The last few days we have been unearthing the world of online communities, the value of data, and the video game industry.
Here is what we know:
- Online community-based sites are sticky – they stay and they pay.
- Digital Alchemy can unlock untold riches from its user data.
- Video Games industry is growing rapidly, spurred on by the growth of esports.
This is one of those rare times where you can hit the trifecta and get direct exposure to all three.
Introducing…
Enthusiast Gaming
Enthusiast Gaming (EGLX:TSX) is getting little attention from the mainstream media. In fact, few investors are involved in the company, let alone the entire sector.
And that’s why, it could be the perfect setup.
The company has already acquired numerous revenue-generating assets.
And Enthusiast Gaming is continuing to grow using a simple method that Buffett would be proud of.
When Enthusiast identifies a high-performing affiliate, they simply buy them and begin retaining 100 percent of the revenue.
That model has led to some absolutely incredible growth for the company.
- The Enthusiast Gaming (EGLX) network is now ranked by Comscore as the largest among its peers in North America and the U.K.
That beats out other leading gaming websites such as Amazon-owned Twitch and IGN. It’s mindboggling how much traffic the EGLX network gets:
- It’s the largest gaming information network in the U.S.
- It generates nearly 1 billion total views a month across its entire network.
- It reaches more combined unique visitors across all platforms than any other gaming entity in each market… almost 44% greater than the next entity (in the U.S.) and 102% greater than in the U.K.
Billion-Dollar Data Acquisition: In Ad Tech Exits, Data Is King
Most of EGLX’s properties make money off of serving ads to its huge audience.
But there’s a problem facing ad networks: Google, along with the other two members of the ad trinity—Facebook and Amazon—have a stranglehold over the advertising space.
Those three companies make up around two-thirds of U.S. digital ad spending. So it’s been hard for smaller ad companies to survive.
That’s prompted aggressive advertising consolidation in the past few years.
Many of the smaller players in the space have tried to join their networks together to lower costs and compete.
Luckily, Enthusiast does not have that problem… because Enthusiast is not actually an ad network.
You see, an ad network is just a network that takes ad space from content publishers and sells it to advertisers, retaining a small cut for the effort.
Ad networks are simple arbitrage. They make money on the spread between the ad space suppliers and the businesses who want to advertise.
That’s not the case for Enthusiast…
- EGLX actually owns their traffic and data, so they have underlying assets. Instead of making money off the spread, they monetize directly off their own websites.
More importantly, Enthusiast has an asset that could help turn their company into a behemoth.
You see, merger & acquisition activity in the advertising sector recently has been driven by data… and Enthusiast’s networks have a lot of data.
And because they’ve carved out a specific (if huge) niche, they can provide extremely targeted advertising.
After all, they already know what kind of consumers visit their websites: video gamers.
But they aren’t monetizing to their full potential yet.
To see why, you need to understand the next four-letter abbreviation very well…
Below is a chart of the ARPU (Average Revenue Per User) generated by other prominent digital advertisers, compared to Enthusiast Gaming.
Note that this chart only shows the advertising ARPU.
Amazon, for instance, would have an ARPU of over $700 if you included its retail sales revenue.
EGLX’s ARPU doesn’t even show up on this chart, despite their traffic.
- This means that if EGLX can unlock even a fraction of their peers’ ARPU, their revenue could skyrocket.
Katusa Research has created a special report on the sector and a detailed breakdown of the opportunity.
Click here to download the Katusa Research special report – The World of Digital Alchemy: Profiting from the Explosion of Digital Traffic.
Because you’re a member of Katusa’s Investment Insights, this detailed report is free exclusively for you. To access your free report and our full analysis on the video game sector, click here.
Regards,
The Katusa Research Team
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