The Third Site

Written By PlayPicks Staff on November 6, 2014 - Last Updated on June 27, 2018
Third Site

 

Something that has been discussed at length throughout the daily fantasy sports industry is the presence and need of a Third Site. Another option besides DraftKings and FanDuel since the buyouts, mergers and acquisitions we saw this past summer. DraftStreet was a solid and reliable third option that had enough differentiation to be successful. This all changed when it was bought out by DraftKings. The Eilers Research report often mentioned a “other site” that would emerge and lay claim to a small stake of the market share for daily fantasy sports. It was noted and I found quite interesting how little of a market share they were attributing to a Third Site. For so long there has been a belief in the daily fantasy sports industry that a third site would emerge and at least grab a decent size of the overall market share but the projections that Eilers Research provides only gives a very small percentage to a third site. I found this quite interesting as it seems to be a pretty common belief across the industry that one day a site like ESPN or Yahoo or even CBS or NFL.com would enter into the daily fantasy sports market. This would cause a pretty significant shakeup in the market share of daily fantasy sports sites because if a site that offered traditional fantasy sports decided to dive into the daily fantasy market it would have a significantly easier battle converting season long players to daily leagues. Since daily players only account for about 1% of actual traditional season long players this would be a significant market to have direct access to. I decided to follow up with the author of the report, Adam Krejcik, to see if he had any more thoughts about this possibility. His response to my question was very enlightening and I thought it very worthwhile to quote below.

 

The primary reason why we don’t think any other sites will surpass FD/DK is our view that the end product is fairly commoditized (meaning it is already very difficult to create an experience/solution that is meaningfully different from other existing sites) and it would entail a substantial customer acquisition budget. That doesn’t mean it can’t happen or new companies won’t pop up and generate some decent rev’s (new sports verticals & international markets appear to be a pretty greenfield opportunity), but again if any do gain traction I think either 1) FD/DK just copies them and then gets those customers or 2) acquires the company outright….The analogy I like to use is the Digital/HD radio phenomenon a few years back when you had Sirius and XM Radio basically just battling it out for subs, obviously way different industry but some interesting parallels. In terms of why ESPN and Yahoo won’t get involved or some other big media brands, is b/c we think they are far more interested in remaining media partners and focused on consumer advertising vertical versus direct B2C business (especially one where there is still some uncertainty about future regulatory landscape). ESPN specifically is owned by ABC, which is a part of Disney Group and so they are very mindful of anything that even remotely resembles gambling, also one of Disney’s VC divisions is Shamrock Partners which is already an investor in FD. Again anything is possible, especially in an early stage, high growth sector like DFS, but this is our current view of the industry. – Adam Krejcik

 

The Third Site Direction

 

I think Adam makes some very compelling arguments in his response above. For a long time, I have been one of the biggest supporters of seeing a traditional sports site make a move into the daily landscape. This appears to be nothing more than a pipe dream however. In fact, it could even be argued that recently the main sites are distancing themselves from the pay to play concept as Yahoo has now announced that they are dropping their Play for Cash Fantasy Basketball option. If a traditional powerhouse does not take on the daily fantasy market than that opens up the opportunity for a number of other sites to grab that market share. Most will end up failing but a couple could hang on and begin to turn a real profit as the race for 3rd place heats up.

 

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