Six months ago, we wrote a story explaining how it had become increasingly difficult—and costly—for mobile media companies built on the backs of social media platforms to deliver views to advertisers. And as a result, many had become less powerful and profitable than they were just a couple of years earlier. So, recent reports indicating Wave Sports + Entertainment raised $27 million from well-respected investors like TZP Group (who led the round) and Lyle Ayes’ Verance Capital may have come as a surprise. While the challenges we described then remain problematic for next-gen media businesses, the broader content and revenue opportunity continues to capture investor interest. In the case of WSE, the company’s scale has also enabled it to evolve from a largely programmatic advertising-driven business to one with a more diversified revenue model, altering its trajectory.
JWS’ Take: The problem most of these next-gen media companies (think: distribution across mobile, social and digital) have or will encounter is generating consistent growth given their inherent reliance on major social media platforms, which can alter their algorithms at any time. “There’s risk to being overly reliant on programmatic ad dollars and assuming those revenues will always go up because they have unlimited inventory to push through social media,” Ayes said.
To be clear, mobile media companies built on programmatic advertising models are not necessarily dying. But without real differentiation or innovation, they are unlikely to scale at the level and on the timeline previously imagined—which is why we suggested in September that some could soon be changing hands.
WSE is not immune to social media trends. But because of the size of its follower base, its mastery of programming formats and the hundreds of official rights partnerships it has, it is not at the whim of the individual platforms, either. “If you are producing differentiated content, backed by attractive rights, and can deliver distribution at a massive scale, you have the ability to create a self-standing brand that can support a direct sales effort, meaningful e-commerce opportunities and sports betting partnerships,” Ayes explained. CEO Brian Verne added that there could also be opportunities for “IRL events and activations.”
With more than 6 billion monthly views and over 110 million followers across 20-plus channels—including Haymakers, Buckets and FTBL—the company has position itself as a brand that advertisers want to be associated with regardless of where its content is distributed.
That audience size makes it an outlier. “There are very few of these competitive offerings at that scale, and almost none of similar size that remain independent,” Ayes said. Competitors with fewer followers and impressions struggle to attract their own advertisers, leaving them few options beyond the less predictable programmatic ad sales model.
WSE has reached an inflection point where its revenue base and recent capital raise enable it to embark on a broad-based original content strategy. Historically speaking, much of the content across its channels has been licensed through official partnerships with third party rights holders. But Ayes is confident that WSE will succeed in creating its own short-form programming and in powering a network of creators. As Verne said, “We live in a creator driven economy, and today now more than ever there’s an opportunity to provide the next generation of storytellers a home to own the commentary and tap into the cultural zeitgeist of the wide world of sport.”
Ayes foresees the audience WSE has built serving as a “differentiator” in its efforts to attract top-tier talent, as well as a “substantial moat” in terms of retaining that talent. “Would [a creator] rather be with WSE knowing they can plug into 100 million people or hope to get distribution on a digital media competitor site [with a fraction of the eyeballs]?” he asked.
If WSE finds success developing short-form content, expect the company to try its hand at longer form programming. Ayes didn’t underwrite WSE needing it to become an independent content studio churning out big budget hits. But he says WSE will “be right a lot more than they’ll be wrong simply because they can push content out way more effectively than a studio without that distribution.”
Verance Capital is betting broadly on the power of content (note: the firm is also an investor in John Skipper’s Meadowlark and Isaac Lee’s Exile Content) and on WSE’s ability to effectively reach a millennial and Gen-Z audience. “Global content spending is going to continue to accelerate, both in video and audio formats, as more and more of these distributors need compelling content to gain subscribers,” Ayes said.
WSE is not profitable today. But that is largely because the company has opted to invest in growth rather than manage to profit. Verne said the company has enjoyed “several long stints of profitability over the last 4.5 years.”
While WSE remains in growth mode, it is not hard to envision the company as an M&A candidate for a strategic acquirer that values its young user base and/or a sportsbook operator looking to supplement its media capabilities. “WSE has a scaled business, with meaningful revenue and meaningful distribution,” Ayes said. As we recently wrote, operators are increasingly turning to content and distribution as they look to escape CAC hell.
WSE’s $27 million was raised at an undisclosed valuation.