Is FaZe’s influence just a short-lived phase or a long-term trend?

FaZe Holdings [NASDAQ:FAZE], the sports and lifestyle social media platform, went public through a SPAC deal 11 days ago. The stock has seen massive swings, which is believed to be largely due to short sellers. Influencer marketing has grown in popularity in recent years, proving that it is not just a short-lived phase. But whether FaZe is positioned for long-term success as a public company remains to be seen.

FaZe debuted as a public company on the 20the July at $13.15. Subsequently, the company’s shares fell to $8.92 and rose as high as $15 per share, with equally wild swings in the number of shares changing hands on any given day. . The company closed the week (29e July) at $13.09.

FaZe Holdings traces its origins back to May 2010, when a trio of top eSports gamers got together and started posting videos of their gaming skills and tips on YouTube under the moniker FaZe Snipping.

As additional members joined and expanded to include more eSports gamers, pro gamers, content creators, and even a few celebrities, the channel was rebranded as FaZe Clan and morphed into into a formal organization in 2012. Today, the “clan” has 93 members. , including rapper Snoop Dogg, who is also a member of its board of directors. Eighty percent of the company’s audience is between 13 and 34 years old.

Acidification on SPAC

The company’s SPAC listing was originally scheduled for the first quarter of 2022, and when that didn’t happen there was speculation that it wouldn’t materialize, especially with investors souring on the SPAC agreements given the poor performance of the majority of companies that listed it. way in recent years. But the 20e In July, FaZe Clan members took to Twitter to announce that they were now listed on NASDAQ.

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Influencer marketing is more than just a passing phase, the market is expected to be valued at $2.85 billion by 2025, according to market analyst firm Market Research Future. And ahead of its listing, FaZe Clan was ranked by Forbes as the fourth most valuable esports company – a momentum its owners no doubt hope to continue.

“They’re one of the only video game organizations with a diverse enough revenue portfolio to not rely solely on esports and/or pay top dollar to bring in creators,” said Chris Mann, senior vice president of game marketing agency REV/XP, which is Chipotle’s current game agency.

“FaZe already has one of the most passionate and engaged communities and it will be essential to see how they continue to innovate to monetize this fandom,” he said, highlighting FaZe Subs, the company’s recent partnership. company with DoorDash to offer specialty sandwiches created by chef and television personality Eric Greenspan, as an example of the company’s innovation.

“Overall, given FaZe’s relevance in a hugely saturated market and its continued ability to position itself as a culture driver while partnering with brands, FaZe Holdings should continue to grow over the long term. term.”

Shareholder reward?

But not everyone is so certain of the company’s ability to maintain its long-term popularity.

“It’s hard to say whether shareholders will be rewarded for believing in companies like FaZe,” said Mark Chen, a former mutual fund analyst and founder of the educational investing website Investing Long Term.

“Social platforms are volatile and changing, so just because FaZe is strong on Twitch doesn’t mean they’ll continue to grow if TikTok takes over. Another big issue is that the value with FaZe Holdings comes from influencers who are part of the clan. Key members could be embroiled in scandals that hurt the business and drive other people out,” he said, noting that gaming and esports companies end up losing in popularity and die out.

“If your eSports organization is unable to move on to the next game, the business will run out of money and shut down. To maintain popularity, eSports teams need to win tournaments.

What are the risks of eSport companies?

Beyond the risk of poor or outrageous behavior among core FaZe members, industry experts point to the fact that esports organizations tend to be exceptions when it comes to traditional shareholder management and business operations. And then there’s the fact that the popularity of influencer marketing has led to countless new players entering the field.

“Esports businesses are easy to replicate and seamless, so they exist in a state of continuous competition for attention,” said Dennis Shirshikov, professor of economics and finance at the City University of New York and strategist. to the technology and real estate brokerage company. Canopy.com. “The ease with which you can start an eSports business makes the industry a little dicey. Businesses will emerge frequently and look promising, only to be completely irrelevant a few years later. eSports himself, Shirshikov believes there is long-term potential for eSports businesses, but he notes that just as traditional sports take time to gain deep and long-term followers, so will even for eSports.

Originally valued at $1 billion in October 2021, FaZe Holdings’ SPAC deal eventually closed at a value closer to $725 million. On its first day of trading, when just over a million shares changed hands, the stock closed at $9.88, 25% below its opening price. The stock’s $15 peak on the 25the July is thought to be due to retail investors looking to put some pressure on investors shorting the stock, with more than 11.5 million shares changing hands that day. Since then, the stock has moved within the $12 range, closing its last trading day on the 29th.e July at $13.09.

Whether the popularity of FaZe Clan members can sustain the company in the long run is something investors should consider when deciding whether to take a long-term bet on its stock. Harry Turner, a former hedge fund manager and founder of The Sovereign Investor, is optimistic about the company’s prospects. “The creator economy is here to stay, and eSports companies like FaZe are at the forefront of that…it’s not just a phase – this generation is truly passionate about creating and creating. content sharing,” Turner said, noting that a recent study found that 45% of Gen Zers prefer making money as influencers to traditional jobs.

“There is growing interest in esports among corporate sponsors. This provides eSports businesses with a steady stream of revenue, helping them grow and prosper over the long term. So overall, the future looks very bright for esports companies,” he said.

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