November 22nd, 2010

Yahoo! Says 2010 is Validating Free Move

Monday, November 22nd, 2010

Yahoo! Sports has long put forth the most-trafficked fantasy sports site on the Web. This year was the first time, though, that it sought to add value to its fantasy football product by dropping fees altogether.

The majority of Yahoo! players have always gotten their fantasy fix for free, but items such as live scoring were available only by paid subscription. Why the change for 2010?

“We decided to go fully free because there was a tremendous amount of interest from advertisers,” Kyle Laughlin, head of Yahoo! Sports and Yahoo! Games, told Investor’s Business Daily in late October.

Yahoo! had previously dropped all fees for its fantasy games in other sports, and Laughlin conceded a drop in paid subscribers before this season. Whether a result of the change or other factors, the company expects to grow its base of fantasy football users from 4.4 million in 2009 to 5 million this season. Traffic growth, obviously, is essential to surviving and thriving within a model whose revenue relies completely on advertising.

“We had to weigh the short-term financial hit vs. the potential upside of adding more users as well as trying to fulfill the demand for advertising from our partners,” Laughlin said. “It’s worked well for us this year in the sense that we sold out of our sponsorships in fantasy football, so it’s been a fantastic kind of validation of that decision over time.”

Of course, the Yahoo! model can’t necessarily serve as a roadmap for too many other fantasy game operations. Any Yahoo! subdivision starts with the advantage of the primary site drawing more than 130 million unique visitors a month. The report also points to big brands MillerCoors, Southwest Airlines, Toyota, Sprint Nextel and Visa as Yahoo!’s leading sponsors.

Because traffic and user numbers were already so high — even the aforementioned growth of 600,000 players would represent just a 13.6 percent increase (not shabby, of course) — it’s worth pondering what kind of revenue might be driven by diversified offerings. Fewer users might have been willing to pay for live scoring, but what about a presence in the short-window (daily/weekly) games area that has been on the rise lately?

It’ll be interesting to see over the next few seasons how high the user ceiling might go for Yahoo! fantasy football and what the company can accomplish in a climate that has proved harsh to ad-supported Web properties.