Virtuous Circles

This should be one of the goals of every Internet business model. Every new member that joins Ning brings in two additional users compounded daily. The compounded daily part is the key that makes their customer growth virtuous and exponential. On average, every user that joins today brings in two new users tomorrow…those two new users bring in four new users the next day and so on. After 10 days, that one new user has brought in 1,024 new users. The graph above is a depiction of the growth in customers from a single new user.

We are working on some virtuous aspects for PlayerSearch and the Draft Analyzer which, if done right, will be a key component of their success.  MySpace and Facebook are great examples of the power of virtuous circles (Geocities had similar features as these sites but didn’t have the social networking aspect that creates the virtuous circles and therefore is no longer around).

SportsLine Founder to launch Open Sports Network

Mike Levy founded SportsLine in 1994 and sold it to Viacom/CBS in 2004. SportsLine has been the #1 premium fantasy sports site ever since it purchased commissioner.com. Mike’s latest initiative, the OPEN Sports Network, is taking direct aim at SportsLine (now CBSSports.com), Yahoo, ESPN and all other walled garden league commissioner services. OSN is planning to launch this upcoming NFL season which would make it the first open sports network. Yahoo just announced last week its plans to open up all of its services, including fantasy sports, but nothing has been launched yet.

TechCrunch has coverage here.

A more open industry would spur innovation and dramatically add to the overall fantasy sports experience. So both of these announcements are great for the industry and especially great for Advanced Sports Media. With open APIs available, the tools companies can create exciting new applications without requiring major partnerships (which are few and far between; we are the only tools company to partner with ESPN and CBS Sports and I know of no tools company that has a partnership with Yahoo, the ultimate walled in garden…so far). This is ideal for our Draft Analyzer software and for PlayerSearch.com. One great feature of our Draft Analyzer software is its integration with ESPN and CBS Sports league commissioner services (these APIs are part of a negotiated partnership and dramatically improve the ease of use and utility of the Draft Analyzer). Additional open APIs would enable us to create even more features within the Draft Analyzer to help users on draft day and throughout the season. PlayerSearch.com would be able to search these APIs and return results directly in its search results page.

This is an exciting development and I hope this trend continues and changes the fantasy sports industry for the better.

Yahoo Fantasy Sports to Open Up

This move by Yahoo has the potential to change the fantasy sports world. At least it would if Yahoo allows people to develop applications outside of www.yahoo.com. I have heard Yahoo state that they are opening up their sites and services, but I have never heard them mention opening up Fantasy Sports. There are dozens if not hundreds of small companies/developers that would immediately begin developing advanced fantasy tools for Yahoo to have access to the 5 million+ fantasy sports players on Yahoo.

As industries mature, companies evolve from (i) competing on features to (ii) competing on complete offerings to (iii) competing on ecosystems. If Yahoo opens up its commissioner services, it would be the first company to begin creating an ecosystem around its fantasy sports offerings. This is simplifying things a little, but looking back on Geocities (purchased by Yahoo) it never became anything more than just a feature (user created profile pages) and was quickly trumped by MySpace which had similar features as Geocities but added social networking to create more of a complete offering. Now Facebook is beating MySpace by creating an ecosystem of 10,000+ developers building applications for Facebook. If this applies to fantasy sports, which I believe it does, then Yahoo is taking a huge step in the right direction.

Yahoo gained its foothold in fantasy sports by being one of the first companies to provide a free and easy to use service (Yahoo is well known for being the site of choice for casual office pool leagues while SportsLine is the site of choice for more engaged players). Yahoo has been losing ground as of late to ESPN which has recently taken up the 100% free model to catch up with Yahoo; All else equal, Yahoo won’t be able to compete with ESPN’s brand and unparalleled presence in the sports world…oh, and ESPN currently has a more complete fantasy offering with several games, good features and unbeatable content (they have hired many of the top writers in the fantasy sports world). Unless something changes, it is only a matter of time before ESPN surpasses Yahoo. Yahoo’s best hope of maintaining its lead (worth millions in advertising revenue) is to trump ESPN’s more complete offering with its own ecosystem. This would empower hundreds of small companies/developers that are passionate about fantasy sports to create the robust features that are lacking with Yahoo’s fantasy games while still keeping the core features simple and easy.

This is an exciting concept…could bring down the walled in garden mentality of the industry.  I hope it is more than just an announcement to fend off Microsoft.

Update:

As the commissioner of the Wisconsin Fantasy Football League for 8 years, I would move my league to Yahoo in a split second if they had a handful of really useful tools that were portable and improved the fantasy sports experience for me and my league members.

AOL Acquires Fantasy Football Site

AOL has been aggressive with its efforts to dramatically grow its unique visiters before it spins of its advertising platform. Apparently AOL has now set its sites on growing its fantasy sports traffic with a tiny (by AOL standards) but important acquisition of Flea Flicker as reported by Michael Arrington at TechCrunch.

AOL has partnered with Fanball for their fantasy football league commissioner in the past…apparently they want to own the property now. Flea Flicker is a good acquisition for AOL…it has a great user interface and is very easy to use and understand. AOL just needs to make it scale. I imagine they bought it for an attractive price for Flea Flicker but dirt cheap for AOL’s standards (Can a company that size write checks for less than a few million?!). This was the best, and possibly only, outcome for Flea Flicker. It is near impossible to build a new league commissioner site at this point. The market is filled with great sites from household brands that offer everything for free (Yahoo, ESPN, CBS to name just the top three…Fox and NBC actually broadcast NFL games and they still can’t compete with the top three; Fanball, RTSports and MyFantasyLeague are also dominant players). Flea Flicker seems to have a very easy to use site, with some pretty cool features, which is ideal for AOL. Flea Flicker had a great product, but not a great business. Both sides win here. Smart move by Ori. 26 and already sold a business to AOL…life is good!

Update:

Here is my guess on valuation:

A per subscriber valuation probably doesn’t make sense in this case as AOL was buying the technology not the customer base. So this was a build vs. buy valuation…Flea Flicker has a great site (I am not just being nice, I think Flea Flicker does a great job of making a complex service easy to use and it adds some cool features that I wish my league management sites would include!). Unfortunately for us entrepreneurs, great features with no IP protection are easily and quickly copied in the Internet world…If AOL launches this site as their own, I would bet we see some of the unique features of Flea Flicker appearing on other league management sites very quickly. So…with no proprietary technology, AOL could have built the site with 2-3 developers over about two years…at $150,000/developer (this is an all in cost to AOL including office space, healthcare, etc.; not just the salary) that is $600,000-$900,000 over two years to do it in house. I imagine AOL would be willing to pay more than their internal cost to save time to market and management hassles/risks of finding developers with the right expertise and knowledge (which they got with the acquisition). My guess is that Ori earned close to seven figures in addition to a dream job at AOL and incredible addition to his young resume.  AOL now has the foundation of a great league commissioner tool that it controls and owns.

USA Today takes equity stake in Fantasy Sports Ventures

I have written about the value Fantasy Sports Ventures provides with its ad network. They have just increased the value they can bring to their affiliates with a partnership with USA Today. In addition to a significant cash infusion, FSV added a great brand and distribution channel to its key assets. USA Today has an audience of about 3 million monthly visitors to their website which makes it one of the top sports websites. According to the press release, the partnership includes content/promotion opportunities with the print edition of USA Today that reaches over 3.9 million readers on a DAILY basis. That is a huge number (not sure how many people read the sports section, but I would guess it is a significant percentage). USA Today was actually one of the first media companies to benefit from Fantasy sports as people depended on them for the box scores each weekend. Once internet sites like Yahoo, ESPN and SportsLine began providing these scores and integrating them into commissioner services like commissioner.com, then fantasy fans no longer needed to manually tabulate scores using USA Today.

This is a great strategic partnership for both sides with content and branded sponsorship opportunities (which are the real gold mines for vertical ad networks).

WSJ Adds Fantasy Sports Content

Sports fans now have another reputable source for great sports content, the Wall Street Journal! I have subscribed to the WSJ print edition since 1990. I have rarely used the on-line edition and their recent move towards providing more content for free didn’t really change my habits, but this new trend of adding good sports content just might! Here are articles one and two written by Nando Di Fino…certainly not fluff pieces! They also include a quick video interview with Nando which is a nice touch.

The WSJ clearly sees fantasy sports as good bait to lure a large and passionate audience (they need a huge audience to monetize their now free, ad-supported content). I will have to add WSJ to our search engine…

Thank you to DerrickEckardt at RotoNation for first reporting this very big news.

Microsoft makes acquistions to grow presence in key verticals

Mashable has reported that Microsoft has acquired Farecast.com (travel website that predicts the price of airline tickets so users know when to buy at the cheapest price…what a great idea!). Microsoft has made public its intention of acquiring websites in key verticals to expand its advertising networks potential. Certainly a good sign for vertically focused websites with a unique offering to users that is able to build a large enough audience to get the attention of the big media players like Microsoft/MSN.

The rumored purchase price was $115 million. With about 1 million unique visitors according to Compete.com, that places a hefty valuation of 115x monthly visitors. A similar merger in the on-line travel vertical was completed at a valuation of 100x monthly visitors. To put that in perspective, Google paid 23x monthly visitors for YouTube and News Corp paid 7.3x monthly visitors for MySpace. The key difference is that the on-line travel sites are able to monetize that traffic a lot more (CPMs for travel sites are among the industries higest). Also, keep in mind that YouTube had enormous traffic but didn’t have a proven business model…and the CPMs on MySpace are apparently in the nickel and dime range (among the lowest of any site).

A Jason Calacanis view on Ad Networks

Jason Calacanis of Mahalo provides the Silicon Alley Insider his strong opinion on the value of ad networks. His viewpoint is from someone trying to grow a huge business with ad revenue in the 8 figure plus range. If that is the case, it certainly makes sense to have your own ad sales team as he states…I don’t think anyone will argue that. He also dings ad networks for running poor quality ads. I agree that if my ad network (Fantasy Sports Ventures) started running ads for AdultFriendFinder on my site, I would remove their ads immediately. Another challenge for vertical ad networks is running competitive ads (by design, these networks serve ads on sites that are highly likely to be direct competitors to other sites in the network…so the ability to remove those ads is also key).

I have stated in the past that ad networks, in their current form, are ideal for running ads on small sites that can’t afford their own ad sales person/team. The ad networks will become really valuable if they can deliver higher value sponsorship or integrated marketing opportunities instead of just banner ads. Their ability to execute on these higher CPM opportunities will determine the ultimate winners and losers in the highly competitive ad network space.

Interview with Ted Leonsis

Kara Swisher talks with Ted Leonsis, former AOL executive.  Ted is now an investor in and chairman of Clearspring (a leading widget platform with over 100million impressions per month).  It is very interesting to see someone who built one of the largest walled gardens (AOL) that has crumbled as of late change gears to a widget business model based entirely on content syndication and small bits of content spread virally throughout the internet.

SportsBuff.com Launches PlayerSearch Site Search

Here is a link to the Sportsbuff.com PlayerSearch Site Search. All SportsBuff content (Player News and Web Links) is included at the top of the search results to drive traffic back to SportsBuff.com. If users don’t find what they are looking for in the SportsBuff content instead of leaving SportsBuff to go to ESPN or google, they stay on SportsBuff.coms site and can check out highly targeted content from national news sources, team news sources, blogs or sports comedy sites. They can also view great videos from sources such as ESPN, MSN, NFL Network, Golf Channel, etc.

At the end of the day, the PlayerSearch Site Search tool will increase page views, time spent on SportsBuff.com and advertising revenue for SportsBuff. Users will come back more often as they are receiving more of their sports content from SportsBuff.com and they will spend more time on SportsBuff as they are reading through headlines and video from around the web while still on SportsBuff.com (all content is opened in a new browser…so users don’t leave SportsBuff when they read an article or view a video on another site).