July 9th, 2015
Via The Wall Street Journal, an interesting report on Yahoo’s bet on fantasy sports:
Yahoo Inc. is looking to supplement its stagnant advertising business with a new foray into legal online gambling.
The Internet company on Wednesday unveiled a retooled version of its fantasy-sports mobile app that lets users wager real money daily and weekly against their friends and in bigger online tournaments. Yahoo will keep about 10% of the entry fees paid by players,Ken Fuchs, vice president of publisher products at Yahoo, said during an event announcing the app.
The new game marks Yahoo’s attempt to make money from a booming industry that has taken advantage of loosening regulations around online wagering. Unlike poker and sports betting, fantasy sports are exempt from the Unlawful Internet Gambling Enforcement Act of 2006 because they involve skill and not just chance, though some states still restrict these services.
Yahoo said playing its Daily Fantasy game is legal in 45 states—all but Iowa, Arizona, Washington, Montana and Louisiana.
Fantasy sports games let people select real baseball, basketball or football players to earn points based on those players’ performance in actual ballgames. An estimated 56.8 million people in North America are playing fantasy sports this year, up from 41.5 million, according to the Fantasy Sports Trade Association. They spend an average of $465 annually on these games, the association said.
Yahoo is experimenting with new business models as it attempts to make money from the millions of people who now use its services on mobile devices. Apart from an earlier service that let users wager on season-long fantasy sports games, the new Daily Fantasy app is the first time Yahoo will generate revenue from mobile apps that is not tied to advertising.“It is an interesting first foray for us with fantasy sports,” Kathy Savitt, Yahoo’s chief marketing officer, said in an interview. “Different models of monetization lead to a better consumer experience than others.”
Players in the game choose how much they want to wager and then are given virtual currency to spend buying the professional sports players they want on their team. Then they earn points based on how those players do, and the players with the most points are rewarded with cash prizes at the end of the day.
Users can deposit up to $600 a day in the app using credit cards and PayPal accounts. They can only withdraw funds into a PayPal account.
The app’s similarity to popular fantasy sports games made by the startup FanDuel Inc. drew criticism from that app’s creator on Wednesday.
“When we heard that Yahoo was joining the daily fantasy space we expected something new and exciting that could affect the industry,” Nigel Eccles, chief executive of FanDuel, said in an email. “Now to see that they’ve spent the last six months cloning FanDuel’s product—pixel for pixel—is totally flattering, but also slightly disappointing.”
Among FanDuel’s investors are the venture-capital arms of NBC Sports and ComcastCorp., which last year invested alongside other firms in a $70 million funding round for the startup.
Yahoo plans to set itself apart from FanDuel and other startups such as DraftKings Inc. by pulling in content and users from its Yahoo Sports sites. The company said those sites have a combined 98 million monthly users.
“There’s going to be lots of winners,” Ms. Savitt said. “To be able to have that sports legacy we think gives us a very unique perspective.”
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