Skillz (SKLZ stock) was among the high-flying SPAC stocks in 2020. However, since their
merger’s completion, their stock has been nearly 40% below its recent highs. As such, its current price is a good entry point for investors, as the company seems to have the potential to revolutionize video gaming apps' monetization.
The company’s stock rose to about four times with Cathie Wood’s endorsement, only to start dropping recently. Fortunately, the long-term bull on their stock remains intact. That shows the company’s future is still intact despite the current volatility.
SKLZ Stock and Gaming
Skillz was created as a software development company that helps game developers to add esports and social gaming aspects to their games. The company focuses on mobile games, a market that’s growing tremendously fast with new technologies. Today, the mobile gaming market is worth over $84 million, with apps like Betway published on the app store by the day.
As a software company, Skillz has the potential to change how mobile video games are
monetized. That eliminates a major problem in the mobile gaming market, considering that most app store games are free to play. However, even these free apps are monetized through in-app purchases and in-game ads, although these monetization techniques affect the gamer’s overall experience.
For most players, in-game adverts can be quite frustrating as they remote the gamer from the game immersion. For instance, most people wouldn't like an ad popping up when playing live casino games at Betway or through any other app.
On the other hand, in-app purchases affect the game's rewards system and lock-out gamers with limited spending power from accessing certain areas to create a pay-to-win scenario. That means some players get cosmetic upgrades to advance in the game, not because of their achievements but the willingness to spend money.
Through their platform, Skillz allows developers to set up games played for real money and other prizes. That can only be done in a one-on-one format, similar to esports tournaments. Imagine a huge Angry Birds tournament where players can pay an entry fee and get their winnings in real cash. All that is made possible by the Skillz technology platform, which takes a 14% cut of the gross merchandise value.
Skillz Presents a Win-Win Scenario
The Skillz technological platform is also beneficial to developers as well. These features make games more enjoyable and competitive, thus increasing engagement. That will lead to more revenue for developers, making it a win-win scenario.
According to Skillz, their technology offers superior monetization of mobile games compared to its competitors. Skillz has a $6.30 average revenue for every average user, which is significantly higher than Glu Mobile’s $1.89 and Zynga’s $1.51.
The company’s latest quarterly results prove the value that Skillz has on the market. The
company’s revenue grew by 95% in the last quarter of 2020, marking its 20th quarter of constant growth. Last year, its gross merchandise value rose by 80%, leading to annual revenue of $230 million and a 92% total growth rate.