Monday, August 4, 2008
Interview with Kelly Perdew, RotoHog.com
Kelly Perdew is the chief executive officer of RotoHog.com (www.rotohog.com), which provides online fantasy sports platforms with a twist. RotoHog's branded and white-label offerings combine traditional scoring systems with a novel, stock market-style trading feature.
Perdew's name should ring a bell with die-hard reality TV fans. As the winner of the second season of NBC's "The Apprentice," Perdew is one of the few people to work for Donald Trump and not have the words, "You're fired!" directed at him. We recently grilled Perdew about RotoHog, its history and business model, and the upcoming fantasy football season, which begins in a month.
Let's start with the basics. What does RotoHog do?
Kelly Perdew: RotoHog provides the best fantasy sports platform in the world. We build, deliver and manage fantasy sports games for major media companies, sports companies and professional sports leagues.
An example of that would be the NBA. Last year, for NBA.com, we provided the NBA Stock Exchange, which is our premier product. In doing that, we created a fantastic, entertaining marketing platform for the NBA and for its fans. We did such a good job at it, that we're not only building NBA.com's Stock Exchange game for next season, but also a fantasy commissioner-style game.
In addition to white labeling our games for partners, we also have a direct-to-consumer site, and that's at RotoHog.com.
What makes your fantasy gaming platform different from others?
Kelly Perdew: The over-arching differentiator of our product is the Stock Exchange game, which is a truly unique game for people playing fantasy sports.
The Stock Exchange game tracks and rewards league members with the largest portfolio value. Say you have 300 RotoHog dollars to build a team. You use that money to buy each player at that player's IPO, which is based on their projected performance. Depending on their actual performance, that price goes up and down in real time over the course of the season.
The market is open throughout the season and you can buy and sell players, so the total value of your portfolio at the beginning of the season might be 300 RotoHog dollars, but by the end of the season, it could be 600 if you've been a savvy trader. The fact that you can have a league with hundreds of thousands of people competing versus just 12 is compelling, too.
Also, RotoHog is made up of fantasy sports fanatics, so the best user experience is built into the DNA of our games. We've also focused on system scalability and reliability, which has been a major problem of fantasy sports providers in the past, including the "big boys."
This is evidenced by the NBA. After the first season of our performance with them with our Exchange game, we basically ousted another competitor in the industry, and the NBA chose us to be the deliverer of all their fantasy platforms, including the commissioner-style game.
So are you competing head to head with the likes of ESPN and Yahoo! Sports?
Kelly Perdew: Actually, no.
I look at ESPN and CBS Sportsline and Yahoo! as partners for us in terms of us providing them with innovative games that have significant scalability and reliability. We complement the games they already offer their users and, since the average fantasy player plays three-plus games, we are helping them to increase monetization.
Does that mean you're already providing a white-label platform for one or more of them?
Kelly Perdew: Over the next year, you will see us providing white-label games for a lot of the "big boys."
Anything you can comment on today?
Kelly Perdew: If I told you, I'd have to kill you.
OK, OK. Seriously, we have to ask: how'd the company come by its name, and what's the deal with "Hog?"
Kelly Perdew: Among the fantasy sports base, the most common game is called a rotisserie league, where you exchange the players in and out from their normal teams to your fantasy team. That's why you can have players from different pro teams playing for the same fantasy team. For example, your fantasy team could have a quarterback from the Broncos, a wide receiver from the Packers and a kicker from the Bears.
Rotisserie also harkens from "The Rotisserie Restaurant" in New York City, where the first fantasy baseball league supposedly started in the 70s. We took "Roto" as an abbreviation for rotisserie, and "Hog" as someone who really loves playing fantasy sports.
It seems virtually everyone who watches pro football these days also manages a fantasy team. Is that more fact or fiction?
Kelly Perdew: The fantasy sports base is very large and is growing significantly. Looking at fantasy sports worldwide, including soccer, cricket and rugby, the entry fees alone exceed $3.5 billion, and that doesn't include advertising revenue. And the number of people playing fantasy games more than doubles every three years.
The great thing is, there's a new crop of players every year as kids learn about the game and start to play. There's a significant amount of growth that doesn't go away.
It's definitely becoming more of a mature market in the U.S., but when you look at sports like soccer—with 4 billion fans, cricket—with more than a billion fans, and basketball in China and rugby across the entire world, fantasy sports is still in its infancy.
How do you market to that untapped international base?
Kelly Perdew: For our white-label solutions, we pick major media partners and leagues that already have the distribution in place, and we power their games with our platform.
And what about your demographic?
Kelly Perdew: It's predominantly 15- to 40-year-old males. At the high end of the gaming spectrum, it's definitely skewed toward males, but when you start moving to the more casual games, such as Pick 'Ems or Trivia, you get more females. It really depends on the style of fantasy game you are playing.
Is the NFL season for you like tax season for an accountant?
Kelly Perdew: Absolutely.
In today's fantasy sports world, football is the 900-pound gorilla. Because football is a one-day-a-week activity, fantasy football is more of a casual game. You can set your lineup once, check your injury report, see how your players did, and then you're done. Whereas many other sports—like basketball or baseball—have a significant amount of activity during the week and therefore have a much higher level of engagement.
In the fantasy player space, football is a little bigger than basketball, baseball, NASCAR and golf combined.
Let's talk money. This time a year ago, you closed a Series A effort worth $6 million. How were those funds put to use?
Kelly Perdew: We used them to continue developing the platform. We've put together a very sophisticated marketing and sales plan for this football season. We had a very successful baseball season and grew five-and-a-half times from 2007 to 2008 and we've also significantly expanded the team.
We're also powering Pro Football Weekly. If you play fantasy football, you've probably heard of it because it's the magazine that many fantasy players use as a draft guide. We'll be powering a Stock Exchange game and a commissioner-style game at ProFootballWeekly.com and more than 100 affiliated Web sites.
So business has been good?
Kelly Perdew: Business has been very good.
I was lucky enough to bring on Michael Stark, who was the head of engineering at Youbet.com and created their platform, which has executed more than a $1 billion in horse racing transactions. He also turned their system into a white-label, functional, industrial-strength platform so that states around the country could use the Youbet platform for all of their horse racing requirements.
Michael brought over a couple of his team members, a couple of his guys, and they are a significant part of us building our platform to deliver white-label solutions around the world.
What can you tell us about your investors?
Kelly Perdew: One of the exciting things from my standpoint about joining RotoHog was the quality of the investors. Our backers—Mission Ventures, DFJ DragonFund, Sports Capital Partners Worldwide and Allen & Co.—have all invested in RotoHog and its vision.
What is that vision?
Kelly Perdew: Through white-label strategy, growth in international sports and by focusing on the end user, we'll eventually become every fan's partner for their favorite sport, team and athlete. We're leaders in innovating and the fantasy sports gaming experience and in fantasy technology.
My dream is to see the RotoHog sports market ticker on SportsCenter, watching prices move based on real-time information. Say you see Peyton Manning's stock drop $4 early in the day, and then, later that night, you find out on SportsCenter that he pulled his hamstring in practice.
The word fan comes from fanatic, and our long-term objective is to be a sports fan's partner and to share their excitement about athletes, teams and sports.
The RotoHog Web site says you're a big Denver Broncos fan. That led to speculation about your first fantasy team being loaded with Broncos like Ricky Nattiel, Vance Johnson, Mark Jackson, Bobby Humphery and Shannon Sharpe. Any truth to that?
Kelly Perdew: This is my eighth year of a keeper league that I play with two brothers and nine friends. In my first year playing, I was fortunate enough to have the No.1 overall pick, and I chose Marshall Faulk and rode him all the way to the league championship. But I admit that I've typically carried two to three Broncos on every fantasy team I've had.
I don't recommend that.
On a personal level, what has winning "The Apprentice" done for your career?
Kelly Perdew: I'm a big believer that when you set objectives and follow your plans, it leads to a big payoff. [Winning "The Apprentice"] obviously accelerated some things and opened some doors. I'm a big fan of networking, so you can imagine how my LinkedIn account skyrocketed overnight.
The show also taught me the power of brand. Working with Donald Trump, observing his methods and how important reputation and name are—Donald did a lot for me and I'm appreciative of that.
Thanks for your time and best of luck in the coming season!