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Social Networking - Thursday, June 21, 2007

Yahoo Buys Rivals For $100M. Why Others Not Interested

Yahoo has paid $100M for sports social network Rivals, whose territory goes downstream to high school sports. Yahoo is getting lauded for the deal which catapults it past ESPN to make it the largest sports coverage site on the Net.

Financially, the deal makes a lot of sense. Rivals may have earned $18M last year largely in subscription revenues. Through better promotion on Yahoo, Rivals may be able to pay for it selling price in short order. Plus its always nice to balance ad revenue with subscription revenue.

We understand the reason there was not a bidding war for Rivals is that its structure is not solid. Rivals is more of a federation than a company. It relies upon independent agreements with hundreds of independent contractors - people who cover sports in Souther Ohio for example. Yahoo had to sign agreements with each of them to get the deal done. However, should ESPN or another network come after these independent contractors with better offers, Yahoo could see its network dwindle. This worst case scenario is not likely unless the Yahoo media people blow it and start treating these contractors badly. in our opinion but this makes the Rivals less appetizing for others.

Read - It’s Official: Yahoo Acquires Rivals.com; Not Official But True: It Cost About $100 Million (PaidContent)
Read - NY Times post