Pando

Yahoo launches new fantasy sports product at the worst possible time

This freakin' company, man

By Dennis Keohane , written on July 9, 2015

From The Yahoos Desk

What the hell is wrong with Yahoo?

Do the people making decisions at that company live in some sort of strange warp zone where the world really gives a shit if the name “Yahoo” is slapped on a new product and then paraded out for all the world to see?

No, really. Is there some sort of Truman Show situation going on where Marissa Mayer sits in a board room all day and just lives this perfect existence where the Yahoo name carries some mysterious power and everyone congratulates her for it?

Or are Yahoo's offices like North Korea, where Yahoo News pumps fake news to workers living in a gated Yahoo campus community? “Yahoo beats Wall Street expectations!” “Yahoo sets new US stock price record!” “Yahoo wins World Cup!"

On Wednesday, Yahoo announced that it is launching its own daily fantasy sports league. Much like existing daily fantasy sites, Yahoo will let players wager -- although like other daily fantasy site, the company stays far away from using that term -- on how well the athletes they select each day perform against a field of other fantasy players. Just like the two major daily fantasy sites, FanDuel and DraftKings, Yahoo will take a percentage of the entry fee: 10 percent to be exact.

Many expected the company to get involved in daily fantasy sports in one way or another...practically eons ago. Almost exactly a year ago, when DraftKings acquired a competitor, I wrote that it would be a savvy move by Yahoo to scoop up a company like DraftKings or FanDuel to add to their existing Yahoo Sports platform, one which rivals ESPN for online news and fantasy sports games.

However, as strange as it seems, since last July, the game has changed to the point that Yahoo may be priced out of a move to acquire FanDuel or DraftKings. Quite simply, Yahoo missed out on an enormous opportunity to steer the company in a clear direction in fantasy sports, a move which could have helped it surpass ESPN to become the leader in Internet fantasy sports.

But Yahoo stood pat, in poker terms, sitting on a hand with a pair of kings, and DraftKings and FanDuel have both drawn pairs of aces since.

The company had one of the top two most respected fantasy sports platforms prior to the launch of play-for-real-money fantasy sites like FanDuel and DraftKings. Two years ago - or last summer even -- no one would have batted an eye if Yahoo gobbled up either of those companies and added it to its existing products.

However, they didn’t and both FanDuel and DraftKings made some powerful allies in the interim. FanDuel announced major funding last year that included investments from NBC and the NBA among others. It also has a deal in place with the NBA and various sports teams in other leagues to be an official daily fantasy partner, which is basically a marketing move. DraftKings received an investment from the MLB and was rumored to have a deal in place for a massive funding round led by Disney, the parent company of ESPN. However, that deal, at this point, looks only to be for an advertising partnership with the “Worldwide Leader,” which is like taking home the second place prize at a beauty contest.

Rumor has it, both FanDuel and DraftKings have impending funding announcements that value each at more than $1 billion. And as the daily fantasy space grows, by some estimates it has the opportunity to be a more than $16 billion industry by 2020 according to Eilers Research.

In fact, the two big names, which are becoming synonymous with daily fantasy, have become the ubiquitous brands in the space -- the Pepsi and Coca-Cola of fantasy. You can’t turn on sports radio without hearing their ads, their branding is all over ESPN and covers major sports stadiums, and they are starting to get perfectly placed ads during major sports “moments” like when FanDuel’s logo popped up at the Mayweather-Pacquiao fight, and when DraftKings had its logo splashed all over the finish line at the Belmont Stakes as American Pharaoh won the Triple Crown.

Yahoo’s timing for this daily fantasy product launch couldn’t be any better for making as little an impact as possible. This is the absolute nadir of sport activity for the entire year. No NFL. No College Sports. No NBA. No NHL. And no international soccer -- futbol -- like the English Premier League and Spain’s La Liga. Major League Baseball is about to take a hiatus with the All-Star Game. So literally this is the week of the calendar year that has the least amount of professional sports activity. It either says a lot about Yahoo’s understanding of the sports industry to make a big announcement like this at a quiet moment in the sports world, or shows that they really don’t have a clue and are launching at the worst time possible in terms of people actually being able to use the product.

Strangely, Yahoo’s move is being hailed by many media outlets as an opportunity to seize the market. Their reasoning is that Yahoo’s existing fantasy users will now have the paid option to use on a weekly or daily basis. It’s actually kind of funny, and many of the quotes picked up from Yahoo’s press conference make the whole thing seem like a conversation with your grandfather about using Facebook or Twitter. Take this gem from the San Jose Mercury Times:

'The rise of daily is early but real,' Ken Fuchs, Yahoo's vice president of publisher products, said in a news conference Wednesday. He said the company hopes to help make 'fantasy sports a mainstream passion' for sports lovers to 'compete, talk smack' and have fun.

Ah yes, daily fantasy is real, Ken, but it certainly is not early. And you are way too late to the game to even try to talk “smack.”

I’ll be honest, there are two ways that Yahoo might have a chance to penetrate a market that already seems closed to entrants big and small.

One is that fantasy sports enthusiasts who already use Yahoo will add a wager to their existing league matchups, a smart option announced by the company as part of yesterday’s roll out of the new product. So instead of just using Yahoo to run a year-long fantasy league, players can put money on the line in the weekly or daily head-to-head competitions that they would have been part of anyway. The only problem with this scenario is that many of Yahoo’s fantasy players, who the company thinks will use their new product because they want to play daily fantasy for money, are already doing so on FanDuel and DraftKings; those who aren’t already on those sites probably don’t have any interest in adding real money wagers to their existing fantasy experiences, which are the Internet equivalent of co-ed softball beer leagues.

The second way that Yahoo could catch up with FanDuel and DraftKings would be to ink a deal with the big fish still out there for the taking, the NFL. Currently, neither of the two existing daily fantasy leagues have been able to form an official partnership with the National Football League, although they have done deals with individual teams like DraftKings's partnership with the New England Patriots. If Yahoo could do a deal with the NFL, which it already has through a recent partnership to live stream games globally, it would be a game changer that could make the FanDuel, DraftKings, and Yahoo daily fantasy arms race much more interesting.

But that is a big “if.” Re/Code’s Kurt Wagner, the only other media person who seems to realize that Yahoo is way too late to this game, pointed out the importance of the league deals already in place for both FanDuel and DraftKings.

“FanDuel and DraftKings have been divvying up America’s major sports teams for over a year now,” Wagner wrote, “and many of the teams are already accounted for. The same goes for some major media properties.”

What Wagner knows -- and as he later pointed out by his reference that FanDuel is already mocking the likeness of Yahoo’s daily fantasy leagues to its own products -- is that Yahoo’s play yesterday is kind of a joke if you understand just how big FanDuel and DraftKings are.

If Yahoo’s Ken Fuchs is excited about all the “smack talk” players can now do on daily fantasy, he needn’t look very far for a great example of it directed right in his direction.

“If imitation is the sincerest form of flattery, Yahoo has a major crush on FanDuel,” FanDuel spokesperson Justine Sacco told Re/code.

Burn.

While the New York Times and other media outlets think that this may be the saving grace for the seemingly directionless Yahoo and Marissa Mayer, this is a move that should have been made more than a year ago, probably by acquiring FanDuel or DraftKings. Maybe the company was concerned about the legality of daily fantasy which falls under the regulation of “skilled gaming” and not a game of chance like gambling on blackjack, and that it was expecting daily fantasy sports websites to be shut down. I imagine that once three out of the four major leagues made partnerships with FanDuel and DraftKings, and once ESPN and NBC got involved, the braintrust at Yahoo realized that they had made a very wrong bet.

So now that we have Yahoo daily fantasy sports, I think its time to finally tie a Google+ or Windows Phone type anchor to the sinking ship that is the once-great Yahoo.