By Emiliano Sanchez, iGaming consultant*
First of all, I need to make a warning: the following column reflects my opinion. I am no expert in finance, trading, sociology or social media, and I do not pretend to be one.
Recent events by the r/Wallstreetbets and $GME (GameStop stock) have been present on every single social media, from Facebook to Instagram, Twitter, TikTok, and so on. At this point, we all know the story: a group of people gathered in a corner of Reddit who decided to support a stock that was crashing down. Whether it was due to an emotional component based on happy memories for the store, or just to punish the hedge funds, that is up to the reader to decide, but one thing is certain: year 2021 has become the manifestation of the ‘democratization of capitalism’ through the Internet. Several youtubers, experts on these topics, have done extensive reporting on this event (such of the likes of Tom Nash and Louis Rossman, just to mention a few), without counting the amount of mainstream media discussing this issue (Fox News, MSNBC, CNN). Even late shows have chipped in on trying to explain what is exactly happening.
Right now, it seems such a romantic idea (the David vs. Goliath myth) and that’s why it has become so appealing to everyone. Retail investors (also known as ‘dumb money’, according to Wall Street) have accomplished the impossible: to force the all mighty hedge funds to bend their knees, showing the corruption and manipulation of the markets by institutional investors. The situation has proved the triumph of ‘dumb money’ because of apps such as Robinhood, in conjunction with online forums (especially, Reddit, in this case).
Of course, like any good drama, the plot thickens with a biblical twist when Robinhood has halted the purchase of these shares to their customers. The reasons remain unclear: lack of funding to cover the purchases; the waiting time for the clearing house to finalize the previous purchases; the fact that they seemed to be linked to one of the hedge funds who are taking a hit on this short squeeze, or even possible repercussions from regulators. Whatever the reason was, clearly, it only poured more gasoline into the social media fire.
A CHANGE OF PARADIGM
Key issue here is that the hedge funds who are taking this massive risk are institutional investors, managing funds from all sources, including pension funds. Thus, the main question that arises is to whom the claim for regulation that has been that has been sustained and repeated for mainstream media should be addressed. From my experience in online gambling, regulation should be applied to the institutional investors who are gambling with funds as delicate as pension funds. This is criminal behavior, as it would be to gamble with third party funds. As unfortunate and unfair as it is, if any of them do lose, they will be bailed out.
I am not planning to discuss what happened, why it happened or what will happen (including the drop in price, the issues of its current value, the possible manipulation from each side, and the massive lawsuits against Robinhood). What we are seeing here is the manifestation of a new generation. They are now adults who have their own finance and relate themselves as a community. For a long time, before the Internet, most of the communities were built around brick-and-mortar facilities. Workplaces, clubs, casinos, neighborhoods were all spaces where they met and socialize. Nevertheless, the Internet came out and spread everywhere. Society responded to it in search for business, news, entertainment, and interaction. Current pandemic has just accentuated the proliferation of new technologies into our daily lives. Beyond what we are expecting with AI, IoT, or even something as close as 5G, we are experiencing a change of paradigm as Thomas Kuhn described it (well, he was using it in the scientific field, but, in this case, we can take a historical license).
UNDERSTANDING NEW GENERATIONS
For years, we have witnessed how, slowly but surely, the Internet is taking by parts of our lives, clearly driven by market penetration, more access to data, and mobile devices. As a generation (millennials, I suppose), we gave our privacy away in social media in exchange of connecting and showing our lives to our friends and strangers alike. We stopped following mainstream media and start looking for content on the web as source of information. Online gaming became the pinnacle for us. Delivery services were just two clicks away. All the movies and music were at our fingertips. Forums to meet equally minded people where the meme culture rules. Dating was as easy as a swipe in our screens. The COVID-19 crisis has just accelerated all of this, by showing us that even jobs (working out of office was impossible, bosses always said) and education could be carried out from our homes. Now, new stars are created every day. They have labeled them as ‘influencers.’ This picture seems so dystopian that can even converge into a reality such as it is described in the book ‘Brave New World.’
This perfect storm that mixes COVID with the generation change made evident that traditional business is evolving in unsuspected ways and into unforeseen territories. Without a doubt, I can say that even though there are lots of millennials who really take into account the monetary issues of their day to day, there is a large portion that does not relate to what most would call ‘a rational decision-making.’ Of course, it’s difficult for companies looking to monetize this players generation to understand things such as the meme culture, the satirical-black humor took at a level that is shocking to older and newer generations alike, and the crazy ideas these youngsters have, always taken from the Internet. All land-based models are quickly adapting to this new reality. Questions are still the same: how to take full advantage of virality in your business vs. the competition? How to increase key metrics for performance and retention? How to move these mobs of people to rally behind your brand? There’s a huge amount of power online communities have today, and also influencers. This is something that will be increasing over time.
LOOKING AT THE GREY SHADES
With this said, I have to admit I do not see land-based options, including casinos, dying anytime soon. They are trying to fit into this new era. There is a slow understanding in gaming executives that online vertical is no competition for land-based entertainment. In fact, iGaming should become an extension of the business for customers. Digital options are only products that can be appealing to new customers who are not interested in the standard and classical formula. What should companies do? One possibility is to play on the borders of new players’ dark sense of humor, reinforcing this strategy with on-the-spot gratification to nurture brand loyalty and retention. The last two terms are something this generation knows very well and should always be kept in mind.
One of my best College professors, Gerardo Contreras, always told us the following phrase: “There are many shades of grey between black and white.” I guess this situation, this reality, exactly reflects the subject of those grey shades. This not only applies to our daily lives, but also to business and even political matters. Through this chaos and confusion, we should always look at those grey shades as in the middle of them lays the meaning and motivation new generations will always seek out and unpack in different, new, and exciting ways.
*Emiliano Sanchez is a seasoned iGaming professional with vast experience in B2B and B2C operations. He is currently working as CCO at Mancala Gaming, and is a Business Development Consultant au Mobius Interactive Ltd.