Skillz

Skillz is a multiplayer mobile gaming platform that hosts tournaments for a variety of online games where users can compete for large cash prizes. Skillz was granted two patents in 2016 which cover two core growth drivers of its platform. Firstly, the platform’s ‘fair play algorithm’ determines the outcome for games (skill vs luck). This is important since there is a thin line between earning cash prizes for games based on skill and luck, the latter which is strictly regulated online in the USA. The second covers technology behind the platform’s ‘tournament management system’ (TMS), which allows developers to integrate their titles onto the Skillz platform.   In June 2023, the company expanded its presence to Las Vegas by purchasing a 36,045-square-foot office building to serve as its new headquarters.

Skillz announced in June 2021 that it entered an agreement to acquire 100% of the mobile game marketing platform Aarki for around USD 150 million in cash and stock. Aarki’s mobile marketing platform is driven by machine learning, artificial intelligence, and big data. As a result of the acquisition, Skillz will expand its revenue stream, and more importantly,  benefit from potential cost synergies through streamlined marketing spend. To diversify its revenue stream, Skillz launched a pilot program in India in December 2021. 

Key customers and partnerships

Skillz announced a multi-year partnership with the UFC, which is considered the world’s leading mixed martial arts organization, in March 2022 . The partnership gave Skillz and its developer community access to licensing rights to create UFC-branded esports mobile games, which will be co-marketed by Skillz and the UFC. The games are expected to be launched in 2023.

Skillz entered into a strategic partnership with Exit Games, a developer of synchronous multiplayer gaming technology in August 2021. Founded in 2004, Exit Games is the developer of Photon, considered to be the world’s leading real-time multiplayer game development technology provider. Skillz also announced a USD 50 million investment in return for a minority stake in Exit Games. Through the investment, Skillz gains exclusive access to Exit Games’ technology. The integration is expected to improve Skillz’s chances of supporting multiplayer synchronous content on its platform. As a result, it enables publishers and developers to build racing, fighting, and first-person shooter games on the Skillz platform.

Funding and financials

In December 2021, the company announced a private offering of USD 300 million of senior secured notes due 2026. The net proceeds from the offering will be used for general corporate purposes, which may include potential acquisitions and investments in products and technologies. This was followed by its IPO, in September 2020, on the NYSE at a USD 3.5 billion valuation, through a merger with a Special Purpose Acquisition Company (SPAC) named Fly Eagle Acquisition. 

In FY2022, Skillz’s total revenue was down 29.8% YoY to USD 269.7 million. The revenue decline was primarily attributed to a 32.5% YoY decrease in gross market volume. The company revealed this was a result of “planned pullbacks in advertising and incentives.” Annual monthly active users fell to 2.1 million (down 27.6% YoY), however, annual average revenue per user remained flat at USD 11.0. Although operating expenses dropped in terms of absolute value, expenses as a percentage of revenue ballooned, especially sales and marketing expenses, which accounted for the majority of operating expenditures. The company recorded adjusted EBITDA losses in FY2022, which amounted to USD 122.4 million, respectively.