Good afternoon, everyone, and thank you for participating in today's conference call to discuss Super League Gaming's Financial Results for the Third Quarter Ended September 30th, 2020. Joining us today are Super League's President and CEO, Ann Hand; and CFO, Clayton Haynes. Following their remarks, we'll open up the call for your questions.
Before we go further, please take note of the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. This statement provides important cautions regarding forward-looking statements. The company's remarks during today's conference call will include forward-looking statements.
These statements, along with other information presented that does not reflect historical facts, are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements.
Please refer to the company's recent earnings release and to the company's reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.
I would like to remind everyone that this call will be available for replay through November 18th, 2020, starting 8:00 P.M. Eastern Standard Time tonight. A webcast replay will also be available via the link provided in today's press release as well as the company's website at www.superleague.com.
Now, I would like to turn the call over to the President and CEO of Super League Gaming, Ann Hand.
Ann?.
gaming continues to solidify its position as a dominant form of entertainment, bigger than TV, much larger than the global film box office, and with fan bases and communities larger than most other professional sports leagues, and that was already set in motion prior to COVID. So, now let's turn to our third quarter.
We told you when we reported our 2Q results that we had seen a surge of engagement on our platform, further powered by sheltering in place. Gaming is an exceptional way to stay connected to friends and family even when you are not in the same home or town.
Hence, in 3Q, it should be of no surprise that we continue to see strong growth in the leading key performance indicators or KPIs. The first KPI is registered players and by the end of September, we reached close to 2.5 million users on our platform, almost three times our year end 2019 user base, and the year isn't done yet.
Additionally, we have pushed nearly 50 million hours of gameplay through our platform in the first nine months of the year versus 15 million hours for the full year of 2019. And the most critical KPI is audience. That's the top of the funnel. It was our rally cry last year to grow audience from virtually zero at the start of 2019.
Last year, we materially exceeded our target and hit 120 million views by the end of 2019. In the first nine months of 2020, we have once again blown past our target, hitting 1.4 billion views through September, 15 times the prior year level. And even more importantly, we are making progress on monetizing this engagement.
COVID took its toll on all of us. No, one was exempt and advertising froze for a bit. We repositioned quickly, and we are pleased to show strong revenue growth in our third quarter, especially considering the ongoing caution of advertisers immense the pandemic. That itself is worth a pause.
While so many companies have taken an obvious hit to revenues in 3Q, ours more than doubled quarter-over-quarter as well as over a year, aided by a lot of positive indicators in our sales pipeline, which I will cover, and including a signature deal with Netflix.
So, given sponsorship and advertising is our largest revenue stream today, let's dig into this. We have been laying the foundation this year, augmenting our sales team, improving our sales efficiency, building our audience, and increasing the amount of premium high-CPM advertising inventory on our platform.
Aside from the obvious improvement in recognized revenue, we see some other positive trends. First, the overall size of our active opportunity pipeline, as of today, has grown to $5.4 million. That is double the size from last year -- from last quarter, with an average deal size of approximately $70,000.
That doesn't mean we will win all of these deals, but it is a good sign to see our opportunity set growing, and this is a dynamic number.
This translates to roughly 80 identified opportunities, but even more exciting, we see a nice trend on repeat advertisers that now represent 37% of the value of our active pipeline, so over $2 million of that $5.4 million.
In addition, the size of repeat customer opportunities has grown from $37,000 for an average deal in 2Q to $71,000 for an average opportunity or deal in 3Q. This reinforces that advertisers find our audience immensely valuable and are coming back to give us more advertising dollars.
And I am pleased to say that we have stepped more into premium programmatic advertising inventory since our last call. We have made investment in video ad units and the initial pilot is showing CPMs in the $10 to $15 range.
And we have plans to grow that capacity, so we can further monetize more and more of our valuable impressions without adding additional cost of sales. Finally, on the advertising front, we are just scratching the surface in how we further monetize derivative content from our platform for more advertising and content licensing dollars.
Today, we have created 123 original episodes for Snapchat alone. And that is a social channel, where, right now, we have currently about 1.5 million followers, including the number one ranked show related to the Game of Minecraft.
And this is a nice new revenue source for us, an advertising stream, which generates a recurring revenue through our advertising revenue sharing arrangement with Snap. The key here is that we are seeing exciting progress in our direct sales efficiency and move toward premium programmatic.
So, we have significant upside, as we continue to grow our network capacity and mature our ad products and sales force capability. And I would be remised to not add that we continue to explore use cases for our patented fully remote live stream broadcast technology beyond the application of gaming.
This as well might generate new sources of revenue for the firm going forward. Now to our second revenue stream, while nascent, we see good promise in our ability to monetize the gaming consumer on our platform as well.
In the early days, as we were building our community, very similar to other social platforms, we focused on low friction user acquisition, which really meant free-to-play and watch entertainment. That was allowing us to gain critical mass with our player and audience base.
Starting in late 2Q this year, we began testing a micro transaction marketplace, and I reported on our last call some promising early signs. While a very small percentage of our players are spending, the average basket size of paying customers was around $10 per month.
And on a monthly active user basis, we were seeing a revenue per user in the $0.04 per month range. Over the last few months, we have grown the average basket to $11.33 per month for the paying user, and we've seen a 30% jump on a mal basis to about $0.055 revenue per user.
Later this month, we will be expanding our alpha marketplace with new products that we expect will speak to a wider segment of our player base and see more conversion in the funnel.
It's still relatively small, but we see real potential to monetize our strong base of over 2 million players and make this a more meaningful part of our revenue story in 2021 and beyond.
And even as we continue to expand our advertising inventory, improve our sales efficiency and grow our direct-to-consumer monetization, we are still controlling our operating costs, allowing us to see revenues grow faster than expenses.
We have managed to not only redirect more of our expenditure to be revenue facing, but also absorb the additional operational effort that comes with more audience, more users and more advertisers, while holding our cost relatively flat versus prior year.
At this point, I will turn the call over to our CFO, Clayton Haynes, who will provide an overview of the third quarter financial results, after which I will come back on with some closing remarks.
Clayton?.
Thank you, Ann, and good afternoon to everyone, and thank you for joining us for today's third quarter 2020 earnings conference call. In summary, our Q3 2020 highlights included a 105% increase in total revenues, reflecting a significant increase in advertising and content sales revenues relative to the comparable prior year quarter.
Our cost of revenue increased 70% from the prior year quarter, which was less than the 105% increase in total revenues, resulting in average margins of 54% in the third quarter of 2020 compared to 45% in the prior year quarter, as we continued leaning into our largely digital and online offers.
Excluding non-cash stock compensation charges, our operating costs for the third quarter of 2020 rose a modest 10% compared to the prior year quarter, reflecting an increase in cost related to the build-out of our direct sales force, as we continued to invest in the monetization of our ad inventory and an increase in platform infrastructure cost, driven by the surge in engagement during 2020.
During the third quarter of 2020, we continued to be focused on increasing monetization and cost reductions where possible.
Diving into the details, from a revenue perspective, as summarized in our earnings release earlier today, third quarter 2020 revenue increased 105% to $718,000, the highest revenue quarter in the company's history, compared to $350,000 for the third quarter of 2019.
The increase was primarily due to a significant increase in advertising and content sales revenue relative to the prior year quarter, reflecting the positive impact of the build-out of our direct sales force earlier this year and our continued focus on accelerating the monetization of our growing advertising inventory and surge in engagement.
Turning to third quarter of 2020, consistent with what we have done historically, we demonstrated the ability to win significant advertising deals with top-tier media companies, and we look forward to our sales force securing these types of deals in future periods, though timing will vary.
As with all advertising based business models, COVID-19 has had an impact in the timing and distribution of advertising revenue, but we feel we are recovering well.
We have made substantial progress in building our views and impressions over the three -- over the first three quarters of 2020 and expect our advertising inventory to continue to grow, so that as advertisers and brands continue to rebound, we are ready to take advantage of the monetization opportunities.
We continue to categorize our revenues into two main segments, those being sponsorship and advertising revenues and direct-to-consumer revenues.
Sponsorship and advertising revenues, which includes brand sponsorships, brand sponsorships of our owned and operated properties, along with our more customized brand partner programs, and also includes traditional advertising and third-party content sales revenues increased by 98% to $677,000 compared to $342,000 in the third quarter of 2019, and comprised approximately 94% of revenues for the third quarter of 2020 as compared to 98% of revenues in the third quarter of 2019.
Direct-to-consumer revenues, which were primarily comprised of the sale of digital goods related to our Minehut digital property, accounted for approximately 6% of revenues for the third quarter of 2020, up from 2% in the third quarter of 2019, reflecting, in part, the surge and engagement across all of our digital properties since the first quarter of 2020.
We continue to emphasize free-to-play offers, consistent with our focus on increasing the volume of new gamers and spectators engaging with our proprietary technology platform and esports brand.
We continue to focus on ramping up overall direct-to-consumer monetization, including sales of digital goods through our micro transaction marketplace, as Ann mentioned.
Third quarter 2020 cost of revenue increased 70% to $327,000 compared to $192,000 in the comparable prior year quarter, a 33% lower percentage increase than we saw in revenue for the same period.
The significantly lower increase in cost of revenue on a relative basis was driven by lower costs associated with the increase in advertising and content sales revenue and our largely digital and online revenue-generating activities in the third quarter of 2020.
Cost of revenues fluctuate period to period based on the specific programs and revenue streams contributing to revenues each period, and the related cost profile of our advertising and content sales activities and digital, online and/or physical, in-person offers occurring each period.
Third quarter 2020 GAAP operating expenses were $4.7 million, slightly higher than the comparable prior year quarter. Non-cash stock compensation expenses decreased $267,000 to $470,000 as compared to $737,000 in the third quarter of 2019.
This decrease was offset by an increase in sales and marketing personnel costs related to the build-out and investment in our direct sales force earlier this year, an increase in technology platform infrastructure costs, primarily related to cloud services, consistent with the surge in engagement we've experienced during 2020, and lastly, the impact of higher insurance-related costs relative to the prior year.
On a GAAP basis, which includes the impact of non-cash charges, net loss for the third quarter of 2020 was $4.3 million or $0.36 per share compared to a net loss of $4.4 million or $0.52 per share in the comparable prior year quarter.
Excluding non-cash stock compensation charges, our pro forma net loss for the third quarter of 2020 was $3.8 million or $0.32 per share compared to $3.7 million or $0.43 per share in the comparable prior year quarter.
The weighted average number of shares outstanding for both GAAP and non-GAAP earnings per share was approximately 12 million shares in the third quarter of 2020 compared to approximately 8.5 million shares in the prior year quarter.
As described in our release today, pro forma net income or loss is a non-GAAP measure that we believe investors can use to compare and evaluate our financial results, along with other applicable KPIs and metrics discussed by Ann earlier.
Please note that our earnings release contains a more detailed description of our calculation of pro forma net loss as well as a reconciliation of pro forma net loss with the most directly comparable financial measures prepared in accordance with GAAP.
From a balance sheet perspective, as of September 30, 2020, we had $10.3 million in cash, approximately $11.8 million in working capital and total shareholders' equity of $15.2 million.
This includes approximately $8.4 million in net proceeds from the sale of 4.98 million shares of common stock pursuant to an underwritten public offering during the third quarter, as previously reported. As of September 30, 2020, we had 15.48 million shares outstanding.
Our current monthly net cash burn rate continues to be in the $1.2 million to $1.3 million range. We continue to be focused on reductions of our cost structure and are continuing to work with our functional leaders within the organization to identify additional cost-saving areas.
As previously reported, we vacated approximately 75% of our office space in Santa Monica, resulting in significant rent and facilities cost savings going forward, and we continue to work with existing and new platform and infrastructure service providers to reduce those costs going forward as well.
In summary, in Q3 2020, we saw the highest revenue quarter in the company's history, driven by the significant increase in our advertising and content sales revenues relative to the prior year quarter and favorable average margins, reflecting our largely online and digital activities in the quarter, all while identifying areas for cost reduction in future periods.
This was balanced with our focus on the acceleration of monetization of our rapidly growing advertising inventory, and investment in our growth initiatives in response to the overall surge in engagement during the period. With that, I will turn the call back over to Ann for some additional remarks.
Ann?.
Thanks, Clayton. I want to express, how pleased I am with the progress we're making. Seizing this opportunity in front of us, this gaining of critical mass, to begin to monetize our growing audience, the company is right now at a high level of productivity and commitment to grow shareholder value.
And I can see it in the energy in every meeting, especially in our weekly sales pipeline and revenue review session, where the hunger to win more and bigger deals is high. And we are only just beginning to show off, how our end-to-end technology, enabling mass participation, competitive gaming and viewing entertainment can be leveraged.
I continue to believe that one of our most unique distinctions is that while we are small in size, and early in our revenue story, we punch above our weight with partners, advertisers and the gamers themselves.
So what should you expect of us in the coming months, as we try to further develop the network effect that is growing between our community of players, viewers, partners and content.
We'll continue to grow our audience and engagement, increase our monetizable advertising inventory and sales force effectiveness, increase our consumer revenue per user, bringing more players and into our monetization funnel, we'll continue to grow our addressable market with more game titles and expanded offers, and we'll continue to progress material strategic partner conversations that provide us commercial scale, but also a potential source of growth capital.
Our goal is clear, continuing to build our large, diverse and young community of gamers through engaging content and entertainment that will enable us to capture a growing share of the advertiser's wallet and our consumers' wallet. And I want to close by being crystal clear with our investors and analysts that, we are playing for high-stakes here.
I consider my day job to deliver transformative moves that can create real leverage and scale for the company. So with that, you have our full commitment. And we are now happy to take any questions that you might have. Thank you..
[Operator Instructions] Our first question comes from the line of Brian Kinstlinger of Alliance Global. Your line is open..
Hi. Good evening, guys. Thanks for taking my question. Can you talk about the two large ad campaigns or the two separate large brands. I think, one, you announced Netflix now. And the second, I think you intimated at least as much, I believe it was the LD conference that you had a second.
So did both of these campaigns go off? And how do they perform in the customers' eyes? And have you received follow-on campaign from these customers as well?.
Yes, absolutely. So I thought it was important in the call that we emphasize how well we're doing on the repeat side of the pipeline. Certainly, we do provide full performance reports to all of our advertisers, and we are seeing that we're outperforming on all metrics. And that's, hence, why we're starting to see that repeat business.
And more importantly, it's not just the repeat business, it's the fact that the size of the deals are nearly double. So these advertisers are willing to put more dollars to work because of our outperformance.
We are seeing pretty consistently new business starting to flow through with media-related companies, like a Netflix or Disney+, people who are every week releasing new content on their streaming platforms and they are looking for ways to reach those desired audiences and drive them to those platforms.
So we do continue to see repeat business with them. We also just ran a very successful campaign with a toy company, Monster Toys, where, as well, we overdelivered on performance.
The agency and the company were very thrilled, and so we're now getting excited talking to them about additional toy releases that are appropriate for our different younger audiences. So we're seeing it as a pretty consistent that we are outperforming, and that's leading to repeat..
Great. And then can you give us some great details for the first time, I think, on the pipeline 80 deals.
Can you talk about how many are larger than, say, $200,000 like, your first two large pilots? And then when you talk about the pipeline, is that a addressable campaigns that are going to happen in the next few weeks, in the next few months, in next few quarters? Can you just help characterize the duration?.
Yes. No, it's a good question. I mean, look -- we have been doing a good job of starting to see as we've been able to kind of reposition and get out in front of advertisers as we've seen advertisers start to loosen up a bit and start putting money to work again, kind of, in the wake of everyone kind of freezing a bit with COVID.
We are seeing our sales cycles start to be faster, but we're already selling against spring break, kind of, New Year's campaigns. So I would say, it's not several years but it's not just several weeks either. It's more in the kind of 6-month range is how we are selling. Now that doesn't mean the sales cycle is that long.
We certainly are starting to see deals flow through and close in a 20-day to 30-day sales cycle. That's kind of at the top-tier of performance. And then your question about deal size. As I mentioned right now, the average deal size is a little over $70,000 in the pipeline, but that's up from about $37,000 just in the prior quarter.
So we like that trend. Certainly, we are -- because we have more reach, we can start going in with bigger numbers on our proposals. So we are seeing that we're putting in more pitches in that kind of six-figure range. That doesn't mean that the advertiser will select all the options we put in front of them.
But the power in having all that reach is now we can be a chunkier part of their spend. And a lot of times in the advertising world, when you have small reach, even if they love what you do, it's just -- they just kind of can't manage 10 different vendors or advertisers that they are trying to route through. It's just a lot more work for them.
So it's always a good sign that if we can take down more and more of a higher percent of a campaign's dollars that we will tend to be a go-to place for them to put more money to work in the future..
Great. Last question, just two parts or separate.
First, can you tell us you talked about your investment in the direct sales force? How many people do you have today versus the beginning of the year? And then it's early in your business model, but do you see the fourth quarter generally being a seasonally strong one given the holiday season and the need to push advertising to kids and things like that?.
I mean we're certainly working hard to convert deals faster, deals of bigger size. I mean we don't give guidance on 4Q. But as I alluded to in the call, the energy is high on our weekly pipeline reviews. And there's a lot of excitement as we are seeing more and more new deals coming in with shorter fuses on them as far as conversion.
So we continue to be very bullish on the progress that we're seeing that we started to make in 3Q and how that will go forward. As far as the sales team goes, we started the year with about 3 people in the sales team, and we've grown that to about 7. A couple of those FTEs are partial -- FTEs because they have kind of broader roles.
But with that, we do have kind of a much higher percent of people in the firm who are now revenue-facing.
And then I think the other important thing is, we've always been so proud of our very high quality, high-CPM model, right? And so we've always resisted kind of cheap programmatic because we don't want to bring down the value of this high-end inventory that we're creating.
But equally, we know that every time we add a premium ad unit, we don't want to always be adding a body against it. And so what we've started to do is work with a few different companies that have effectively marketplaces for video ad units of high-quality programmatic.
And so when I referenced starting to put some of that inventory to work in these programmatic marketplaces where we can still get a $10 to $15 CPM, we think that is a really nice complement to our direct sales team..
Great. Thanks so much..
Thank you. Our next question comes from the line of Allen Klee of National Securities. Your line is open..
Yes. Hi. Last quarter, on the call, you gave a stat of how many monthly users -- the run rate or monthly -- and the number was, I think, around 275 million.
I was wondering where that run rate is now?.
Okay. So that was monthly active users. It was about 275,000 monthly active users. And we're seeing that number now kind of in the 400,000 to 500,000 range. So it continues to grow as the user base grows..
Okay.
And the CPMs that you've been getting on average for this past quarter, did you say 10% to 15%? Or did you say specifically...?.
10% to 15% is -- was the programmatic ad units that we're testing. I mean, we tend to see more in the 15% to 25% range, for the direct sales campaigns. And we've seen, in some cases, CPMs go as high as $40 to $50..
Okay. If I just ….
15% to 25% direct sales is a good range..
…so it looks like if I did my math, that you sold out, maybe some number around 5% of your inventory in the current quarter.
So the real question here, which is, I think, so important for the revenue opportunity ramp-up, is how you can get that number higher? And how we can think about the ramp of -- and I know you just mentioned, the video programmatic.
But like is there a sense of how we can think about, how you can start selling out a much more, higher percentage of your inventory?.
Absolutely. So one thing to remember is, not every viewer impression has an ad unit against it, right? So we talked about that a little bit on the last call. How you -- we are continuing to add more ad inventory, but we don't want to put an ad unit against every viewer impression. It would be a bad experience, for the players.
But you're absolutely right, that right now, we're only really selling out about 25%, I would say, to 30% of our ad units. And a high-performing sales team would be selling out kind of 85% to 90%. Now -- so all these numbers are going to continue to be dynamic, right? Because since our last call we've added more ad inventory.
So we want -- in an ideal state, we want to serve that high-quality CPM, we want to be selling out 80%, 85%, 90% of our available ad inventory, we want our ad inventory to continue to grow so that, that overall potential dollar value grows as well. And then we want repeat customers, shorter sales cycles, and bigger deal size..
Okay.
And for your advertising revenue, is it -- for that segment, is any -- was any of the, amount that you said there also related to sponsorship?.
Yes, advertising and sponsorship is all lumped together there. And that's really because, if you recall, when we -- in the early days, we would run our own programs. And then we would try to bring a sponsor in to kind of put their name across the top of it.
But now more and more of our sponsorship opportunities have blended into advertising opportunities. So there's not really a big distinction there..
Okay. My last question is, in direct consumer, you mentioned, you're going to be rolling out some new type of things.
Could you comment on that a little more?.
Yes. So right now, when we introduced this notion of a micro transaction marketplace, specifically first in our owned and operated property called minehut.com, we just threw in a couple of items, that we thought would speak to power users of that website.
And so the good news is, we did prove that, we could attract and sell, again, a growing basket size now an average of $11.33 a month, speaking to that kind of real narrow segment of that max user of the platform.
So when I talk about what the advancements we're going to make for marketplace at the end of the month, we're calling it Marketplace 2.0 is, we're going to put in a lot more digital goods, that speak to a wider range of different segments, some our more casual players or maybe players who are coming more for the social aspects than the gameplay aspects of the platform.
And so we're excited to see, if we can now put in front of a wider birth of players, things that can convert more people into wanting to put in their credit card and start paying..
Maybe one other thing I....
There can be things that are very -- have a real kind of product or experience benefit like, something that maybe expands your server side. So you can invite more friends into your private realm to play. It could be a way for you to back up your gameplay, so that you can save your different private worlds or realms.
Or it could just be some of the things that are going to be in the next marketplace are just much more kind of social and entertainment related, different skins for your Avatar and things like that..
If I could ask one last question, sorry.
On the subscription side, when could we potentially be thinking about, that as a revenue opportunity?.
Yes. So part of Marketplace 2.0, we're looking at how we can create UX functionality, so that there is an option for people, especially with things like expanded server plans, and the ability to invite more friends, or with backup servers for it to be a recurring charge.
And so that will be us kind of dipping our toe into a recurring revenue stream through that kind of monthly renewal of those features and benefits. And then, we still have aspirations, over time, to think about subscription that would be more related to premium content.
So, not just your gameplay, but access to entertainment content, access maybe to an expansion of gamer tools for you to spin up your own tournaments. But that's still in our product roadmap..
Okay. Thank you very much..
Yes..
Thank you. [Operator Instructions] Our next question comes from the line of Carter Mansbach of Forte. Your line is open..
Hey, guys. Good afternoon..
Hey..
Hey. So I have two questions. One is there was a report today that ESPN was getting out of e-gaming, and I'm wondering what the effect that could have in a positive way on the company? And the second part is cash on hand. So I know there are people that have been concerned that the company is going to run out of cash in the next year or so.
And maybe you guys would need to do a money raise.
Can you address that, please?.
Yes. So, what you see ESPN doing is very similar to where you saw a couple of years ago, Turner tried to kind of make a bet and invest in content for e-sports at the professional level. And so that only speaks to about 10,000 to 15,000 professionals around the world. And that's a very specific type of content.
It's high cost, because you're bringing people into Madison Square Garden or Staples Center. It's big production, no different than like an NFL game. And certainly, in the wake of a pandemic, all types of big, live event entertainment, is on hold. We're operating at a very different part of the e-sports pyramid.
We're about the mid-tier players and creators of content. So, when I talk about the tens of millions of gameplay hours running through our platform, that's gameplay that we have exclusive access to. By facilitating those tournaments, we can repackage and distribute that content in a lot of different ways to monetize it.
And so, one of the ways I explained is, we have a set of social channels, some of the largest social channels on Instagram and Tiktok in the gaming category. This is where everyday gamers upload their own user-generated highlight reel. So it doesn't cost us anything. They upload it to us for free. We take that piece of content. We now own it.
And we can both post it on those social channels to drive up our following and audience there for ad revenues. But then we can also repackage it and distribute it elsewhere. So when I mentioned that we've sold the 123 episodes to Snapchat, that's us repackaging that content and using it for other ways.
In fact, we have a leading position, really a dominant position when it comes to amateur e-sports highlights. And that's very different than watching a professional tournament. Anybody can consume that content. It's short-form. It speaks to where millennials and Gen Z spends their time. They don't just need to see super-elite content.
They are cord-cutters, right? And they consume short-form, and they like that it's highly quick and digestible and entertaining. So that's really our sweet spot on content, a very different place than what some of the big media companies were trying to do and trying to kind of own the professional level of e-sports content.
As far as cash on hand goes, I mean, we talked about this the other day, Carter, when we were having a chat. I believe the company has proven that it can attract strategic investment. And that strategic investment wouldn't just be growth capital.
It would come with commercial hooks opportunities for us to really transform the company on the back of someone else's leverage, someone else's global distribution and scale. We've done a really good job, I think, organically growing the company.
But my closing comments, we are -- I wanted to be extremely candid about the fact that, it's time now for us to take this critical mass that we built is now interesting to some pretty big, powerful companies out there that what we produce, both in the community, the audience we have, it's interesting to them, the content that we have is interesting and a use of them.
And that's where my focus really is, is focusing on big commercial partnerships that would bring that growth capital and that ability to really scale the company now in a bigger and organic way. It's time to take that kind of bolder next step for Super League and kind of pull us out of kind of micro cap. And so that's where our focus is.
We think that's the most shareholder-friendly source of capital, and that's where our focus is..
That's perfect answer. All right. So, one follow-up. Over the last two calls, I've now heard you mention Netflix and Snapchat. And I would like to know, do you think, as time goes on, and considering that you're so small and no one really knows the company that well.
As the relationship grows with big companies like a Netflix or Snapchat, when you come out with press releases, can -- do you think they will, in time allow you to put their names in the release?.
I know. It would be wonderful if they did. I mean, right now, you guys had asked earlier about bigger deals that we have. We do now have five deals that are over kind of $200,000. We have many deals in the pipeline over $100,000. So again, we like the direction and a lot of them are with these repeat customers, these big media companies.
The reality is, is that we're still a drop in the bucket for their kind of annual spend when you look at it collectively from a content point of view. But that's when I talk about the bigger kind of strategic explorations I'm having with strategic partners.
It's really about more than just, "Let us be an advertising platform for you." I think about it all the time, you think about what's happening with telcos right now? Well, telcos are either formally buying up media companies or they're creating pretty strategic partnerships with them. Why? Because content is king.
And if they can get that content onto their devices, it creates more stickiness to their devices, to their consumer offerings. We're sitting on a massive amount of, not just gaming-related content, but gaming tools and gaming tournaments and things that really speak to where a lot of this younger audience of gamers want to spend their time.
And I think that there's a lot of ways that we could show our value to some big strategic partners in a really different way. And whether that be media companies or other companies who are chasing this audience, I think what we have is valuable..
Okay. Great. Thanks guys so much for taking my questions..
Thank you. Our next question comes from Bill Morrison of National Securities. Your line is open..
Hi, guys. Thanks for taking my questions. A couple. We didn't hear anything much about the VSP. Is that still progressing? And what the revenue outlook look like there? And then on sales efficiency, you mentioned last time you expected to get to like 50% efficiency.
So are you still expecting that? And do the sell-side platforms affect that? Or how do they affect that? Those are my questions. Thanks..
Yes. I mean, definitely, what we did talk about is, we didn't put out a bogey on the last call for where we would get to on the next quarter with sales efficiency. What we said is, look, we're probably at about 20%, 25% efficiency with this brand-new team, and we want that to grow and we believe that 80%, 85% is kind of best-in-class.
You're never going to sell-out all your ad inventory. And that's just kind of a standard rule of thumb or benchmark that is used out there. So we continue -- again, the metrics that we can track are bigger deals and faster closing and selling out more and more of our ad inventory, but that ad inventory does continue to grow too.
So that ball kind of keeps moving, so to speak. But certainly, I would say we've improved our sales efficiency without a doubt since last quarter as evidenced by the fact that we did two times plus in revenue..
Yes, no doubt. So how does -- how do the SSPs figure into that? Does that make that ratio lower? Or is that lower the target or...? Like, sell-side platforms….
Yes.
I mean -- I think the sell-side platforms are -- as we've been now doing some of this programmatic testing, we've been again, careful to say, okay, let's really -- we have an ad products manager who really is figuring out where are the most valuable places, the most valuable views and impressions where we can add inventory first, what are the right pieces of ad inventory to offer up to some of those sell-side platforms versus preserving them for our direct sales because they're of higher value.
And so I think we're doing a good job right now of building more video ad units.
In fact, you'll see us creating in the product road map over the next couple of months, a specific video portal, where we'll be able to take all this content we're generating and drive more viewership to it, and that will give us more video ad units that we can push through those programmatic services and get that kind of $10 to $15 range.
And again, still preserving the higher CPMs for our direct sales team's efforts. When you think about what we did for Netflix, when we were promoting them, it was much richer than just a video ad unit or a trailer. When kids come into minehut.com, they first are teleported into a virtual social lobby, where they run around and chat.
They're not game playing yet. Well, we created kind of Easter egg hunt for them. We themed that lobby to that Netflix content that we were marketing. We also could extract sentiment out of the chat. That's like having a live focused group. And then we still -- when the kids were ready to go into their private realm, we still got to show them the trailer.
So it's when you combine all of those other integrations, that's why we're able. It's such a deep authentic form of engagement.
So, I think that's where we really wanted to have our direct sales effort focused on and then continue to create more programmatic video ad units that we can pump through these programmatic marketplaces and really, frankly, try to stay away from the kind of sub-$1 CPM banner ads and pop-ups that really are a real kind of turn off for the younger audience..
No doubt. So, just a follow-on on that.
So, you expect like the vast majority of your ad revenues to be direct sales for the foreseeable future? Programmatic is not going to spike way higher?.
Well, I mean, we'll see. I mean, the fact that the last call, it was Laura Martin from Needham, who said, hey, I think you could be doing more programmatic. And our concern has always been about ruining the experience.
And what we don't want to see is after all the hard work to build this audience and community, start to see people move away from our platform. And so that did spark a set of conversations and this effort we've been making now on our product road map to add more quality video ad units.
So, I'm hopeful that we'll be able to see programmatic, but still with that nice high CPM in 2021, be a more meaningful chunk. In that way, we don't have to keep adding workforce as our ad inventory growth. So, who knows what the balance will be next year, but I'm -- it's very promising..
Good, good. So, yes.
So, I guess -- so just the -- like, midterm question is, when do you think your sales force efficiency would be at a place where you could generate like $1 million a month in revenue, roughly?.
I'd be taking a total guess. I'd prefer not to just throw kind of a wild number out there.
I mean, what I would tell you is, I mentioned that our ad inventory, if it were static, which it's not, last quarter, if we sold everything out, we could probably be doing about $10 million to $16 million in revenue per annum, if we kind of held it like a $20 average CPM. Now the ad inventory has grown since then. And we're selling more and more.
So, we're not selling everything out, but it probably is about 50%. That's probably a decent kind of way to think about it. But, again, there's multiple variables to be considered here that would -- that have to translate into that $1 million a month, which is your question.
So, you just -- you need to see us, again, closing deals faster, size of deals getting bigger, keeping, preserving that nice premium CPM and I do think overall, pipeline health. If you -- we continue to see the pipeline stay nice and healthy in that $5 million range, that's a good indicator as well..
Cool. Great. And then last question on the video production booth.
How is that going?.
Yes. I mean, it's interesting. We've been doing -- we didn't play it up too much in the script, but we have been higher to do some things that we were using those use cases to show the flexibility of it. We recently did an award show using the broadcast technology.
We are in -- continue to be in conversations with other uses like game shows and talk shows and so we're excited. We continue to further productize the tool kit. Think of it as almost like a fully remote virtual production studio that has a kind of a cloud-based master controller.
So, you can run a high-end quality live stream broadcast all off your laptop. And you can be patching in talent and overlaying graphics and sounds and doing all the cool stuff that usually those big expensive physical studios would do.
And because we've solved for it with gaming that's so complex that we know that, there are others who might be interested in using this for other types of programming. So, we continue to think that, that could, over time, become another kind of side revenue stream when people maybe want to start licensing that product from us.
But its early days, and we think the most important thing we can do is, first, show off those use cases and use that as a way to see if there's a real market of interest for us..
Great. Thank you, very much. I appreciate it. Good luck..
Thank you. At this time, this concludes our question-and-answer session. I would like to turn the call back over to Ms. Ann for closing remarks..
Thank you. We'd like to thank everyone for listening to today's call. We look forward to speaking with you at upcoming conferences, and when we report our fourth quarter results early next year. And most importantly, we wish you all a very happy and safe fourth quarter and holiday season. Take care..
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation..