2023-10-06 08:45:00 ET
Summary
- SoFi Technologies has announced a multi-year partnership with TMRW Sports to develop a tech-forward golf league led by Tiger Woods and Rory McIlroy.
- The partnership positions SoFi to accelerate its brand awareness and become a top-10 financial institution.
- Golf is a growing sport, particularly among young adults, and the partnership with TGL Golf could provide excellent exposure to SoFi's target demographic of Gen Z.
I didn't see this coming as news broke that TMRW Sports announced a multi-year partnership with SoFi Technologies (SOFI). TMRW Sports is the group led by Tiger Woods and Rory Mcllroy developing a tech-forward golf league to further the game of golf. In addition to having my undergraduate degree in economics and an MBA, I grew up in the golf business and have a degree in golf facility management. Before exiting the golf industry, I held several positions, including running outdoor operations at a country club. Having extensive knowledge about the golf industry, I wanted to write an article about this news and discuss why I feel it will benefit SOFI in the long term. This move positions SOFI to accelerate its initiative toward brand awareness and could become another critical success factor in reaching SOFI's goal of becoming a top-10 financial institution.
Following up on my September 8 th Article
On September 8 th , I wrote an article ( can be read here ) discussing the fireside chat that Anthony Noto ((SOFI CEO)) participated in and what his comments could mean for the banking and technology sides of SOFI's operations. We learned that 50% of SOFI's SoFi Money funded accounts come from direct deposits with an average balance exceeding $20,000. This is critical because it signifies that SOFI's ecosystem is extremely sticky. Going into the last month of Q3, Mr. Noto confirmed that SOFI should add at least $2 billion to its deposits, and the inflows into SOFI mainly come from the top-5 banks in the United States. Mr. Noto also confirmed that SOFI is positioned to keep its interest rates higher for longer compared to its competitors when the Fed starts to cut rates. I am eagerly awaiting SOFI earnings on 10/30 to see the progress toward profitability, revenue growth, and member growth. It will also be interesting to see what progress has been made in the RFP's SOFI is participating in regarding their cyberbanking platform. Until then, the news regarding TGL Golf is massive, and I can see why Anthony Noto made a specific cryptic tweet about it.
The impact from SoFi Stadium and why golf is the industry to go after
At the recent Goldman Sachs Communacopia + Technology Conference , Antony Noto presented at a fireside chat where the metrics behind SOFI Stadium were discussed. A Thursday, Sunday, or Monday night football game will generate roughly 20 million unique views, which is 5 million more than the unique views SOFI generated from its previous sponsorships. SOFI ended up playing a numbers game and determined that by allocating its advertising budget toward SoFi Stadium, it would produce roughly 80 million unique views from having 4 games at these timeslots. In addition to SOFI's logo being plastered all over the stadium, management expected that viewers watching the televised broadcast would hear the name SoFi Stadium at least 15 times during the broadcast.
I am not sure that people realize how big golf is, not just in the United States but globally. To put the depth of golf into perspective, the United States population is roughly 335 million, and in 2022 , more than 1/3 rd of the population (119 million) over the age of 5 played golf or consumed golf content from sources such as television or podcasts. The number of Americans aged 6 and up who played golf on and off the course was roughly 41.1 million. There were 3.3 million people who played golf on a course for the first time in 2022. The following stat is the most important when SOFI is concerned, as the sport's biggest customer segment is young adults from 18 to 34 years old. From this cohort, 6.2 million participated in playing on a course, while another 5.8 million participated in going to a driving range. The junior golf segment has reached 3.4 million juniors, and 37% of juniors are girls. At the end of 2022, there were roughly 16,000 golf courses at 14,000 facilities, which is more than Starbucks ( SBUX ) or McDonald's ( MCD ) locations in the United States.
Those statistics were just from the United States, but golf is an international sport with several professional tours, including the PGA Tour of America, the Champions Tour, the PGA European Tour, the Japan Golf Tour, the PGA Tour of Australasia, and the Sunshine Tour in South Africa. There are also 2 nd tier tours, including the Challenge Tour, Korn Ferry Tour, and the Asian Development Tour. Golf is currently the 10 th largest sport in the world, with roughly 450 million fans, ahead of American Football.
Golf is the perfect sport for SOFI to get involved with as it's focused on the future. With the largest segment of golf participants in America being SOFI's target demographic of 18-34-year-olds, it's the perfect place to have an affiliation. The United States Golf Association has allocated tremendous resources to expand golf from country clubs to mainstream while involving juniors. Unlike football or baseball, golf is a sport that can be played throughout someone's entire life, and from 2006 to the end of 2022, the number of juniors playing golf increased by 36% (900,000) to 3.4 million. There is also the possibility that TGL Golf will transform the golf industry the same way that Top Golf has transformed the golf driving range experience.
Why TGL Golf could be the next big thing and great for SOFI
Starting in 2024, TGL will start its inaugural season as it brings forward a new generation of golf through a combination of advanced technology and traditional golf. The SoFi Center will be the home to TGL, with its arena built on the Palm Beach State College Campus. The SoFi Center will consist of a 250,000-square-foot custom-built venue that will accommodate nearly 2,000 people. The dome will reach 75 feet, covering TGL's playing surface of 97 by 50 yards. The tech element will consist of a 46 by 64-foot screen. The inaugural season will include 15 regular season matches followed by semifinals and finals matches, and some of the biggest stars in the sport are signed on, including Tiger Woods, Rory McIlroy, Jon Rahm, Justin Rose, Adam Scott, and Rickie Fowler.
There is also large amounts of capital getting behind this as four of the six team ownership groups have been announced:
- TGL Atlanta: led by Arthur M. Blank, AMB Sports and Entertainment (Atlanta Falcons, Atlanta United, PGA TOUR Superstores)
- TGL Boston: led by John Henry, Tom Werner, and Fenway Sports Group (Boston Red Sox, Liverpool FC, Pittsburgh Penguins)
- Los Angeles Golf Club: led by Alexis Ohanian (Angel City FC), Serena Williams, and Venus Williams; as well as limited partners the Antetokounmpo brothers, Alex Morgan, Servando Carrasco, and Michelle Wie West
- TGL New York: led by Steven A. Cohen (New York Mets), Cohen Private Ventures
Golf is time-consuming, especially on the PGA Tour. The average time that a round takes on the PGA Tour is 4:45 for a threesome and 4 hours for a 2-person pair. The average length of a PGA course is 7,200 yards, and that doesn't include getting from hole to hole. There is a lot of downtime between shots, and unlike other sports, part of the coverage is the players walking around and setting up for their shots. The TGL could be the answer to the time issue in golf as it eliminates many aspects of the round and streamlines everything, so the focus is on the actual game. The TGL concept could also improve the in-person experience. Transitional pro events are a hassle as spectators need to walk the course with countless others to follow certain players, and seeing the action is often a challenge. Creating a way for golf to be enjoyed in a hybrid approach within an arena allows the in-person experience to be comfortable and enjoyable.
This could be huge for SOFI from a brand awareness perspective. This isn't a mediocre attempt at something. The right people are coming together, and the top stars are not just endorsing this league, they are playing in the events. The TGL has the potential to become a media powerhouse on both broadcast TV and the internet. I am expecting viral clips and content each week with SOFI's brand attached to it. When I look at where the capital for the teams is coming from, I expect advertising to be done at many sporting events and throughout PGA Tour Superstores, and SOFI's logo should be attached to all of it.
SoFi Stadium has played an integral role in brand awareness, and I expect the TGL league to amplify the results.
SOFI has become a household name, and the latest partnership with TGL Golf should amplify the results they have seen from ad campaigns and brand awareness at sporting and entertainment events. Over the past year, SOFI's member base has increased by 44.48% (1,921,000) from 4.32 million at the end of Q2 2022 to 6.24 million at the end of Q2 2023. SOFI's deposits have also grown by 369.72% ($10.03 billion) over this period.
Here is the main reason why I am excited about the partnership between SOFI and TGL Golf. Golf is a growing sport, and the biggest customer segment in the United States is young adults from 18-34 years old, with roughly 12 million participants in some form. The United States Golf Association is very kid-friendly and continuously looks to grow the game. There are now 3.4 million juniors involved in the game, which is the next wave of individuals needing banking needs. Gen Z was born between 1997 and 2012, placing their age ranges between 11 and 26. This is a critical demographic SOFI is trying to attract, and TGL Golf could provide excellent exposure to these individuals. Gen Z has little to no allegiance to big banks and will be setting up their financial infrastructure for the first time.
SOFI is playing the long game because, over the next decade, Gen Z is on track to take over the economy. According to Bank of America ( BAC ), Gen Z's income will reach $33 trillion and surpass millennials in 2031. Since the end of 2020, Gen Z is on track to increase its income from $7 trillion to $17 trillion by 2025. The Pew Research Center has reported that Gen Z has the fastest-growing income, led by individuals in the United States, followed by China. This is the demographic that will be taking on student loans, buying a home for the first time, and starting to invest for their future. If TGL Golf takes off and expands, it could catapult SOFI's brand awareness and exposure to the next level. While I am excited about a lot of things regarding SOFI, this multi-year partnership could have a tremendous impact on the revenue generated from loan originations and financial services.
Conclusion
Earnings season is approaching, and SOFI will report in several weeks. There is much to look forward to, and senior leadership continues delivering for long-term investors. I recently increased my position by 1.96% and plan to add shares again before earnings. I don't know what SOFI will do in the short term, but the long-term vision looks bright. SOFI is on the verge of profitability as the projected timeline is Q4 of 2023. We have student loans restarting, and SOFI is participating in several RFPs to provide technology services to large financial institutions. I still feel that SOFI isn't receiving the credit it deserves on the technology side, and if they start bringing on large-scale financial institutions, this will change, and the market could reward them with a hybrid valuation. Ultimately, I think the foundation has been created for SOFI to grow into a top-10 financial institution by market cap, which is Anthony Noto's Goal. I believe SOFI will finish 2023 strong, and 2024 will be a transformational year for its business.
For further details see:
SoFi Technologies Sponsors New Golf League Developed By Tiger Woods And Rory Mcllroy