Firy Inc. (SKLZ) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. I'm Michael Packer from Wedbush Securities, and we are nearing the home stretch on the first day of the Winter Games Forum. I am very honored and pleased to have my good friend, Andrew Paradise here, who is not only one of the smartest guys that I cover. He's also a better poker player than any that I know. So good guy, good poker player. And one's poker skills tells you a lot about that person he's fun to play poker with. In any case, Andrew, welcome. Thank you for being here.

Thanks for having me.

Skillz is a so far kind of a volatile SPAC story. And I think that you have struggled with kind of attracting an institutional shareholder base. And I truly believe that I am as much to blame as anybody. The story is just not getting told well, and it's not that you guys are doing anything deficient. It's that I don't think you're particularly well covered. But can you help this audience, because I think we probably have at least a dozen potential investors who don't really get the story. Can you help people understand exactly what does Skillz do? What is eSports for everyone? Why do we want to play against one another? Why do we want to put money on the line and bet on our own, not that, but wager on our own skills in a game. And how did you come up with the idea? And then as you kind of expand upon that, what inning are we in? Like where are we going with this? And how big do you think the market really is?

Okay.

That's a lot of questions.

All 45 minutes of questions at once.

Perfect. Yes. Go for it.

Yes. Go. Look, competition is age old. It's inherently human. It's one of the fundamental behaviors to being human. I think the very best technology businesses, they've been businesses that have digitized something that we would -- always been doing as a people. You think about something like Facebook and you think about social networking, it's really just replicating a lot of activities that people were doing in the offline world before technology. Fast forward and think about Skillz and what we're doing, we are building broadly the competition layer for the Internet. We're looking at every type of off-line competition, ranging from 1V1 golf to team-based sports like basketball to really complicated things, 100-player competitive video games. And we are -- as you're going and bringing all these things online, the 1v1 of golf, that can be anything from a fighting game to, literally, we actually have digital golf on our platform. And Michael and I can putt against each other on Skillz, and the best player can win. The business is often best known because it's a B2B2C technology platform that is powering now 2 billion tournaments a year. the revenue for our business today primarily comes from monetizing just one small part of our system, which is price-based competition. So price-based competition, it's less than 20% of all the play behavior on the system. When people play in these price-based tournaments on the platform, what's often referred to as an activity called skill-based gaming, we are capturing a transaction fee that ranges between 15% and 20% of each tournament. So people pay us entry fees to play in tournaments. Game developers use our business to build the competitions inside their video games. And that's certainly -- that's the today. And that today actually has been a little bit more narrow in a sense versus the entire world of digital competition, we are really focused on mobile competition. So we're often known as the first company to do mobile eSports, first company to do what's sometimes referred to as casual eSports. But we run literally tens of millions of these tournaments. And they -- with an average entry fee of a couple of dollars, we capture a transaction fee against that. It's a business of pennies, but those pennies add up when you're talking about billions of tournaments. So that's our today world. It's a world where we're still vastly underpenetrated. When you think about how broad digitizing all competition really is. You're talking about a multitrillion dollar someday industry. Today, the sector we plan in mobile gaming, mobile gaming, it grew up from -- when we entered, it was about an $8 billion sector in 2012. It was $86 billion in 2020. It's projected to be $161 billion in 2025. So just the one sector we're playing in, in mobile gaming is actually a massively valuable TAM. And we're really this differentiated monetization solution for that sector. So today, in mobile gaming, you really have two ways to generate revenue and to build all that TAM. One is advertising and the other one is in-app purchasing. Think of Skillz, so competition monetization is a third way to monetize. And we're really the biggest and kind of foremost company in that space that we've defined. We have a lot of patents behind our business, probably about 70 plus now around the technical stack and building out the capability for a game maker to self-service sign-up, quickly integrate and launch a highly competitive mobile video game. When I think about the stack piece and going public, we were very early in the kind of the wave of stacks. If I kind of rewound the clock and thought about what are the best ways to capitalize the business, I think we were really worried about geopolitical risk and the capital markets during COVID. So that's when we engaged in doing this stack. It was actually kind of at the beginning of COVID. So we were selecting a stack in April, May of 2020. And I'm going to remember that time frame. We were worried about whether or not the window to IPO company would be open for the next couple of years. I had the joy of running and building a technology business through 2009. I didn't -- I'm young enough that I missed the '01 cycle. But I'll tell you, having the scars back from the '09 cycle, I was, I really maybe a bit overly cautious. And we said, look, we can do the stack route, we can get to market faster, and we can make sure we hit an open capital markets world, capitalize the business properly for the next leg forward. And when we think about our business, getting that capitalization behind it has been really, really important. We spent -- I believe it's about $110 million deployed to build the business to IPO. Post IPO, we were able to capitalize the business with literally 6x as much capital. And so when you think about our journey forward over the next 10 years, and we often -- I often talked about the 100-year journey to building the future of competition, getting capitalized properly is critical to everything that we're doing. And I would say -- inarguably, it's been great from a business building standpoint. From a volatility in terms of the investor base and the ups and downs of being a SPAC stock, it's definitely been painful. I wouldn't say anything to the contrary.

Before we get into market size, which I do want to pursue, you mentioned 70 patents. And only because I've known you since inception, I'm aware of at least half a dozen competitors who aren't really doing anything. So can you talk about the secret sauce? Like what exactly is your tech stack? What are those 70 patents? Like what type of technology do you have? How do they work with security and privacy and know your customer payment processing? And just like how do you manage all that stuff? And what is it about your tech stack that's proprietary that creates a barrier to keep somebody else from replicating what you've built?

So I think the best technology businesses, particularly consumer-facing, the very best ones have significant network effects around them to ensure that they can really capture the market that they're defining. So first of all, you have to understand and expect that Skillz is a market-defining company. So it's really very different from many other kinds of companies you could invest in. So that's kind of our first piece. And the second piece is can we capture and continue to control that market space as we're defining it. I thought a lot about this in the design of our technology platform from early day 1. I think the best network effects, our database network effects around consumer technology platforms. So I admire companies like Google. Google Search is one of these data network effects, where by being first mover, capturing the data from users, getting the right search results and then having a recursive loops with machine learning, they're able to stay ahead of any other company that entered including, I mean, Microsoft Century Bing. Similarly, we designed data network effects both around -- there are actually two important areas. One is cheating and fraud. So protecting players, ensuring trust in the marketplace. And that's a trust in the marketplace go very hand-in-hand in terms of businesses. And the other part is personalization. So we designed a data engine that is ingesting now, I believe, we're capturing 1.8 billion data points a day on system. We're actually -- we're now capturing with the acquisition of an ad network technology called Aarki. We're participating in 5 trillion auctions every month where we're capturing data and we're able to basically describe the data value chain from when we show an impression, all the way through the final day a user pays us. And so that means we can do things like predict when we're participating in auction, how much that user is worth before we actually win the auction. It also means that when we win that auction and that user onboards into the system, the data personalization systems, we are actually creating more and more variants of Skillz. So we're functionally running about 400,000 segments of personalization. I think we're one of the only companies in the world doing something like that. It's a data technology we invented. In fact, that data personalization, one part of it is how we match -- how we handle cheating. Cheating is a huge problem. And I would say, well, let's start with -- fraud is a huge problem in every online business that engages in commerce in particular. You have to remember, this is a commerce gaming system. So in some ways, it's like having almost a video game bank. And so we're responsible for ensuring that every transaction in the ecosystem occurs more or less flawlessly. And if it doesn't, we actually refund back consumer money. So in our P&L, there's a line item where we're canceling, refunding about 0.5% of all the tournaments on the system. And why are we doing that? Well, something went wrong. We couldn't find -- the most frequent thing that goes wrong is we can't find a player of adequate skill level, of comparable skill level to your own play in a timely manner. So Michael happens to be the best player in the world on Solitaire Cube. We -- and he wants to play 1,000 tournaments a month, we can only fill 800 of those tournaments with the #2 player in the world. That would be a very like almost hyperbolic example of what I'm talking about. But the reality of it is we can never get a perfect match, there is no such thing. But we try to get a near perfect matchup between two players in the head-to-head tournament. Or we run even formats that are 100,000 players in a tournament. And we want to make sure that every one of those tournaments has an adequate and fair match up across the player base. It's really about ensuring that the trust in our marketplace. So those are some of the network effects that we designed to the business. I can tell you this that where we are today in the data capture that we've gone through over these last nine years, we don't believe that we could replicate our business with our existing team. So if you took away our system and said to our team tomorrow, rewrite it and build and compete with Skillz, we don't believe we can do it. It also would take us a pretty long tech build. I spent a long journey, a lot of technology invention to get to where we are today.

Okay. Let's talk about the addressable market And just for background, for the audience, there's about 3.5 billion people who regularly play mobile games, who play mobile games every month. Skillz has a small fraction of 1% of those people on its platform. But I've seen the boardhouse numbers, and I actually -- mine are actually higher. But my view is that 2/3 of those people at least more like 90% think they're good. And investors laugh when I say that, it's -- no, but we all have a game that we think we're really good at, which is why we keep coming back to that game. And so I always joke, 99% of gamers think they can beat everybody at a game. We're all really good at something. Mine is not Solitaire Cube. But what do you guys think about the addressable market? How many people of those $3.5 billion actually would like to compete against other people and play games. And then what subset of that, do you think, would actually be willing to pay money to enter a tournament against other people?

So the number we've seen -- well, a couple of numbers. One is there are now 2.8 billion monthly active users in mobile gaming. It's a crazy large number. In fact, when you look at the market, we're primarily in the domestic market today in the U.S. market. So U.S. market is arguably about 20% of the TAM. 80% is outside the U.S. And separately, Skillz is 90% U.S. revenue today. So there's a huge opportunity for us just expanding overseas kind of in line with what we've done. Moving away from that and you think about what are the number of people of that 2.8 billion that actually want to pay to compete for prizes because that's really how we generate revenue today. Again, let's call it, 85%, 90% of all the revenue in our business is from competitions not from advertising. So the number that we've arrived at, and this is actually, I'd say, a critical piece of research team building a company. So the first survey we ever did was before we built the company. It was to find out how many consumers out of every 1,000 would pay to compete for prizes. And what we found was their willingness to pay in kind of a 5-point scale, 4s and 5s where it was about 40% of every 1,000 people. We actually recommissioned that same study repeatedly with different groups of consumers. So the final study, the one that Michael Pachter is referencing with my boardhouse was once we had enough venture capital into the business to afford a higher-end primary research company, but there were two previous studies that actually landed out. I believe the numbers were 39%, 40% and 41% across the three studies. The boardhouse study, the one he's referencing kind of lands back at that. You multiply that out against the 2.8 billion monthly active users. You can see that there are 1 billion people that we would want to acquire playing monthly on the service. We're pretty far away from that right now. There's a lot of room to do that. Now there are a couple of pieces that I've messaged to everyone here in order to accomplish that. One is, obviously, you have to go international at 80% of the markets outside the U.S. never get to the 1 billion without that. The other one is we don't have every game. So the question and the nuance is, people will pay to compete in their favorite game. The game, as Michael's referencing, the game, they think they're best at. because why will they pay to compete? Well, because they expect to win. And that's the very nature of digital competition and monetizing competition. I'd say most of the people who play in a tournament, they have an anticipation of beating their opponent. The very nature of what we try to do is ensure that both players or all players have a pretty equal chance of beating each other. It's the most exciting matchups when you have these near competitions with maybe even an upset from the underdog. But to get to the 1 billion, it's international, it's every type of content. So one of the things we're doing is we're adding in more and more types of content to the platform and pioneering into new formats. For those of you who don't know our business, we built all of the revenue to date really off of only a couple of genres of video games. We would propose that there are about 18 categories of video games, and we have two that we're really good at right now, just card games and board games. Card -- or you could argue a cardboard puzzle maybe for Skillz right now. There are so many others. I'll give you an example where we don't yet have a great IP in Trivia. But now we've actually signed Trivia Crack by Etermax. Trivia Crack is the #1 game outside of the Skillz ecosystem in the world in trivia on mobile. So it's a 40 million now game. I believe the annual -- It's 150 million annual users on that game. And so what we're doing to that partnership with Etermax, which is -- it's a 450-person privately held company. As we're building out Trivia Crack Payday together, and Trivia Crack Payday is -- the goal is to build the future of what could be interactive Jeopardy, to kind of give you a vision of where they want it to go. For anyone here who would like to try it, you can just go on the U.S. App Store on iPhone and download Trivia Crack Payday right now. Try out the title and see what you think. But it's -- what I'd caution investors is just because Trivia Crack is the #1 franchise off of Skillz, it doesn't mean that when we marry up Trivia Crack with a competition system, we'll generate the ideal competitive trivia game right away. I think it takes time and perseverance of tinkering with something that was designed as a single player game to turn it into a great multiplayer game. And that's where we are at Trivia Cracked Payday. It's on platform. It's in soft launch. There's really exciting potential. And I'd say more broadly, the category of Trivia is one of these other categories beyond the existing ones we're in to get to 18 total. Similar, I can -- I don't know if I'm going too long-winded here, Michael, you tell me, but same thing with Big Buck Hunter. So a Big Buck Hunter Marksman, which is on platform. Big Buck Hunter is in first-person shooters. We don't -- we haven't had a hit in first person shooters yet and really built into that genre. That's another one of the 18 genres. Really excited. The Big Buck Hunter went from soft launch earlier this year when they went live, and I believe it was the end of Q1. They went to hard launch in Q3. Big Buck Hunter is now actually one of the very top games in the sports category. It's also the first, first person shooter on platform that we've seen scale. Really exciting because I think it may sound strange to people in the audience, but virtual deer hunting competitions, very well may be a mainstay here for the next 100 years. I don't know if we'll be hunting a physical deer, but certainly, virtual deer are going to continue to be hunted. And so it's really exciting to see that because that's -- there are a couple of things happening there. One is you're seeing a very different genre on platform. The other one is you're seeing a very different demographic on platform. So not surprisingly perhaps to the audience, but the people playing something like a competitive bingo game are a very different audience from people who are virtually hunting deer.

I neglected to invite the audience. If you have a question, there's a Q&A button at the bottom of the screen. So go ahead and type a question and then I'll get to them as they come up. As we think about the addressable market of 1 billion people, you mentioned that you don't have -- you don't currently have a ton of games that are really widely popular. So, so far, your business model has been to put a game on the platform that doesn't have an audience and then you guys spend user acquisition and bring an audience to the game. How do you expect that to change? I know you have to make people aware, but when you get games like Big Buck Hunter and Trivia Crack on the platform, that people probably will recognize. Are you going to spend less user acquisition, do you think? Or do you think that the user acquisition will be more effective because the games are recognizable and familiar?

Well, I'd say a few things. One is just what's a healthy level of digital marketing spend for a multibillion-dollar consumer brand? I think your answer is probably somewhere between 10% to 25% of $1 billion spend. So, you think about, I don't know, let's take something like Tide okay? Tide, we all know Tide. They're spending $1 billion in consumer, and they're spending probably somewhere between 10% and 20% on digital. That's considered an effective long-term spend, recyclable spend on that to maintain Tide as the #1 laundry detergent in your mind when you go into the store. I'd say similarly with Skillz, investing in scaling up our digital acquisition made a lot of sense up to a point. I don't think we would message to investors that they should expect our digital marketing, particularly for the domestic market to grow dramatically in the years ahead. I think we're at a point where we feel like we have a very healthy level of budget for the market in terms of digital. I do think in terms of brand building and expanding. And so that's part of what you're asking about, I'd say, branded games, branded IP, things like our partnership with the NFL, it's very much around adding branding into the portfolio and using the partnership with NFL to be able to augment and halo Skillz brand. So pretty exciting that that's out there and going. We've actually -- announcing that deal has allowed us to start conversations and in some cases, close conversations with other exciting competitive leagues a lot smaller than NFL, unarguably, but DRL recently announced a partnership with us. DRL, whether people here watch it or not or participate in it is important to us, right? It's important to us, much like the PBA is important to us because we have this goal of long-term powering basically every sporting organizations, eSports. And the NFL, one of the reasons we want to announce it is because we want to show kind of all the sporting leagues out there. One of the top sporting leads in the world had selected Skillz as their partner. And I also think it helped us accrete significantly more developers participating in the competition, about half of the developers who submitted into the competition to win NFL branding, so NFL IP and NFL marketing muscle, half of them were net new to Skillz. The other half are from our community. But that's a wonderful thing for the ecosystem because all those developers are now onboarded into our platform and arguably can now much more easily build their next game with our company. Where we are with the NFL competition. And for those of you who have seen me talk recently, I apologize for any repetition, but we're now down to 14 semi finalists. So that's 14 companies from hundreds that submitted to try to be one of the companies to win. We had hundreds of submissions, down to 14 file store building games. We plan to narrow to about five games with the finalist pack. Originally, we were targeting one game to win the branding and the marketing muscle. There now may be multiple games given the, I'd say, the quality of the competition amongst the developers for the IP. Very exciting in terms of getting football-based video games out there for the existing football demographic as well as trying to broaden the NFL football demographic beyond the traditional core fans. So I'd say branding is -- both brands living on platform and helping build out the Skillz story is really powerful as we think about the years ahead. I'd also say, Big Buck Hunter certainly you're seeing -- part of the reason it's scaling so quickly is that branding, of course, helps accrete existing Big Buck Hunter fans to the platform. Probably not dissimilarly with Trivia Crack, although we're not -- Trivia Crack Payday is not yet being promoted.

And I remember back in -- before you went public, talking to you about how easy it was for us to use the software development kit and how easy it was for a developer to put a game on the platform. Is it still easy? And can you describe what's taking Tribute Crack months rather than days to give them a platform?

Oh, sorry, I didn't mean to misspeak there. Trivia Crack Payday, went -- we were like signing the deal. By the time we signed the deal, they were already live.

Okay, good.

So they're live -- sorry, when I was selling the audience.

It's just not being promoted.

Yes, download Trivia Crack Payday. As you know, Michael, the process for a mobile game developer in particular, is they want a soft launch, have very small amounts of audience go into the game, tinker with experience before going to a hard launch. So we're in that iterative soft launch state. Now you also know from being in the industry like I do, that not all the games in that soft launch iteration ever achieve hard launch. Sometimes you tinker and you never get to a place where you have confidence in scaling. And that certainly happens. We talked about this in our Q3 investor letter. But with a 450-person company working on tinkering with unarguably the best trivia game in the world, I think there's reasons to feel confident. I'd still want to always advise caution to anyone who's thinking about joining our capital base.

And what is your outreach effort to other brands other branded games? I mean I understand the NFL, But Trivia Crack is a real game. Are you doing the same thing with other -- and you don't have to name them, but what other games that we've heard of -- And do you have a formal effort to bring in games that already have an audience?

Well, maybe I can talk about it a little more broadly than that. Big Buck Hunter Marksman, first-person shooter, making a mark in first-person shooters. Trivia Crack Payday entering into trivia, you could imagine with other categories we're thinking about similarly.

Okay. So we're in year 9 or 10 -- 9 of your 100-year plan. So I hope you're around 91 more years. So how do you think about -- like what should we be looking for, for the next five years? I mean, you mentioned earlier this year expansion into India. We're getting towards the end of the year. I don't know if that's happened yet or that's on the verge of happening. But how should we think about international expansion and roll out the next couple of years? How should we think about audience size in the next couple of years? And I realize it's game specific. So not looking for a prediction by quarter, just kind of -- should I think about the audience doubling and paying users doubling in the foreseeable future in international doubling? I mean how do I think about it?

Well, I think we have continued to signal that we plan to launch in India in Q4 and maybe it's just the end of it. And that we've talked about India as being a first step in an overall larger international plan. Still on task, still very much what we're doing. I do want to correct one thing you said, never have said there's a 100-year plan. It's 100-year vision. The plan has been a 15-year plan the whole time. We are 9 years into that plan. And actually, for the people who have been working here the whole time, I think they'll tell you we're doing the same thing we said we were -- I mean, it's -- in some ways almost excruciating to know what you're planning to do for the next 15 years. In other sense, it's comforting that we're moving along on our plan. We are actually, from the original things we thought we would do over 15 years, we're a couple of years earlier than we had anticipated. So maybe you'd say 11 years into 15 years of planning. But it is a very large, large vision of what we're trying to build as a technology platform. That's part of why we had to have such a long-range plan. Getting beyond casual gaming into core gaming, it will -- I don't want to see it break my heart. I will die trying before we stop trying to make the genres, I like most, like first-person shooter and Battle Royale exist on a platform in a meaningful way. Believe me, there isn't a day that goes by where I don't wake up and think, man, I wish I could play Call of Duty on Skillz. Man, I wish I could play PUBG on Skillz. That is not happening, my friends. I'm actually -- I'd say, quite obviously, more like I'm working every waking moment trying to make that happen. It's a process. It's a process of the network and the technology part of getting public. It helped give the investor community confidence in the business, certainly, but more importantly to us, it gives the developer community confidence in building on the platform. Think about how different it is for an investor versus a developer -- sorry, let me say again, think about how different it is for an investor versus a developer in partnering with us. So investors were saying, Hey, buy into the stock, you guys can buy it now, you're fully liquid, you can sell out tomorrow. To a developer, they're building the future of their livelihood on our business, right? We're going to become the majority, if not all, of the revenue of their business. And by the way, that infrastructure that they're relying on with our business is mission critical. We go down, they go down. And by the way, they don't have an equity interest. They don't have equity upside in Skillz. So it's a very different proposition overall to the developer to uptake the product and to use it and to grow their business. When we think about the path forward, getting public, I think, gave the developer community incredible confidence in building on our platform. It's the most important reason to go public was the developer community. And it was exposing our financials through the process of going public, but also really helped the developer community understand that the platform works and why it works.

Sorry. Go ahead.

No, it's okay. I'm very long winded today.

Hence my question about games from an audience because I think there's a disconnect between your vision and popular game companies with popular games. And I mean, I've told you in the past, I've spoken to Activision to Zynga, and I'm like, why isn't Candy Crush on Skillz or where is the Friends? And they're like, oh, because our audience would go to zero if we put it against 1 another, like, you're crazy, your audience would play more. So my view is that people who play Words with friends to be really happy to enter a cash price tournament. And people who play Candy Crush would love to play for prizes. And those guys don't agree. And that was my question a few minutes ago. Do you have somebody who's trying to convince them that it wouldn't be 100% of their revenue. It would double their revenue or quadruple their revenue, but it wouldn't be all their revenue. They keep their core business and still make money. How do you think about educating the game publishers and developers that gains that already make money would make more money if they're on the Skillz platform?

Well, and talking about cannibalization, right, it's really this proposed fear. We've seen no evidence at any level of game company of cannibalization like that. We have not seen that happen. In fact, it's always been accretive. I think what you're going to see separately with whether it's Trivia Crack Payday and promoting against existing audience, is the users who want to play the original title and want to play in a single-player format, they stay on the original tail. Users who want to play in a competition for it, they come across, the reality of it is we're monetizing about 8x the level of audience of your average IP game. So every 100 users that moves over, you're making multiples more money as a game studio. Separately, like when you think about Activision Blizzard, which is the biggest gaming company in the Western Hemisphere, Candy Crush, one of the biggest games in not just the Western Hemisphere but the world. I think it's all about step functions. And we've never seen the company in the network getting a game that is 100x the size of network to sign up, both, I think, would be operationally very difficult for us -- so scale in terms of server scale, customer support scale. It's a much higher-end customer support model that we offer than traditional video gaming. We run it over a -- I don't know if people are familiar with our service from a customer support standpoint. But maybe just to talk about for a second. We're running 24/7 customer support at an under 60-minute response time at over 90% CSAT. It's not like normal video games. Normal video games, you have a problem you reporting it, you never hear back. Your postie is never, and your CSAT is 0. That's why I don't know how you might. Now like when PUBG crashes on me, I don't report that. I just reboot.

I, in fact, have reported it a couple of times to Zynga, and it's about 24 hours, but they do get back, but it's about 24 hours.

What's your customer satisfaction rating on it? Are you happy with their responses?

Well, it's slow, but they do get back to you. I just had things disappear from my account and I've told...

Yes. No, no, sorry, when I mean your CSAT in terms of did they resolve your issue. So more than 90% on that.

They did but 24 hours, not fast. We did get a question from the audience. I'm going to paraphrase because I think that I can articulate this a little better. Can you just talk to us about -- assuming your current model, not that you get Candy Crush, how do you -- how would you see revenue and sales and marketing scaling? Would they be correlated? So if revenue grows 100%, sales and marketing grow 100%? Or do you think marketing in front of revenue? Or do you think revenue growth exceeds marketing spend?

So we expect our marketing spend to continue to become more and more efficient over time through Aarki. So the same dollars purchasing more and more users and not only more users, but those users having a higher flow-through to pay. So installed to first-time pay will continue to increase. So the way -- what I would say is we expect marketing to grow more slowly than revenue.

Yes, that's what I thought.

So yes, so the answer is -- so long story short, yes, I wouldn't want to say marketing won't grow a single dollar over where it is today. I don't think we would want to set that expectation right now. But I do think we are comfortable saying the expectation that they will continue to diverge.

And one of the things I think that is really horribly misunderstood about your business is your cohort analysis. The people in the system that pay and how long they live. And every time I see that graph, it strikes me as being more and more impressive yet I think the commonly held perception is people play once and then quit and never come back. So can you just talk about cohorts and what you've seen? I know you've only been live a couple of years, but what you're seeing with people and longevity of paying users?

Actual you are hurting my thoughts, we have been live for almost 8 years.

Yes. But...

Meaningful depth of scale.

At scale.

Depth of cohorts yes, at millions of Consumer cohorts of millions, correct, only, call it, under 5. The -- what we've seen, though, across actually every cohort is very consistent. So the behavior from 2014 onwards, the cohorts look very similar from year to year to year. We've never had a cohort go to zero. Competition is very much -- it's this evergreen experience where. But if you think about what you're paying us for, your average paying consumer, they're choosing to pay us, choosing 15 times a day. They're choosing 15 times a day to pay Skillz. And when they -- and by the way, they on average paying consumer is choosing to pay us 120x plus a month. you kind of do the math there. I mean they're roughly doing 10 sessions a month of 15 payments a month. Okay. So that's a lot of choice, choosing yes. What are they choosing? And what are they buying? They're buying a competitor, right? Because if you're playing in a tournament with a $10 prize you're not paying -- you might say, no, I'm paying to win the prize is like, no, you're paying for an experience to fight someone for $10. And for really 90-plus percent of our user base who pays. It's not about earning a living. That is the fourth largest reason for why people pay. And top 3 are fair, fun and meaningful competition. But it's about making in it -- it's about making it count. One of the things that I find remarkable of the system as a game player, and I invite you to try it. I'm happy when my opponent aborts early. In other video games, a map because -- in other video games and I'm playing with no price, I'm angry when they quit because I don't get a full game, and I don't get the joy of beating them. I don't know if you've ever played like StarCraft II, like you fight the battle, you overcome the opponent, but they quit before you wipe out all their bases. It's like kind of annoying. But see in prize-based play when they quit your like "yes". I took their -- well, it's about taking it from them. It's not about winning, so to speak.

The other way we held this perception, and we can end on this is that you have revenue concentration at any given point in time among a handful of games. And I invite you to expand upon this, but it's my perception that you will always get people gravitating to the newest and most fun game and that it's human nature to try different experiences and change all the time. And yet, I think investors think, Oh, my god, what happens if bingo black -- Blackout Bingo disappears from the platform, if they take their ball and go home, you'll lose your entire audience. So can you talk about revenue concentration on games and how that's trending over time?

Very similarly, actually, revenue concentration is very similar today to what it was several years ago with our -- just one developer. So first game became popular on the platform. Actually, when there's was only one really popular game, revenue concentration is not that dissimilar from where we are today with multiple developers with hit titles in different categories. It's really -- it's the hallmark of a successful media company. What it means is that there are certain experiences on the platform that are players -- the overall game playing population prefer. So we've had just to kind of debunk this and help people understand. We have actually many Solitaire titles on the platform, but there's only one Solitaire Cube. In fact, the first Solitaire platform Game was on system in 2014. It's still on platform. Those guys, they actually -- they generate a nice level of profit every month. It's one -- basically one person. They launched a very broken, buggy solitaire game, landscape mode, actually, not a portrait like Solitaire Cube. -- not the level of polish that's -- I don't hope this developer wouldn't feel upset them saying this. But look, it's a very different caliber of execution from what you see from Tether at Solitaire Cube. But there is certainly a next solitaire title on the platform just below Solitaire Cube. So it's about -- and I think you know this really well, Michael. The head in video games of each category is much larger than the tail because of the top two games in the category like your top game and first-person shooter at any given time, how much of the audience of all first-person shooters are playing that one game Well, I mean a lot, a lot. So yes, concentrates massively, 40%, 50% of audiences you might say. And so the difference with Skillz is we're not selling the title upfront. We're not selling a subscription model like a Netflix where if everyone's watching House of Cards, it's not like House of Cards is all the revenue on Netflix, even though it's the exact same risk in that model that is with ours, right? Because the reality of it is, if people are only paying for Netflix for House of Cards or people are only paying for HBO for Game of Thrones, when Game of Thrones ends, they're going to cancel their subscription. As surely, as our transactional revenue would end if we were only monetizing a per view of Game of Thrones or House of Cards to finish that analogy. The difference at St Media Games is we're not selling -- we're selling a repeatable experience. We're not selling a onetime journey. So the thing that's really, really cool is -- How many times are you going to rewatch Game of Thrones. Well I don't know. I watched -- I tried to rewatch season 1 actually. I -- We tried to rewatch, I didn't finish season 1 the second time. But -- so they probably consume at one time. In video games, you're consuming the exact same content 15x a day. So That's why I think there's so much power in our model.

We're at time. I've got another person heading into the queue. Thank you so much, my friend. Have a wonderful Christmas. I probably will talk to you between now and then. But thank you for joining us. Appreciate it. And I encourage investors to follow up with Ian and Stephan and learn more about Skillz. Thanks again, Andrew.

Awesome. Thank you. Thanks, everyone. Happy holidays.