Yahoo’s Kenneth Fuchs Recently Explained How the Yahoo Daily Fantasy Sports Service Will Work
Yahoo launched a daily fantasy sports site this week, hoping to compete in a growing industry. The daily fantasy sports industry currently is dominated by two companies: DraftKings and FanDuel. The two companies, located in Boston and New York City respectively, have developed significant revenue streams and are trying to grow their business base and revenues.
Despite the presence of two key competitors, Yahoo believes it is still early enough in the development of DFS gaming that a third key competitor has room to grow. Daily fantasy sports sites were launched in 2009 and 2010, but the business model only has developed significant momentum post-2012. Though FanDuel and Draftkings have lured investors like NBC, Disney, and Comcast, the companies themselves remain relatively small in comparison to major corporations like Yahoo.
Yahoo Fantasy Sports
Also, Yahoo is no stranger to online fantasy sports. Since the early days of the Internet, Yahoo has developed a reputation for developing a major fantasy sports community. Most fantasy owners have at one time or another joined a free Yahoo fantasy football league, whether they enjoyed the experience or not. The paid leagues also have a significant impact on the industry.
Given that Yahoo has a large database of online fantasy sports owners, a daily fantasy sports site which markets to those players could be a powerful engine for building a DFS customer base. DraftKings and FanDuel take a different approach, spendings millions of dollars on TV, radio, and Internet advertisements on sports-themed stations and websites.
How DFS Works
All three businesses have the same basic business plan, which online gamblers know very well. People are encouraged to register an account on a DFS website. The player then funds their account with one of a number of payment methods: credit card, debit card, web wallet, e-voucher, or bank wire transfer. When this happens, the new member is given a welcome bonus which depends on the size of the payment they made.
Daily Sports Contests
Once their real money account is active, people can join contests in a number of popular American sports: NFL, NBA, Major League Baseball, NHL, and NCAA college football and college basketball. After paying a fee to enter a one-day fantasy contest, the team owner fills out a starting lineup according to the parameters of whatever sport is being simulated. Each contest has a scoring system, along with a salary cap to provide a degree of difficulty for picking players. When the games are played, players’ statistics convert to fantasy points and a winner is determined.
The various DFS services take a fee for hosting each contest. Usually, that fee is about 10% of the entry fee a player pays. If you enter a $10 contest, $1 goes to DraftKings, FanDuel, or Yahoo DFS. The remaining money collected is handed out to winners. This can be a winner-take-all format for smaller player pools or a large player pool of winners, like one would see in an online poker tournament.
Yahoo Side Bets
Yahoo has one option that the other sites don’t have. Those who host local leagues on the Yahoo fantasy servers have the option of having head-to-head contests with other members of their league. The option essentially lets league rivals have side bets throughout their fantasy seasons, to keep things interesting or settle grudges.
Reasons to Doubt Its Success
There are reasons to doubt whether the Yahoo business model will succeed, though. DraftKings and FanDuel have spent the last year inking deals with teams in the NBA, NHL, MLB, and the NFL. FanDuel has an exclusive deal with NBC Sports, while DraftKings has a deal with Disney Corporation, which owns ESPN and ABC Sports. Thus, Yahoo is going to have a hard time inking official sponsorship deals with pro teams, while it might find advertising on the sports networks difficult.
Yahoo also is well behind on getting players to join its service. Millions of DFS gamblers have already joined either DraftKings or FanDuel. Those people might be reluctant to give up their familiar platform for the Yahoo daily fantasy sports service.
The launch of the Yahoo site attracted the attention of its newest competitors. Justine Sacco, a spokesman for FanDuel, told Re/Code, “If imitation is the sincerest form of flattery, Yahoo has a major crush on FanDuel.”
Daily versus Yearly Competitors
It also should be noted that not all fantasy owners want to engage in daily fantasy sports. It would be a mistake to assume that every person in a local league wants to gamble on one-day contests throughout the year. Many dedicated fantasy football owners stop engaging in fantasy sports altogether for 6 months of the year.
The wives of fantasy football owners are sometimes called “football widows”, and those wives might not wants their husbands playing throughout the year. Also, some players exhibit burnout by the end of the fantasy season. It can be a grueling and emotional experience to manage a team through a 4- to 5-month season. By the time the holidays roll around, many fantasy football owners want an offseason–no joke.
That being said, Yahoo Fantasy Sports should add an additional level of intrigue to the so-called daily fantasy sports war currently taking place between FanDuel and DraftKings.
