Yahoo’s Daily Fantasy Sports Entry Makes Missteps In Weeks After Launch

Some of the problems experienced by Yahoo in its entrance in the daily fantasy sports industry resemble those that might be made by an online gaming startup rather than a giant internet corporation.

Yahoo sets the stage and launches

This spring, Yahoo announced it would be getting into the daily fantasy sports market — a natural crossover, as it is one of the giants of fantasy sports of the season-long variety. At the time, it sounded like CEO Marissa Mayer had big plans for DFS, according to her statements in an earnings call:

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.

Her revelation that Yahoo has been working on DFS for a lengthy period of time brought with it expectations that it would be launching a fairly polished product.

Then, Yahoo’s DFS launch came suddenly earlier this month, without much warning. At the start, people were simply excited that Yahoo had entered the space. But that sentiment didn’t last that long.

What went wrong for Yahoo initially

The start for Yahoo was positive enough, with contests just based on Major League Baseball. There was a big freeroll that filled, and a $50,000 guaranteed contest that Yahoo offered players willing to deposit. But the warm, fuzzy feelings about Yahoo dissipated relatively quickly. For instance:

• FanDuel takes aim: One of the two major players in the DFS industry, FanDuel, lashed out at Yahoo for cloning its product. CEO Nigel Eccles: “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.” Previously, FanDuel and fellow industry giant DraftKings had welcomed Yahoo as validation for the industry.
• Some bad, some good with players: Existing DFS players seemed underwhelmed with the Yahoo launch. There was pretty much nothing in the platform that differentiated it from other DFS sites, other than the amount of the salary cap. There is no deposit bonus, not much in the way of big guarantees, and generally not much attracting regulars at other DFS sites. And given the fact that Mayer claimed Yahoo’s entry was going to be “unique,” it certainly didn’t seem that way.  Still, Yahoo has generated enough unique users that put it in the second tier of operators behind FanDuel and DraftKings, and possibly third in the market. But it seems clear that Yahoo had its sights set on more than just that.
• Yahoo doesn’t control the narrative: The DFS industry, although it has gotten some mainstream press stories, almost never gets blanket coverage like the Yahoo launch did. Major media outlets like the Wall Street Journal and the New York Times called DFS and Yahoo’s product gambling — a term the industry tries hard to avoid. Yahoo also just launched without calling it a beta test or a soft launch, which likely raised expectations for its product on day 1.

Still, despite all that, no one would have termed Yahoo’s launch a debacle. It was getting its product in front of users before the all-important NFL season, which is when the rubber meets the road for DFS operators, and when mistakes can’t afford to be made.

Then, more problems started surfacing.

What went wrong for Yahoo later on

After the initial rollout, Yahoo started having other issues that attracted unwanted attention:

• A contest that was titled “Everyone Wins Guaranteed“ was true to its name — no one went away empty-handed. But the ire of DFS players was raised as the prize pool of $22,000 — which would have been fully guaranteed at any other DFS site — was not paid out. And, the contest brought up legal questions, from whether it was compliant with the Unlawful Internet Gambling Enforcement Act to truth in advertising laws at the state level.
• Yahoo initially paid out a contest that included statistics from a game that started but was later postponed, in violation of its own rules. Yahoo did make good on this mistake with affected players.
• A report from Robert Della Fave noted that identify verification and financial checks lag behind many other DFS sites, and actually resemble the protocols of offshore gambling sites more than anything else.
• Mayer made a claim that there were already 1.3 million DFS users at Yahoo — half of them paying users — in a recent earnings call, a claim that didn’t match what observers had seen so far. A day later, Yahoo noted the numbers Mayer used were wrong.
• There have been some issues in crediting players after contests have concluded, although that is not a problem unique to Yahoo in the DFS industry.

It’s hardly the early track record one would expect for the internet giant, given that it wasn’t reinventing the wheel and was following the gameplan for DFS that had been laid out by FanDuel, DraftKings and others.

Things haven’t gone smoothly, but…

Clearly, not all the news hasn’t been great for Yahoo. But it’s still more than capable of being a major player in the DFS industry, even if that doesn’t come immediately.

Eilers Research has predicted that Yahoo is likely to only generate $5 million in revenue this year with its DFS product, which would be an earth-shattering number for a DFS startup not named Yahoo. Revenue at both FanDuel and DraftKings this year will exceed $100 million.

Yahoo has a number of advantages in the DFS space that its competitors don’t — like easy access to season-long players for attempted conversion and a media platform (its own) with which it can acquire players.

With NFL season about a month away, we’re also still waiting for PokerStars to potentially roll out its own DFS product. With Amaya/PokerStars’ DFS status unknown for now, the industry is left watching the arms race between DraftKings and FanDuel — which are now both valued at over a billion dollars.

And while that is going on, Yahoo will attempt to make its claim for No. 3 in the space and build on that position in 2016 and beyond.

Photo by yodelanecdotal used under license CC BY 2.0.