What Drove Yahoo’s Purchase Of Citizen Sports

To buy or to build? That’s the question that drove Yahoo’s decision to buy social sports startup Citizen Sports, which owns a series of sports-related apps on the iPhone and on Facebook, according to Yahoo (NSDQ: YHOO) media head James Pitaro. “When we really sat down and looked at what we were doing in the social space and where we were trying to get, we ultimately decided that what they already had is superior than what we would have been able to do in the short term,” he says.

Now, he says, Yahoo Sports — which is “doing a very good job on the PC” — will be able to bolster its presence on the iPhone — and also build a presence on Facebook. “We haven’t been as active on Facebook as we should be,” he says. “It’s a top priority for our media businesses.” During a discussion with Pitaro and Citizen Sports CEO Mike Kerns, the two men also talked to us about the future of fantasy sports online, the overlap between Yahoo Sports and Citizen Sports and also some details about the deal, which will see about 30 employees joining Yahoo.

Some highlights:

The new audience for fantasy sports: Pitaro says that Yahoo determined that in the fantasy sports market Yahoo Sports was no longer competing so much with the “usual suspects” (ie ESPN (NYSE: DIS), CBSSports) but rather with Facebook. “People have a finite amount of time to spend leisurely online,” he says. That time is increasingly being spent on Facebook, so the deal lets Yahoo reach new users who might not have time to consume “the fancy product” on the PC. It still hasn’t been decided, however, how exactly the Citizen Sports and the Yahoo fantasy sports platforms will be combined — or what the ultimate branding will be.

The two iPhone apps: Currently, Yahoo Sports has a fantasy football iPhone app — and Citizen Sports has one of its own. Kerns says that in areas like that, “the goal will be to collaborate on the best single application.” Those overlaps, however, are rare. For instance, Pitaro says that Yahoo had discussed building a broad sports app but hadn’t done so because of a lack of resources. Citizen Sports, however, does have an all-encompassing sports app (Sportacular). “It’s fantastic,” Pitaro says. “We don’t have to go out and build this thing.”

Deal terms: Kerns says his company — which has “millions” of users accessing its apps on Facebook and via their mobile phones — had been “intermittently profitable,” was growing and had recently built out its own ad sales teams. The company wasn’t looking to sell but realized that what it had built had “created shareholder value.” All of its 30 or so employees will now join Yahoo.