'ESPN of Sports Betting' Seeks Growth in U.S. Ad Market
Last month, Perform Group, a U.K.-based sports media company, warned investors and analysts that its year-end revenues were expected to fall 6% short of expectations. The miss, they said, was partly because digital display advertising in the U.S., where Perform is majority owner of The Sporting News, would not grow as quickly in the fourth quarter as it had forecasted earlier in the year.
Investors didn't take the news well, quickly halving Perform's stock price on the London Stock Exchange. On Jan. 10, the company said Chief Financial Officer David Surtees had resigned after six years at his post. Oliver Slipper, joint-CEO at Perform, told Ad Age the revenue miss was related to overly optimistic forecasting, not poor performance. The company still expects revenue growth of 35% for 2013, with ad revenue growing at more than 50%. Most analysts remain bullish about the company, and its stock price has recovered somewhat.
Still, it was a surprising misstep for the high-flying Perform, which aims to be a serious player in the U.S. ad market. The company, which draws the bulk of its revenue from distributing content and data to sports online betting sites, has looked to digital and video advertising for growth. In doing so, Perform is following the money, Mr. Slipper said.
Perform, described by an executive as the "ESPN of the sports betting business," is in a unique position to take advantage of this explosion in demand for video. It holds video-streaming rights for a host of sports – soccer, cricket and darts among them – that it provides to various sports-betting portals. This has enabled the growth of in-game betting, where people bet on the minutia of a game, such as corner kicks and red cards. (A small part of its content-distribution business is selling sports data to traditional media companies.)
It's all perfectly legal outside the U.S. "From a global perspective, our b-to-b businesses are doing very well," said Juan Delgado, Perform's managing director of North America. "They're our cash cows." Indeed, through the first half of 2013, content distribution was 64% of its £92.4 million in revenue for the period.
But digital advertising, particularly in the form of video, is where Perform sees the biggest growth opportunities. "It's the fastest growing part of our business," said Mr. Slipper. "I see advertising becoming as big as content distribution." Perform has struck deals with a variety of major sports leagues, including the NFL, to carry highlights on the company's ePlayer video portal. That video portal is present on more than 1,800 news websites worldwide, according to the company.
"We see really interesting demand for sports video content," said Mr. Slipper. "I think there is still more supply than demand for quality content."
The U.S. is Perform's largest ad market by revenue, but it remains a relative newcomer to the space, with its ePlayer rolling out in the U.S. in 2011. Last March, the company bought a majority stake in The Sporting News, the more than 100-year-old publication that went digital-only in 2012. With the deal, Perform created Sporting News Media Group, a brand that includes the namesake title along with Goal.com and its ePlayer, which licenses sports clips to other sites. Sporting News Media ranked 10th among sports properties in December for desktop web visitors, according to comScore, with 8.4 million U.S. unique visitors. Its total digital audience, including unique visitors on desktop and mobile as well as viewers for its syndicated video player elsewhere around the web, reached 32.5 million in November, the most recent reporting period, according to comScore. Based on this metric, Sporting News Media is the eighth ranked sports property. The brand has held the top rank among sports properties for U.S. unique visitors consuming video.
Since March, the company has introduced new ad products, including the custom products now common among publishers and a private exchange for its display ads, according to Rich Routman, Sporting News' chief revenue officer. It rolled out a mobile app that casts itself as a Flipboard for sports, drawing content from a range of sources, including competitors.
Of course, Perform holds something of a wild card beyond the ad business. An added bonus to entering the U.S. market is the potential relaxing of online sports betting laws. Perform would be in a position to enter the market quickly and with scale, Mr. Slipper said. "We would be very well positioned in that market if it ever were to become legal," he said.