Business overview:

Skillz, founded in 2012 by Andrew Paradise and Casey Chafkin in San Francisco, provides a platform/layer (through an SDK) that allows for easy introduction of competitive playing dynamics in mobile games by game developers (9k active). It is an alternate form of monetization (rather than ads or in-game items - which they believe are "inferior") for game developers, which supposedly improves engagement → 2.6 million MAUs, with paying users spending an average of 62 minutes daily on Skillz games (more than most social media - although they are payers which makes sense). The way it works is: players can make real money "bets" on themselves (pay for entry in competitions), and gain the profits if they beat the players they are competing with - Skillz takes a 16%-20% share of the GMV. The games are distributed independently on app stores, rather than on a "Skillz Platform", and simply integrate the Skillz system on their code to gain competitive capabilities including receiving user deposits.

According to the company, there is a flywheel in which "greater user engagement directly leads to more developer revenue. More revenue enables developers to build more content for the platform which, in turn, increases user engagement and retention." Only 3 developers, or 19k dollars of GMV ever leave the system, and the company projects 1.6bn in GMV for FY2020.

In order to provide these services to game developers, Skillz powers a larger tech platform of services, which includes technology developed to prevent cheating in the platform, as well as tech to recognize and approve games based on whether it is based on chance/luck, or skill. According to them, their business is built on top of "data science".

The games in Skillz's platform are basically casual games, prepared for better competitive game-play. For example, 21 Blitz is a Blackjack game, but modified in some aspects in order to become skills based, rather than mostly luck. There is also Pool, Golf, etc.

The developers using Skillz aren't very well known, and also seem to depend on the platform in order to monetize their games (clients depend on this aspect). We question whether the games in the Skillz platform eventually saturate, or even if they will never reach the levels of quality of top mobile games, becoming a way of monetizing second-tier, niche mobile games (if this is true, is it still a good opportunity? Could certainly be.) If this is true, they are probably targeting second-tier competitive gamers as well, who can still make a lot of money through the platform. Skillz even highlights developers challenges that they help overcome:

They also mention a belief in democratizing the mobile gaming industry and allowing to "level the playing field" for every developer, which again demonstrates that at least currently, they end up working with second-tier developers.

Platform: (more detail on page 166 of S-4)

Go-to-market Strategy

With a blend of our analytics and data science, we leverage software tools to efficiently acquire, retain and engage users while reinforcing our trusted consumer-facing brand for both the end users and our developer partners. We acquire and engage users primarily through:

Their go-to-market is a combination of paid marketing channels, in combination with discount/loyalty offers (end-user incentive programs) and exciting games → They cross-promote products with their user base and users that pay have more than 10 games - "Through our cross-promotion channels, we use a combination of content, contests and special offers to engage existing users." (how is cross-promotion done? notifications? email?)

The average Three-Year Lifetime Value of our 2018, 2019 and first half 2020 cohorts is expected to be 4.7x our total user acquisition costs for those same periods. Our payback period, or the time it has taken to recoup our investment in user acquisition, has averaged four months over these same periods.

Paid users gain loyalty points every time they play (as part of the user incentive programs), and these can be exchanged for apparel, luxury goods and even vehicles (this is marketing costs from "Ticketz" which is expected and in S&M.

They see more opportunity in driving acquisition through offline and omnichannel marketing:

According to Skillz, their core strengths are: