Month: February 2023

“Without these companies being creator-led to begin with, they would not come close to the valuations that that they eventually got,” said esports industry insider Rod “Slasher” Breslau. “The downside, however, is that most of them are not business people.”

These challenges were on full display on Jan. 10, when the leading esports organization 100 Thieves laid off roughly 30 of its employees — or roughly 15 percentage of its workforce, mostly across its content and partnership departments. The wave came six months after dozens of staffers were laid off in July. Representatives from 100 Thieves did not return multiple requests for comment.

One of the good ones

Esports organizations have long been notorious for elevating professional gamers to more business-focused senior executive roles — and for suffering scandals as a result.

Richard “Banks” Bengston, the former chief operating officer of FaZe Clan, dragged the company into controversies involving cryptocurrency schemes and illegal gambling before stepping down in May 2022. At TSM, CEO Andy “Reginald” Dinh was fined by Riot Games last year over allegations that he verbally abused some of his employees. Some workers in the esports industry are beginning to lump 100 Thieves founder and former pro “Call of Duty” player Matthew “Nadeshot” Haag into that group, too.

Haag did not immediately return requests for comment.

100 Thieves was Haag’s brainchild, but his leadership style was flawed, according to former staffers, who told Digiday that Haag treated some coworkers rudely, prioritized his passion projects over 100 Thieves’ money-making partnership business and failed to professionally communicate the company’s business plans.

Haag founded 100 Thieves in 2017 and now serves as both the CEO and public face of the company, which is considered one of the most popular esports brands in the world. Backed by $120 million in venture funding, 100 Thieves counts Drake, Scooter Braun and Dan Gilbert among its ownership group, as well as Haag and his fellow creator–owners, the popular streamers Rachell “Valkyrae” Hofstetter and Jack “CouRageJD” Dunlop. The org has won numerous titles in games such as “Call of Duty” and “League of Legends” and was valued at $460 million during its latest funding round in December 2021.

100 Thieves built a reputation as one of the good ones — an esports organization genuinely well-positioned to function as a business in the long term. The company has a robust M&A strategy, and its streetwear-inspired merchandise has often sold out in a matter of days. In 2019, The Verge referred to 100 Thieves as “the Supreme of esports;” last year, Forbes ranked it as the second-most-valuable esports org in the world.

But it’s beginning to look like a completely different company. The latest layoffs left at least one department — content production — “almost completely gone,” according to a former 100 Thieves staffer, one of six who spoke to Digiday and requested anonymity over fears that speaking out could jeopardize future esports job opportunities. Of the 188 employees at 100 Thieves that are publicly listed, many are contracted, part-time or no longer work there.

Moreover, 100 Thieves’ positive public image belied a culture of confusion and executive mismanagement, according to four former employees of the company.

Haag used his time and resources to prioritize expanding his own passion projects, including an energy drink called Juvee and a game development studio, over the partnership business necessary to keep 100 Thieves chugging along, according to three former employees.

And this passion clouded his ability to hear, and act on, critical feedback, even from other C-level executives, former employees told Digiday.

“In general, there’s a bit of a culture of fear,” a second former staffer told Digiday. “Nobody wants to step out of line.”

Four of the former 100 Thieves staffers who spoke to Digiday for this report expressed misgivings about the long-term viability of Juvee, but said that 100 Thieves management ignored these concerns. While the long-term viability of Juvee is yet to be determined, the gaming energy drink space is already somewhat saturated with competitors such as G Fuel and Rogue Energy and any consumer packaged goods business comes with high overhead costs for shipping and manufacturing.

Haag’s lack of trained business experience also occasionally came out in the way he communicated company strategy to 100 Thieves staff. 100 Thieves bundles its creators’ social followings to create a team-wide total to share with investors and partners, which is a standard practice among large esports orgs. But during one all-hands meeting, Haag referred to this practice as “selling them some snake oil,” according to two former staffers.

Passion over profits

Haag’s mercurial approach to 100 Thieves directly impacted its partnership business, according to two former employees of the company. Many of the org’s brand partners expected Haag to feature heavily alongside 100 Thieves’ other creators in the org’s branded content and activations — but as 100 Thieves grew and its sponsorship obligations expanded, Haag’s participation in branded content declined noticeably.

In recent months, Haag and other prominent 100 Thieves members such as Dunlop have rarely participated in branded content, according to a fourth former staffer. “I think that’s why a lot of the viewership has been lost — because they have all this different talent that’s there,” said a third former staffer. “They’re like, ‘who are these people? This isn’t what we signed up for.’”

Over the past six months, viewership of 100 Thieves’ YouTube channel declined by 12.39 percent and engagement with partnered videos on 100 Thieves’ YouTube channel declined by 54.55 percent, according to the data platform GEEIQ.

Six of 100 Thieves’ brand partners did not renew their contracts with the org in 2022, according to GEEIQ: Rocket Mortgage, Omen by HP, Dollar Shave Club, Rockstar Energy, StockX and CashApp. Rockstar Energy owner PepsiCo declined to comment on its reasons for ending the partnership with 100 Thieves, and the other brands did not immediately return requests for comment.

At the moment, brand partnerships account for the overwhelming majority of most esports organizations’ revenue. Although 100 Thieves president and COO John Robinson told Digiday in January 2022 that the company’s revenue streams were split evenly between partnerships and apparel sales, two former employees informed Digiday that partnerships formed the bulk of the company’s revenues, as they do for other large esports orgs.

“They’ve run into literally the same issues as every other organization, except that they have made 100 times the splash as everybody else,” Breslau said. “So it appears they are more successful than everybody else, and I don’t think that, financially, that is backed up by the merch drops.”

Pivoting away from branded content

Yet 100 Thieves appears to be deprioritizing the partnership and branded content side of its business in 2023. The organization is moving away from its current, more robust partnership approach, which includes custom content and brand integrations, toward more of a traditional sports sponsorship model focused on naming rights and jersey logo slaps, according to two former staffers.

“They’re taking the gas pedal off the whole YouTube content thing because the numbers are just doing very poor recently, so I think they’re focusing way more on esports,” said a fourth former 100 Thieves staffer. “It’s feeling more like a traditional sports company.”

The company acknowledged its financial situation as recently as December 2021, when Robinson told Dexerto that reaching profitability was not 100 Thieves’ top priority. 100 Thieves’ rapid rise, followed by its successive rounds of layoffs, form a cautionary tale about the dark side of the esports industry’s predilection with creator–executives and what happens when the reins aren’t relinquished.

“90 percent of [esports] revenue is in brand sponsorships and activations — and we have so much trouble finding other ways of revenue,” Breslau said. “Considering these are our biggest problems, they are only compounded further by having half of the biggest organizations, by valuation, started by creators that do not have training or experience in these fields.”

The path to profitability was originally set for 2023, and was later pushed back to 2025 after The New York Times bought the sports publication. To achieve this profit goal, The Athletic’s chief commercial officer Sebastian Tomich is focused on more than just selling ads directly to prospective advertisers. Programmatic advertising, ticket sales, sports betting partnerships, and licensing intellectual property to streamers to produce documentaries and scripted series are all priorities for 2023, he said on the latest episode of the Digiday Podcast.

Here are highlights from the conversation, which have been lightly edited for clarity and length. 

The first meeting is always the easiest to get

I had the benefit of leading the charge for a company that’s getting into advertising for the first time. And so one of the benefits of that is that you’re always gonna get the first meeting. It’s the second and third meeting that become a lot more challenging to get, but I’ve got 1,000 clients to meet with just to show off what we’re doing. And I have to believe, I do believe and the team believes, that this is always going to be a meeting worth taking. 

We are not seeing any type of challenge in terms of getting meetings. Of course booking ad dollars in a contracting market is always going to be more challenging than a growing market. But it helps a lot to be new. And also, there’s a huge benefit to being able to build something from the ground up. We’re not spending any time trying to unwind any legacy system or antiquated way of working with advertisers. We get to start fresh.

The programmatic tap is on — for the moment 

It’s money, we can turn it on and off. And, personally, I have a bias towards great design and I tend to find that programmatic advertising can infringe on that. I’m always pretty cautious, particularly when you have a product where people are paying for it directly. So I’m never going to say programmatic is a central focus. Programmatic is a way to generate revenue [though] and again, you always have the opportunity to turn it off. It is on right now and it’s on as long as we need it. 

The thing I will say to the team is the more we sell directly, the less we sell programmatically. So please sell more. And from a quality perspective, generally what I’m finding right now is it is benign. Of course there are things that come through that I don’t love, but they tend to be pretty isolated. And we’ve been able to maintain this healthy balance with getting some programmatic advertising in but at the same time maintaining the premium experience that makes people feel good about paying us directly.

Natural extensions into the world of sports 

We are thinking of [ticketing, merchandise and betting] as ways that we can add value to sports fans’ lives. And they happen to also be ways we can make money too. But like betting or not, a sizable portion of our audience is betting on sports and so it makes sense for us to have some type of offering. In this case, we have great partners at BetMGM, we have betting content, we have exclusivity with them, we have been providing odds — we’re not doing affiliate marketing for them, so we’re not incentivizing people to bet — but for those who are interested, we have been a contact for them. The world of affiliate marketing is just something we’ve chosen not to pursue at the moment [but] I have learned now to never say never on anything.

In the case of ticketing, same thing, like what sports fan isn’t trying to go to a game. So again, it’s an opportunity for us to make money and also provide value back to the readers. We do not have a partner right now, but it’s something that we are very interested in pursuing.

Digiday’s survey found that more than two-thirds of agency pros (69%) said their clients spend at least a small portion of their marketing budget on TV — a number that has remained fairly steady since the start of last year.

This year, agencies said their clients are most likely to dedicate a small portion of their budgets to TV (including traditional TV and connected TV): 32% of survey respondents chose this option. This is a change from the third quarter of 2022, when the largest percentage of agency pros (28%) said their clients spent a moderate portion of their marketing budgets on TV. In the first quarter of last year, the largest percentage of survey respondents (32%) actually said their clients spent none of their budgets on TV, but, interestingly, those who said their clients spent a large portion on TV was a close second at 29%.

Notably, the percentage of agencies who said their clients put a large portion of their marketing budgets toward TV has steadily fallen since Q1 2022: from 29%, to 25% in Q3 2022 and to 21% this quarter.

But it is also important to note that 69% of agency clients spending at least a little on TV marketing is significant.

Agencies’ confidence in TV marketing is a bit shakier than their clients’ ad spend on the channel, Digiday’s survey found.

As of last year, the largest percentage of respondents to Digiday’s surveys said they were somewhat confident that TV drives marketing success for their clients (29% said this in Q1 2022 and 30% said this in Q3 2022). But this year, the largest percentage of agency pros are only slightly confident in the marketing success of TV (31% said this in Digiday’s most recent survey, compared with 19% a year ago and 16% six months ago).

Meanwhile, the percentage of agency pros who told Digiday they are confident or very confident in TV’s marketing success has fallen compared with last year: About a quarter of respondents said they were confident in TV in Q1 2022 (24%) and Q3 2022 (25%). This quarter, 19% said this. And the percentage of agency pros who said they were very confident in TV’s marketing success was up to 15% in Q3 2022, but this quarter only 9% of respondents said they’re very confident in TV. (Ten percent said they were very confident in TV in Q1 2022.)

This year, Digiday’s survey asked agency pros to break down their clients’ marketing spend on traditional TV advertising versus connected TV for the first time. And it turns out that they’re more likely to spend on CTV.

Eighty-seven percent of agency pros whose clients spend money on TV marketing said they spend at least a small portion of their budgets on traditional TV. That sounds like a lot. But not when you compare that percentage to the 97% of agency pros who said their clients who spend on TV spend at least a small amount on CTV.

When looking at agency clients’ spend on traditional TV, the largest portion by far spends a small portion of their marketing budget on traditional TV at 43% (compared with 19% who spend a moderate amount of their budget on traditional TV and 26% who spend a large amount).

The largest portion of those who spend on connected TV also spend a small portion of their marketing budget there (38%), but it’s by a much smaller margin: More than a quarter of agency pros whose clients spend on TV advertising (27%) spend a moderate portion of their budget on CTV, and nearly a third (32%) spend a large portion on CTV.

“More people are looking at brands that align with their values, reward them for loyalty and show up in the spaces where they are or aspire to be,” said Laurie Blair, vice president of global marketing at Hyatt, adding that the chain also worked with Hyatt (the athlete) to provide gift cards for each of his teammates’ families to help pay for hotel rooms during the Orange Bowl held in Miami in December.

Hyatt is just one example of a brand striking up a major partnership with a college athlete to promote a campaign tied to recent and upcoming sporting events. Clothing brand Lulu’s and sportswear brand Lacrosse Unlimited are also looking to highlight partnerships with college athletes. They are hoping to leverage these athletes to reach out to new consumers, particularly those in the Gen Z cohort.

As a result of the changes to the National Collegiate Athletic Association’s name, image and likeness policy in recent years, college athletes can now partner with brands to capitalize on their influence. This has drawn brands like Hyatt, Lulu’s and Lacrosse to college athletes to boost brand awareness and grow their presence on social media.

“College athletes are celebrities [to] Gen Z,” said David Morrissey, co-founder of Postgame, a full-service NIL influencer marketing agency for college athletes. “You don’t want to age out with your consumer, you want to be able to access a younger one.”

Partnering on Gen Z’s level

Despite the current economic climate, the companies said they do not plan on decreasing their influencer advertising budgets. (It’s unclear how much of the brands’ influencer marketing budgets are dedicated to college athletes as they did not disclose those figures.) This is likely due to the fact that these brands want to connect with Gen Z where they spend most of their time — on social media.

As for Hyatt’s recent NIL agreement with University of Tennessee wide receiver Jalin Hyatt, the brand utilized its Instagram, LinkedIn, Twitter and Facebook accounts to promote the partnership and generate engagement in a timely manner. The hotel chain also tapped Hyatt to spread the news of its agreement to be the exclusive hospitality sponsor of the Sundance Film Festival through 2025, which Hyatt (the athlete) shared through his Instagram account and Instagram Stories. “The collaboration just made sense,” said Blair.

Lacrosse Unlimited is also tapping into the NIL space to find ways to appeal to Gen Z via social media with its UNLTD Athletes Program. To do so, the brand recently signed new Lacrosse athletes: mid-fielder Belle Smith from Boston College, and attacker Connor DeSimone from Johns Hopkins University.

As part of the effort, Lacrosse Unlimited is developing each athlete’s social presence to help them showcase the Lacrosse Unlimited products they are currently using on their Instagram and TikTok accounts. In return, the brand promotes its talent through sponsored posts on its own accounts.

“It’s a really good opportunity for us to connect with our consumers on a level where a lot of the kids who play lacrosse really look up to the college athletes,” said Rob Rimmer, Lacrosse Unlimited’s creative director. “It gives us authenticity to that consumer to know that we’re connected with these athletes in that way.”

Tapping athletes’ authentic voices

Lacrosse Unlimited also highlights its talent behind the scenes as well as what they’re currently doing in their everyday lives via social channels. The effort comes as the brand is focusing more on Gen Z, who want to see authenticity and get a close look at who these athletes are outside of their sports via social media. “Our talent is right at that perfect age where everything they’re doing is revolving around their social media and their presence on these social channels,” said Rimmer.

When it comes to promoting Lacrosse Unlimited’s talent on social media, Rimmer said Instagram accounted for 80% of the brand’s ad budget and TikTok accounted for 20%. Instagram was given a higher priority over TikTok because it offers a broader range of images, carousels and videos than TikTok does, noted Rimmer.

For Lulu’s part, it’s expanding its NIL program this year to include female college athletes as a part of its marketing strategy to target Gen Z shoppers via social media. Doing so is meant to expand the brand’s reach to Gen Z shoppers, according to Lulu’s senior marketing coordinator Sydney Howell. (Lulu’s did not respond to requests for further details about the program.)

As Gen Z consumers continue to question brand trust, marketers and agency leaders believe partnerships with college athletes are a good way to help brands stand out.

“Our talent is right at that perfect age where everything they’re doing is revolving around their social media and their presence on these social channels,” said Rimmer.