If you're stuck with Chad Pennington on your roster, you may have had it with fantasy football. But for Yahoo! ( YHOO) and its rivals, the game is just getting started. As deep-pocketed giants like Yahoo!, Google ( GOOG) and Microsoft ( MSFT) jockey for Internet dominance, sports fans are emerging as a key battleground. The big Web companies are looking to grab loyal customers who will draw big advertisers. Emerging as a solid traffic driver: fantasy football leagues, where friends face off by stocking teams with real-life players -- such as Pennington, the injury-riddled New York Jets quarterback -- and comparing their statistics. The Yahoo! Fantasy Sports Web site attracted 5.6 million unique visitors in August, according to comScore Media Metrix. That was about double the 2.9 million registered by Disney's ( DIS) ESPN.Com, the next largest service, comScore said. The market research firm estimates that there were 10.7 million unique visitors that month to all fantasy sites. The figure measures people who view content such as articles about player injuries. Football is by far the most popular of the fantasy sports. Some 6.5 million people will play in Yahoo!'s fantasy leagues this year, up more than 10% from last year, says Nathan Noy, founder of Drafthelp.com, a Web site for fantasy sports hobbyists. This season, News Corp.'s ( NWS) Fox and Viacom's ( VIA.B) CBS are adding fantasy football coverage. Yahoo!, which began offering fantasy football in 1999, declined to comment on either Noy's analysis or comScore's figures. But it's clear that the company attracts users by letting them play for free. Players can add services including real-time statistics for $24.99 per team for a season. But mostly, Yahoo! makes money on football by selling advertising. "They like it because if you are going to be camped out there a little bit longer on the site, the chance of you doing something else like click on an ad increases," says Martin Pyykkonen, an analyst with Hoefer & Arnett who rates Yahoo! outperform.
Indeed, once people go onto a Web site to play fantasy sports, they tend to linger. Fantasy Players spend an average of roughly 30 minutes on the Yahoo! site per visit, longer than people spend on Yahoo! News and HotJobs, according to comScore. Yahoo! saw a 42% increase in 2004 in the number of people who purchased some sort of service related to fantasy sports. Players also tend to remain loyal to their sites, making them an attractive audience for advertisers. The enthusiasts, who are mostly men, have yearly household incomes of $72,750, about 40% above the national median, according to the Fantasy Sports Trade Association. People spend about $100 a season on entry fees and play in an average of two and a half leagues, according to the association's survey. It estimates that about 13 million adults have played fantasy games in the past year. Beyond Yahoo!'s quest for ad dollars, fantasy football offers a chance to introduce people to more features, said David Katz, head of Sports and Entertainment for Yahoo! Media Group, which includes fantasy games. "You are talking about some of the most engaged users that you can find on the Internet," he says in an interview. "This is the kind of thing that sponsors don't need a lot of cajoling into. From a sales standpoint, it has been a terrific experience." Yahoo!, based in Mountain View, Calif., doesn't disclose how much it earns from fantasy sports. As of June, the company had 10.1 million of what it called paid relationships, people who paid it for some sort of service. The biggest chunk of those fees comes from Yahoo!'s co-marketing deals with telecom carriers in which they sell each other's services, and from the company's premium email service, Pykkonnen says.
Still, fantasy football remains an attractive business for the company. Entertainment subscriptions including fantasy sports may offer Yahoo! greater opportunities for growth than in other fee services where there is greater competition from rivals, Pyykkonen says. Yahoo!'s success at fantasy football is spurring increased competition from rivals. Both ESPN and Fox Sports began offering free fantasy games this year. So did the National Football League, which previously provided only a pay service. ESPN got twice as many people to sign up for fantasy football this year as it expected, said Paul Melvin, a spokesman for the network. He declined to disclose the figure. Signups at Fox Sports and the NFL's fantasy games also surpassed expectations, according to spokesmen for those organizations. "Others have not been forced to go free because of Yahoo!," says Greg Ambrosius, the head of the Fantasy Sports Trade Association. "It's just that big sites like ESPN and Fox who have advertisers who want to reach larger audiences can supplement the free model financially, whereas smaller sites can't do that." Viacom's CBS SportsLine is bucking the trend. It has charged for fantasy football since 2002 to focus on attracting hardcore fans and advertisers interested in reaching them. The Viacom-owned Web site estimates that it has 3 million fantasy players, most of which play football. SportsLine says it has no interest in offering free games. For its part, Yahoo! still expects to continue to dominate fantasy sports. "We have been able to withstand the competitive threat," Katz said.