As esports begins to eclipse hockey, basketball, and baseball in popularity, investors have been looking for the best way to take advantage of the market’s rapid growth.
Should they follow the lead of Michael Jordan, who has invested in an esports startup, or Drake, who has invested in a lifestyle, apparel and esports company, or New England Patriots owner Robert Kraft, who has invested in an esports league?
Well, the Aquilini Investment Group, the owners of the Vancouver Canucks professional NHL hockey team, believes they’ve found a new—better—way to profit. Aquilini GameCo, which is the parent company of Luminosity Gaming, has merged assets with Enthusiast Gaming (TSX.V:EGLX) to create the largest video game media and esports company in the world.
On top of that, Comscore has just verified Enthusiast Gaming (TSX.V:EGLX) to be the largest online gaming network in the United States, surpassing the likes of industry giants Twitch, IGN, and Gamespot.
Why is this important?
Because Enthusiast Gaming(TSX.V:EGLX) was already one of the largest North American networks of video gamers, which attracted more than 150 million monthly unique visitors. Now that the deal is complete, its community has grown to an unprecedented 200 million monthly unique users, surpassing Amazon’s Twitch, which has a valuation of nearly $4 billion.
Reddit, by the way, bills itself as the front page of the internet, the place where the members of its passionate community go to explore and learn. Well, Enthusiast Gaming (TSX.V:EGLX) has that same type of passionate user base and could become the front page for the rapidly growing esports community.
Plus, Enthusiast is going to be hitting the ground running thanks to a wealth of funding. The combined assets of Enthusiast Gaming (TSX.V:EGLX) and its new partners include $55 million in cash to be deployed on accretive M&A and proforma 2018 revenues of $22 million.
Combine that funding with the unprecedented access to gamers that the new venture will offer and it’s easy to see how the company could become a real force in online gaming.
The new company will be able to develop one-of-a-kind sponsorship, advertising, and branding opportunities through eight esports teams, including the Vancouver Titans, the #1 Overwatch League franchise. It will also extend its reach to 50+ esports influencers, more than 85 gaming media websites, and nearly 1,000 YouTube and Twitch channels!
Enthusiast Gaming is not a conventional ad network—it’s a community
The company operates a sprawling network of over 80 owned and affiliated gaming websites (including The Escapist, Daily Esports, Destructoid, Operation Sports, the Sims Resource and Nintendo Enthusiast) appealing to every niche gaming community and drawing in over 200 million visitors a month. Starting from just a single blog, Enthusiast Gaming (TSX.V:EGLX) has continued to grow at a staggering rate, connecting an online community across several touchpoints.
Right now, however, Enthusiast Gaming’s (TSX.V:EGLX) current valuation reflects that of a conventional ad network—something that it is not.
At their most basic level, these networks take unsold ad space from online publishers and sell them to advertisers, while getting a cut of the ad revenue. These ads are then sent to the site of that publisher. Ad networks essentially act as an intermediary between advertisers and publishers, owning no properties, other than the platform on which advertisers buy these ads.
What the market perceives is that Enthusiast Gaming functions very much like an ad network, deriving most of its revenue from advertising, clocking in over 12 billion ad requests per month across its network, with a growing volume of advertisers targeting its hard-to-reach demographic.
However, there are major differences.
Most notably, Enthusiast Gaming (TSX.V:EGLX) owns and operates a significant amount of the traffic that goes through their network. Typically, Enthusiast’s network of website affiliates earns a 70% revenue share of earnings. However, once the company identifies a high-performing affiliate, it then offers to buy the publisher outright, bringing additional revenue in-house. One example is the acquisition of “The Sims Resource,” the world’s largest female video gaming site. This strategy allows for more substantive growth and revenue opportunities.
- Enthusiast Gaming Announces NFL Superstar And Super Bowl Champion Richard Sherman As Shareholder And Luminosity Brand Ambassador
- Enthusiast Gaming To Acquire Steel Media, A Leading Mobile Gaming Media And Events Company
- Enthusiast Gaming And Luminosity Gaming Announce Acquisition Of Interest In Overwatch League Esports Team
Per-user valuation: Just a tiny fraction of comparable communities
What Enthusiast Gaming (TSX.V:EGLX) is doing is not simply connecting advertisers with publishers, but rather building a rich online ecosystem that can deliver untapped marketing potential and user engagement opportunities for brands.
Enthusiast Gaming’s (TSX.V:EGLX) current market valuation, therefore, puts it well below that of comparable online networks, considering the size of its global communities.
Below is a quick look at some networks that have also built record-breaking valuations on the backs of their immense online communities:
The wide, gaping chasm we’re seeing between the sheer size of Enthusiast Gaming (TSX.V:EGLX)’s online communities and its current market value is thrown into even starker relief once we compare it against similar online platforms, using metrics such as “revenue generated per user” and “value per user.”
Let’s look at Reddit, a company with similar demographics and user focus. With its 330 million users and $110 million in annual revenue, Reddit generates just 30 cents of revenue per user every year. If you were then to look at Reddit’s marketing valuation of $3B, investors have decided that each user has a theoretical value of $9.09, essentially what the market figures to be the lifetime value of that user.
Enthusiast Gaming (TSX.V:EGLX), with over 200 million users and its pro forma revenue of $22 million, generates around .11 cents per user—and is significantly undervalued compared to other media platforms. The company, of course, is still in the early stages of its expansion, and so as the community matures and more income streams come online, its revenue should grow as well. But even if Enthusiast’s value per user were pegged at less than half that of Reddit’s at $4, this would mean a market capitalization of almost $1 billion! This is why Enthusiast Gaming‘s (TSX.V:EGLX) market undervaluation is almost unprecedented.
Another community with the same demographic is the video game chatting platform Discord. With 200 million active users, Discord recently secured $150 million in financing for a $2.05 billion valuation. This puts the company’s value per user at roughly $10.
Twitch.com was acquired by Amazon for $970 million in 2014, but currently that valuation has ballooned to $3.87B. Twitch has approximately 140 million visitors and $435 million in revenue, putting their value per user at $27.64. Compare this with what the market sees as Enthusiast Gaming’s meager (lifetime!) value per user—roughly $1.00—along with its projected annual per-user revenue of 40 cents. This is another reason why Enthusiast Gaming’s (TSX.V:EGLX) market undervaluation is almost unprecedented.
What’s the true value of online communities?
But can we truly compare platforms like Reddit and Twitch with Enthusiast Gaming (TSX.V:EGLX)? What all of these platforms share is one thing—they host authentic communities of passionate online gamers—and this means a lot to brands.
Online communities form the core of a user’s online experience—which is exactly why Reddit’s slogan is, “The front page of the Internet.” When users go online and explore, they will always return to anchors—whether it’s Facebook, Reddit, Twitter or their favorite online website forum, which serves as the home for their online community. Otherwise, they would be lost in a sea of random information and conversations, without a tether in which to turn to for personalized content, as well as like-minded netizens they can talk to.
Marketers fully understand the value of online communities in brand advocacy, creating excitement about their products and sharing tips, advice and other resources related to that product. As these communities grow, they allow brands to engage in real conversations with users and prospects, rather than just to serve them ads.
Enthusiast Gaming’s (TSX.V:EGLX) most valuable asset is its huge authentic gaming community, and their continued loyalty and engagement with the company have allowed it to explore a host of strategic growth options, while branching into new channels, including brand deals, sponsorships, subscriptions, merchandise, and sponsored content.
The largest online gaming network in the United States
Enthusiast Gaming (TSX.V:EGLX) is now ranked number-one in gaming traffic by Comscore, putting them ahead of Twitch, IGN, and GameSpot. In addition, only Enthusiast Gaming (TSX.V:EGLX) remains independent of these gaming sites. Enthusiast Gaming (TSX.V:EGLX) delivers more combined unique visitors and views than any other gaming information network in the United States! The numbers continue to grow as proven by a visitor growth of 107% and 148% in views year-to-date for the company’s owned and operated properties.
The power of a large and growing community
Enthusiast Gaming (TSX.V:EGLX) hasn’t stopped growing either. Recently, it recently acquired The Sims Resource, the world’s largest online female video gaming content and community destination with 2.5 billion page views per year, while generating over 10% of the total views of Twitch.com. The company further increased the size of its ad network this January with an agreement to represent all of Omnia Media Inc.’s gaming traffic in the United States, representing over 50 million monthly visitors and 400 million subscribers over 900 channels.
This enormous online network has also fueled the success of the Enthusiast Gaming Live Expo (EGLX), which recently surpassed 55,000 attendees, making it the largest gaming convention in Canada. This was promoted through sponsored pieces in Enthusiast’s large network of affiliated sites such as Destructoid. The skyrocketing attendance figures of EGLX is testament to brands of how it can mobilize its own communities to engage and participate, and it’s clear that Enthusiast’s value per user will only grow exponentially from here.
A passionate management team and advisors respected by gamers
It’s clear that Enthusiast Gaming’s management is made up of passionate gamers who are an active part of the gaming community. Enthusiast Gaming (TSX.V:EGLX) is viewed favorably within the gaming community, who can see that their independent grassroots passion for gaming is genuine and can’t be easily replicated by corporate sites such as IGN or Gamespot.
Here’s a quick look at the key figures behind Enthusiast Gaming (TSX.V:EGLX):
Adrian Montgomery, CEO of Enthusiast Gaming: Adrian Montgomery has been a senior officer and director of several public and private companies in the fields of media, sports and entertainment, finance and industrial services. Most recently, he served as president and CEO of Canucks Sports and Entertainment, one of Canada’s premier sports and entertainment organizations. He is the former president of Tuckamore Capital Management, a conglomerate with over $700 million of annual revenue, and was also the former CEO of QM Environmental, one of Canada’s largest contracting companies. Mr. Montgomery has been active in the political process throughout his career and has served as a political advisor to Leaders at all levels of government. Mr. Montgomery is also a member of the New York State Bar Association.
Menashe Kestenbaum, President of Enthusiast Gaming: A passionate gamer, Menashe got his start in video games when he was 13 writing for IGN, where he eventually became a community leader. In 2011, Menashe launched his first gaming blog, “Nintendo Enthusiast.” In 2014 he incorporated Enthusiast Gaming (TSX.V:EGLX), monetizing and growing the network since. Menashee has personally owned and operated gaming websites to a readership of over 2 million gamers, and has led Enthusiast—growing a writing and community staff of over 84 people.
Steve Maida, President, Esports of Enthusiast Gaming: As an avid gamer, Steve has been involved in the esports industry for over 15 years and is the founder and owner of Luminosity Gaming. Prior to founding Luminosity, Mr. Maida found success in the marketing industry working as an independent consultant providing full marketing services to various professional service providers, including law firms and medical professionals. In 2015, Mr. Maida married his enthusiasm for gaming with his experience in marketing and founded Luminosity Gaming to become the globally recognized esports organization it is today.
8 reasons why enthusiast gaming (TSX.V:EGLX) is a compelling gaming play
1. UNPARALLELED UNDERVALUATION
The size of Enthusiast Gaming (TSX.V:EGLX)’s online gaming community is in sharp contrast with its market valuation. Considering similar online platforms such as Reddit, Twitch, and Discord have per-user valuations Enthusiast investors are benefiting from an incomparable undervaluation.
2. THE LARGEST GAMING NETWORK IN NORTH AMERICA
Enthusiast Gaming (TSX.V:EGLX) sits at ground zero of the gaming and esports opportunity. Growing the network from one gaming website, Enthusiast Gaming now includes: +85 websites, 900 Youtube Channels, the largest gaming expo in Canada, eight professional esports teams and over 50 gaming and reaching 150 million online visitors per month, Enthusiast Gaming is one of the largest gaming audience in North America and growing.
3. A COMMUNITY OF GAMERS, BUILT BY GAMERS, FOR GAMERS
Enthusiast Gaming (TSX.V:EGLX) management executives such as Menashe Kestenbaum, Steve Maida and Niero Gonzalez are passionate gamers themselves and respected veterans of the industry, with a finger on the pulse of the gaming community.
4. AGNOSTIC PLATFORM, LOWER RISK OPPORTUNITY
Enthusiast Gaming (TSX.V:EGLX) is an agnostic platform that covers all subsectors of the gaming industry. Most gaming industry peers like game developers and esports teams put all their eggs in one basket, with significant amounts of upfront capital. Enthusiast Gaming’s network strategically covers a variety of topics, content formats, and media platforms which provides a lower risk investment option into the gaming sector.
5. THIS NEXT GAMING WAVE MAY BE UNPRECEDENTED
Analysts are now seeing the floodgates starting to open for esports and video game investment, similar to what happened with marijuana investment a few years back. 2019 video gaming industry revenues are projected to surpass $130B, Enthusiast Gaming (TSX.V:EGLX) looks to be well ahead of the curve, building a huge network of authentic gamers willing to spend on both online products and in-person experiences.
6. EGLX’S UNPARALLELED MOMENTUM
In the past three years, Enthusiast Gaming (TSX.V:EGLX) has grown from one online blog website and a small series of gaming meetups to the largest gaming network in North America. Enthusiast Gaming (TSX.V:EGLX) is still climbing the ranks of the top gaming sites in North America and has achieved significant revenue growth year over year.
7. EGLX’S ESPORTS NETWORK
Enthusiast Gaming (TSX.V:EGLX) boasts a combined reach of over 60 million followers via its 8 professional esports teams, more than 50 gaming influencers, and its merger with Luminosity Gaming. Enthusiast Gaming’s ability to attract top industry talent is growing exponentially; it can offer brands increased awareness and unique influencer partnerships.
8. CUSTOMIZED MARKETING CAMPAIGNS AND SYNERGIES WITH ROGERS ARENA AND CANUCKS SPORTS
The Luminosity Gaming merger gives Enthusiast Gaming (TSX.V:EGLX) access to Rogers’ and Canucks’ network of partners and sponsors. Via a direct sales team, Enthusiast will create customized marketing campaigns for large brands which due to the sheer size of the network can offer segmented, targeted marketing and analytics adding significant value to its future campaigns and synergies.