this year? We’ll have to wait to find out.