Focus: Sporting websites get the red card treatment

Every sport defines itself by its winners and losers, so it is notsurprising that as sport websites undergo their first majorshakedown, there will be those that make it through to the next stageof the battle for survival and others that will suffer the red card.

One of the best-known sites in Europe - Sportal, launched in 1998 -is among the first major online sports sites facing extinction. Lastweek, the company was "fighting like hell" to avoid administration,needing pounds 6m from investors. Last month, Rivals.com, a heavilyhyped group of community sites for American sports fans, said it hadbeen forced to leave the online field of play. A UK online studypredicts a further cull of sports sites, in both the single-sportsand multi-sports arenas, in the next two years.

Among the major problems have been profligate spending and thereluctance of the advertising and sponsorship industry to rally tothe boasts of the best sports websites that report millions of pageimpressions, hundreds of thousands of unique users and many minutesof user "stickiness".

Marcus Leaver, the CEO of Rivals.net, says: "The sports webcompanies have the size and demographic audience to attract goodadvertising and sponsorship numbers, but we need a responsibleindustry body like television's BARB that the media buyers believein. At present, the buyers are faced with each individual site doingtheir own thing and providing data in different forms and atdifferent times."

Rivals.net is the European version of Rivals.com, which adopted amore lean-and-mean marketing strategy than its US counterpart. Thespending differences between the US and UK versions of the Rivalssite illustrate how prudent business models have survived. Rivals.comheld its internal staff gathering last year in a massive Las Vegasconference centre with celebrity speakers. Rivals.net held its in ahotel in Dundee. "The Rivals.com attitude was folly," says Mr Leaver."It was Hollywood meets cyberspace. Ours was a bit of a pie-and-a-pint affair, but we're still in business."

The major players in the sports internet market are sanguine aboutprevious excesses. They even claim to have predicted the downfall ofthe sports sites as far back as Euro 2000, when Sportal became theofficial online sponsor of football's second largest tournament tothe tune of a reported pounds 10m. By contrast, Sports.com's totaladvertising budget last year is reported at pounds 350,000.

"That kind of money [Sportal's] would create a major hole inanybody's finances," says Sports.com's CFO Gavin Chittick, who sayshe turned down the Euro 2000 deal. "We took the view of having a muchmore conservative marketing strategy rather than throw our moneyaway."

But it is not just careful housekeeping that is the saviour ofsites such as Sports.com, there is also an ability to cash in onrevenue areas that had seemed to be of minor consequence. Syndicationof content to provincial newspapers or other websites and selling-one-mail address lists have been lifesavers at a time when theadvertising and sponsorship world does little more than dip its toein the online water.

And further diversification by the sites is in vogue. Among thenew money- making ventures planned are small print-run magazines orbooks, link-ups with television or radio programmes and repackagingcontent for 3G licensees. "Advertising will continue to be part ofthe income picture," says Mr Chittick. "But while that area is 10 percent up against our first quarter targets this year, the contentsyndication is 25 per cent ahead of schedule."

The largest sports sites maintain it is a question of when not ifthe advertisers will respond to their impressive figures. Rivals.net,for example, can boast more than 870,000 audited unique users (theirequivalent of a reader or TV viewer) every month, while the averagetime a user stays on the site is around 35 minutes. These figures areamong the best in the UK industry, but the sites believe media buyersare waiting until after the shakedown before investing large sums ofmoney because they need to be sure their online partner will still bein business in six months. "It all comes back to keeping our costbase low until advertisers decide to come to new media in largernumbers," says Mr Leaver.

A Forrester Report published last month predicted a relativelyrosy future for the survivors. It puts total revenue in 2000 of 31major UK online sports sites at pounds 41m, including pounds 27m fromvarious forms of advertising or sponsorship and pounds 10m fromsyndication. But the report also acknowledged that the generaldot.com turmoil would take its toll over the next two years.

The report's author, Rebecca Ulph, says there will be a two-stageconsolidation of sports sites, with the main winners being thealready-strong, media- owned sites attached to TV channels ornational newspapers. But multi- sports independents includingSports.com will also prosper because of official tie-ins with rightsholders, such as Manchester United, Leeds United and the Open GolfChampionship. A third, smaller category - community or niche sites -will prosper if they can win long-term loyalty from users.

"Sportal's problem has been that its market place is saturated andall the multi-sports sites are trying to make money out of a genericproduct without distinguishing each other," says Ms Ulph. "Sportalalso went into the rest of Europe too soon because multilingual sitesare very expensive." Her report says three things will define thewinners in the consolidation game: unique content, high-profile brandnames (eg sites which boast a name such as Beckham or Owen) andpassionate user involvement with the sites.

Another lifeline for sports sites could be online gambling, whichaccounts for around 8 per cent of revenues among major UK sportssites. But an over-reliance on this income stream is dangerous whenthere are already specialist betting sites such as Eurobet.com andFlutter.com, says Ms Ulph. "Betting is not the panacea because it isa kind of entertainment and is more likely to be most successful oninteractive television or on WAP phones."

Apart from disappearing altogether, online sports sites have alsobegun merging. Sports.com recently bought Megastar, formerly theDaily Star's website, for "well below" the market valuation of pounds100,000, and BSkyB acquired Sports Internet last year to supplementits own Skysports.com.

"We saw Megastar as a site that could improve our portfolio toadvertisers because they had 500,000 unique users who were adifferent demographic profile to Sports. com's," says Mr Chittick."Media buyers want to see staying power and critical mass, so thisdeal made perfect sense." Going back to the investment market,however, as Sportal has been forced to do, is a long-shot. Sportswebsites may have been among the leaders in driving people onto theWeb, but their valuations have dropped with the rest of the market.Sports.com, for example, was valued at $200m (pounds 141m) in January2000, a time when golfing phenomenon Tiger Woods and basketballlegend Michael Jordan both chipped in $1m for a stake in thebusiness.

"We know valuations have gone down by 80 to 90 per cent, but youhave to have broad shoulders," says Mr Chittick. "Those of us withblue-chip partners and very conservative marketing costs willsurvive. We plan to be in operating profit by the middle of nextyear."

At least that optimism - for some - is supported by the ForresterReport findings, which found 13 per cent of the 31 sites interviewedalready profitable and clear signs that more sites are putting theirbusinesses on track. Rebecca Ulph gives a simple example ofbikemagic.com, a site designed for cyclists to talk to each other."The users are passionate about cycling, write reviews and just wantto communicate with each other about anything to do with theirsport," she says. "When users write their own product reviews, it ischeap content for a community-related site and it also drives e-commerce. What could be better?"