Super League Enterprise, Inc. (SLE) Earnings Call Transcript & Summary

Companies and specifically in the technology space are great at jumping on trends. The trend that seems to be emerging is the concept of Web 2.5. And what -- that really speaks to what Austin just articulated. Companies recognize that there is a generational divide in how their audiences of different ages want to connect with them and the kinds of content that will be attractive to them. And so I think what we will continue to see is more and more commitments to 3D immersive content experiences because that's going to be necessary and it's going to be possible. I mean that's the other thing that we don't really talk about is, you can now load a 3D web page through your browser almost as quickly as you can load a 2D web page. And that will only improve in terms of technology and speed. And as a result, the push in the space is to be in this hybrid environment. So Web 2.5, it really means that you are leveraging principles and practices and tools and capabilities in the Web 2 space when it comes to proven customer acquisition, proven data collection, proven monetization techniques but you're looking at Web 3, the 3D Internet for engagement. And sitting right in the middle is I think where companies are going to find themselves increasingly really with every passing quarter. And I think in Q4 of this year, it will be surprising to anyone who isn't paying close attention to this space, how many programs and how many experiences are brought to market by major brands, major IP owners to drive everything from awareness to commerce, to travel. I think you're going to start to see airlines in this space. It's really going to become significant right at that intersection, Web 2.5.

But you almost described it for me. I mean, whether we're talking about barbie.com or maybe to your earlier point on tourism, like just give our audience a little bit of a feel of what would it look like if today, somebody had it was employing a 2.5 strategy.

Well, I think -- I mean, I'll give you 1 example that I think we've mentioned Barbie a few times. Big movie coming out this weekend, great brand to be talking about, terrific time for Mattel. Hopefully, a terrific time for the movie business. They really need it but I think what you can envision is barbie.com becoming different in 2 primary ways: one, outside of barbie.com and one within barbie.com. I think you will see Barbie expand their digital presence by having a more consistent place in immersive environments and those immersive environments are Web 3 environments. It might be Roblox. It might be...

Just like building the Dreamhouse for Mattel.

That's right, just like when we did that. And they will then start relying upon their trying through Web 2 measurement capabilities and media evaluations and attribution models as more tools around attribution become available in Web 3. They will be using those tools to evaluate both the return on the investment in creating that presence, but also to evaluate the level of resource commitment they're going to give to that Web 3 presence on an ongoing basis. What will also occur is that because a significant percentage of their user base, their target customer will be spending the kind of time that Austin referenced earlier, 15 minutes a session in these immersive spaces outside of barbie.com. They will start to create an equivalent immersive landing experience, a landing environment back on barbie.com, so that when they're able to bring those consumers over, they don't have to change the language that they're using to communicate with that audience. And that's where I think you will start to see an enormous amount of activity. And frankly, one of the things that excites us most about LandVault's capabilities, they are one of -- they're one of the emerging sort of top builders of photorealistic experiences that can be deployed in web environments. And part of that is even related to the technology underpinning their business.

Yes. I mean, it is amazing isn't it, like in the Mattel example, just if you keep that common thread. They own American Girl. They know all about in real life, high-touch experiences and how you want that to be so special and personalized. And you think about the dwell time at an American Girl store for many poor parents out there. But it's so crazy, isn't it, that the dot-com experience still kind of feels like a web brochure from 2005. And so it's exciting to see Austin, you said it earlier about how gaming noise leads on technology. And again, it just goes back to the elements that have been built to create great gaming experiences are now going to change the Internet forever. So what -- on the just higher-level tech side in this journey to Web 3, Austin, we'd love LandVault's perspective on what do you think are the critical components here? And just your kind of scorecard perhaps on how this emerging space is doing. Because again, you've got companies out there like Meta who put up some really bold goals that had a really compressed time horizon, and it kind of scared people off a bit about where it could go and so. Maybe just a real practical view from you guys on the Web 3 backbone?

Yes, definitely. For me, it's pretty simple. It's about access and fidelity. I think there's still a little bit of a gap almost between the Metaverse, the virtual experience that had been promised and what's actually been delivered and the user experience on a lot of these platforms. We know some -- some of the earlier platforms have their problems, right and can be difficult. If you're a first-timer coming on, you've got to download something, you've got a -- you're already going to a platform you're not familiar with. So we really see one of the main areas of development is around access. And to what Matt said, that's why we're starting to see a lot more of these photorealistic experiences hosted right on client's websites and accessible from mobile, desktop, VR, any platform you like with a single click. So I think that's a huge barrier that we're pressing at the moment. I think that one is probably most important. I think there's also the photorealistic side of things. I think some experiences, if you're a -- if you're Lego, then you can -- you understand how you can translate your brand into Roblox. But for a lot of brands, for luxury brands, for automotive brands, for lifestyle brands, there are many brands out there that are saying, like, "no way am I going to put my brand into an environment like that, they need something that's a little bit higher fidelity." Same thing from kind of more serious, I think training or educational use cases. You need more near real life, second-best thing to real-life type of scenario. So I think that's another important one. And then from the technology side, I think also AI is going to play a role in the future as well.

Well let's go there. You brought it up. That's the hottest topic in the room these days. So let's talk about how you think AI is or could impact the space. So Matt, why don't you take it first? We'll mix it up a little.

Sure. Sure. Thanks for getting us in there. And I think, look, the most exciting and practical applications of AI today are reflective of an impact in the creative and creation arena. There is the creation of every type of content, written image, 3D video, the creation of presentations. AI has magnificent applications well beyond it. But in terms of our phase, the delivery of 3D environments is 1 piece and the publishing and the access is 1 piece of the equation, distribution, in a sense. I don't think AI is going to have an impact there. Creation, the impact is going to be profound. It will get easier and easier and easier to create all kinds of content including 3D content, including 3D environments and that's going to impact anyone in this space, but more than anything else, it will help accelerate the growth of the 3D Internet, the growth of the proliferation of immersive experiences. And so it's a wonderful development if you're sitting in this arena. If you think about the transition of the Internet from Web 1 to Web 2, Web 2, now Web 2.5 and Web 3, we've never in the history of the digital revolution, there's never been a technology that is going to accelerate the next wave as quickly as AI is going to accelerate this wave of transition.

All right, Austin. You brought it up.

No, no, I totally agree. And I think that's great. I mean, creative is my zone, right? And I think a lot of creatives -- there's a perception out there, I think, that creatives are scared of AI. And I actually kind of think that's nonsense. I believe that the AI still does need that creative guidance today. But I think we're -- again, we're talking about a long term -- a longer time line here. I think today, AI is an amazingly powerful tool to help us. I kind of think of it more as enabling us to scale our output versus kind of replacing the human touch entirely. I think, at least internally, at LandVault, we're using it to generate environments, to generate non-key assets, really take some of the lift off of the creative process and allow us to focus on the high-touch moments and on the really important bits. So I think that's really amazing and powerful. But actually, I think even more exciting is this kind of word press moment I think that we're going to have in a few years where particularly in the Web 3 space, to really get that level of mass adoption, anyone needs to be able to create a space, right? It can't just be the big brands who've got tons of money to spend who can kind of dominate the space. The promise, the ethos of Web 3 is a more equitable, inclusive space that everybody can participate in, that everybody is compensated fairly and equitably for their work, for their creativity, for their collaboration. So I think we're certainly working on some tools to accelerate that time line at LandVault through Matera, through our kind of publishing and tokenizing and monetizing technology there, which is really exciting. But I think, like I said, AI is going to help enable this word press moment where now, if you need to create a website quickly, you can do that work like Canva for a presentation, right? It's tools to complement that creative process and enable people who have maybe a lower understanding of the technology to publish virtual experiences and I think that's going to be a really powerful thing that's coming up in the near future.

It's a great way to describe the space and the trajectory. And I just think it's worth pointing out that the largest gaming platform in the world is a gaming platform in which all of the players who are there are playing games created by other players. That's Roblox. And that wasn't conceivable a decade ago. Of the approximately 3 billion gamers that are spoken about being in the world, 500 million are playing games created by other players. Roblox is a big chunk of that and there are other platforms. And that has been the fastest-growing segment of the gaming space. The main reason is because the creation tools have advanced so dramatically and we're just getting started. And so if you can extrapolate that to exactly what Austin was talking about and think about the creation tools becoming easier around 3D experience and 3D asset and 3D interactivity creation for any digital destination or web experience, you can just imagine. You put that kind of creative power into the hands of the masses, you're going to see new e-commerce businesses created by 24-year olds that are only 3D. And they're going to be some of the hottest new e-commerce websites that you can imagine. And it's just because the tools are there, the creativity is there, and we're seeing this acceleration largely driven by generative AI.

Yes. I mean one of the things I find -- and I'm sure Sam feels it too when we're out talking to brands and investors is, a lot of times because of your great point, Matt, you made even just about the average age of the C-suite, even just simple things like you don't play Roblox. You play mini games inside of Roblox. The fact that just like TikTok, anybody could be a content creator or be a star, anybody can be Tom Cruise. Well, guess what, anybody can be a game maker. And it's no longer in the hands of 5 to 10 Activisions. And so I think that a lot of this is just -- as everything becomes democratized as far as content creation, it's even just changing all of our mindsets about who a creator is. And what's funny too and it is a true story as Matt knows, I mean, we know some of the creators. We have an extensive network of developers, game dev partners in Roblox. But one of them is a former intern, who -- after helping him save money to go to college, he now gets a nice big check every month from Roblox. And I think he just turned maybe legal to drink alcohol in the States last year. So that's the new way of the world. So with that, I mean, we talked a little bit about that C-suite. I mean what advice would you guys give to the CEO or CMO of a big kind of global brand right now? If you were sitting next to them at a dinner or a networking event, what would you say to them?

I mean, I think some of the things that we covered, I think the key and what someone in Generation X might recognize and relate to is the reference to social media. I would suggest that the social media for the younger generations, Gen Z and Gen A, is these interactive environments where experiences from games, to shopping, to tourism, to exploration, to education, that is the framework that I think they need to apply to this space. And it's just about them creating the right kinds of content for these new social platforms. And I would try to help them not think of the space as gaming, because I don't want them to be thinking about EA's Madden. And I don't want them to be thinking about Activision's Call of Duty, because that's not what we mean. What we're talking about here are socially driven, creator-driven environments where the publishing of content, the pace of publishing is driven by the masses and the brands need to think of these spaces as a place where they too have to be creating content as one of the masters, the same way that they entered the social media space more than a decade ago.

I think that's great. I would agree with all of those things. I think maybe to put some other angles on it. I would really ask the question, is it right for you? And I think what I mean by that is, the goal, really the big opportunity is to cultivate a relationship with the up-and-coming generation, and I feel strongly about that. And I think brands, IPs, anyone looking to get in the space in a meaningful way need to look at the experiences and evaluate the opportunity in the right way. I think it is a bit different from the reach that you'll get with the digital campaign. I think they need to adjust their metrics realistically when entering the space and try to resist measuring it in the same ways that they would have measured a social campaign or would have measured a digital campaign because I think right now, the benefit is -- the main benefit is creating this connection with new users. And to give an example of one of those things and what I mean by that, I think we all know like the holy grail of information grab was always the e-mail address. And I think now as we move in and see more adoption in the Web 3 space, things that brands should really be paying attention to are the -- are a wallet address, right? That's your new kind of e-mail address in this world. And while you don't necessarily get personal demographic information from that, the amount of information that you can grab by looking at someone's wallet is profound. You can see there's a sports fan, you can see that they're a car fanatic. You can really learn a lot. So I think it's really about businesses looking hard at the metrics, understanding that it's an audience play now and that the revenue play is a bit more long term. And just understanding that we're looking at a longer time horizon. And I think if the brand is -- or an IP or a business understands that, I think they're set up in a good place to evaluate the benefits of an experience now.

Yes, that's great. I mean just building on some of the things you've said, both of you, I find myself often first trying to say, "look, the audience is already there." It's shifted. You just -- you're just learning about it and you're trying to catch up. I do think your point, Austin, about changing their expectations about what role does this redirection of marketing investment will play in reaching their end-year marketing objectives or campaign goals is important. And I do think helping them understand, too, that they can dip their toe in. You don't have to run out and create a persistent world out of the gate. There are so many ways with the advanced products that we have for you to do trials and to start to understand those metrics and measurement. They're really kind of rounding errors on a lot of these brands' marketing budgets. And then I do think what I find myself more confidently doing as of late is then being willing to say that look like marketing objectives are fine but you're kind of maybe missing the bigger picture here. Like, what is your dot-com strategy? Really. Let's take an inventory, respectfully, of some of your websites. How do you feel about them? I think because I spend a lot of time in retail in my early life, I obsessively thought about, as you mentioned, dwell time earlier and foot traffic and like-for-likes. And those were problems that I was told, running 20,000 convenience stores around the world, that I was only ever going to be able to incrementally improve, if at all. And to now have a completely different way to think about that problem and to drive that digital to physical crossover and deeper engagement, I mean, that to me, if I saw one of my old retail mates, that's the first thing I'm saying is, there's a new solution out there that makes -- allows us as retailers to think very differently about ways that we can drive performance. And even I think a lot about like R&D. And I definitely think about this in the Mattel example. And I've said this to people at Mattel, which is, don't ever make a bunch of 3D real-life plastic prototypes again for the R&D purpose. Supply chain cogs. You have 10 new Barbie ideas? Let's drop those 10 characters in one of these game worlds. And we can maybe find your next $1 million or $1 billion toy line in a really fast iterative way that again very true to these game platforms, what they've done in democratizing who can make a game. Well maybe anybody can make the next great billion-dollar toy line. And think about how that totally turns the R&D process on its head for some of these companies. So yes. It's hard, because I am so excited about how it could transform their business models that I almost sometimes feel like I'm working for Mattel in that example but I try to refrain myself and be respectful on that. But maybe just to wrap, we have another important stakeholder out there. LandVault has some great kind of venture capital investors behind them. Super League had some public investors. Obviously, it's kind of been a crazy time for private and public markets. So what do you guys think investors should be thinking? And I guess, just -- and some of this might be a time horizon-type question versus how you felt maybe a couple of years ago? Do you feel like we're right on the cusp of this market category really taking off? And how do you see investors thinking about their interest in this space from an investment perspective? So Austin, why don't you start.

Yes. I think I believe they call it the wave space but I think we see this same kind of trend, the same kind of graph happen over-and-over 10 with emerging tech. And I think you see kind of an initial hype cycle and then you see kind of the hangover from the hype cycle, which I believe we've hit now. And then it's kind of a slow and steady trajectory up out of there. So I think we're in the slow and steady part now. I think a year ago, like I said before, brands were kind of going in the space at all costs. Now it's more of a test-and-learn approach, which I think is the sustainable approach, right? So I do think that's set to continue to grow at a steady pace now. And I think things like Apple Vision Pro getting released only support virtual experiences, immersive experiences and every day, as that Gen alpha gets older and enters the workforce and has more disposable income, I think all the signs point in the same direction. It's funny, the -- if you look at the graph of block chain adoption in Web 3 space, it mirrors very closely what the Internet was doing in the '90s, right? So I think we're seeing the same thing happen again. And the graph is almost exactly the same. So yes, I think we're in a really good place. And I think it's also a really interesting time now. I think a lot of the businesses that were capitalizing on that hype cycle and not necessarily approaching it the right way, taking a long-term view, some of them a bit more extractive than others. I think you've lost a lot of that in the space. So I think there is a benefit of a bit less noise now. So I think I find that when I go to conferences, when I go to events, the meetings that I'm having are more meaningful, the people I'm connecting with are more serious and are there for the right reasons and taking the long-term view. So I think there's been kind of a weeding out moment, which is also a positive thing, I think.

It's a really great point because there's definitely -- there was a period of time where everybody was just saying they were a metaverse or immersive consultant just to say it, hanging up a shingle as a one-man shop. And then you're -- we're sitting there building out real tech and capability and we're kind of competing against that noise, right? And so I think you're right. I think it's -- there's been a good cleaning out of that. Matt, what do you think?

I think the investors tend to consider at least 2 major factors when looking at a space. One is the momentum and the other is the data. And I think Austin really covered how the momentum side of the equation has been viewed, is being viewed and is likely to be viewed, where we're in this steady growth phase where real use cases and sustainable businesses are going to start to emerge as prime examples of success in the broadly defined immersive web or 3D Internet. I think the other piece is the data. And the data is overwhelming. It is staggering. If you look at the way that people under 25 spend their time on digital screens, the majority of that time is spent in immersive environments relative to anything else other than watching videos. But a substantial percentage of the videos they're watching are full of content taken from immersive environments. And so immersion is the content category of dominance across every metric. And so investors who are looking at that data and extracting from there what they believe consumer behavior will be in the next 5 to 10 years, the space is an inevitable. It is undeniable that it is growing in its importance and we'll have a significant growth curve.

Thank you. That was really well said, both of you. And so with that, Matt and Austin, I just want to thank you for your time today. Again, you guys are 2 of really the most influential leaders in this exciting new emerging space. And I think it's been a great opportunity to share that your knowledge with some of our brand partners, investors. So thank you so much for your time.

Thank you.

Thank you, Ann. Great to see you, Austin.

Great to see you, man. We'll chat soon.

Bye-bye.

Bye-bye.