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Like many retail brands during the global pandemic, GameStop has been having a tough time. In the third quarter, its revenues were down 30.2% year over year, and even before the world fell apart, it was facing significant headwinds as the gaming industry moved toward digital sales.
The result of these challenges was a stock price that was, until a few months ago, hovering somewhere between $4 and $5. It’s important to note that even at this price, there were many who believed the stock was woefully overvalued. As of Wednesday night, GameStop’s stock closed at $347, making the company a little more valuable than Delta Airlines.
You see, not everyone was willing to give up on the brand so easily. Despite its financial challenges, the name itself remained strong. People remembered walking into these stores as teenagers. They wanted the company to do well because, despite all evidence to the contrary, the brand continued to resonate.
This resonance turned an idea into a movement, which is the true power of branding. Just as a weak brand can cause an otherwise sound business to stagnate, a strong brand can rouse it from the dead even as it flails.
Many of these people congregated on a subreddit board called WallStreetBets. WallStreetBets is like what might happen if a boiler room from the ’90s was run by a pack of clever internet trolls who didn’t mind betting their rent checks on deeply speculative securities. They are notoriously and almost endlessly optimistic, encouraging members to have “diamond hands,” which means to hold onto shares even in the face of massive losses in hopes of generating even larger gains.
There are many of these kinds of channels online. In a world where memes can quickly translate into actions, a good marketer must at least have a passing interest in all of them. Your job isn’t to shape the conversation, but to understand it—and by doing so, afford yourself the perspective to be proactive in a rapidly changing world.
In the case of WallStreetBets and GameStop, what needed to be understood was that the coming battle would be driven by a fascinating combination of hope and spite.
The hope lay in the simple belief that GameStop is a much better company than its current fundamentals reflect, that one day it could become a digital juggernaut to rival Amazon in the games market and its stores can be transformed into cultural hubs for gamers and enthusiasts. People believed this because GameStop’s marketing team was transparent about the vision for the future, a bold reimagining that people were willing to fight for.
The spite began in earnest on Jan. 19 when Citron Research, a firm that specializes in short selling, said that after a recent price increase, they believed it was time for people to get out of the stock. The folks at WallStreetBets, with their “diamond hands,” took umbrage.
GameStop has always been a magnet for short sellers, investors who bet on a stock price falling. When you short a stock, you borrow and immediately sell, hoping to buy it back sometime later at a lower price while keeping the difference.
WallStreetBets disagreed with Citron. More than that, they believed that short sellers like Citron (and, later, hedge fund Melvin Capital) represented all the excesses of big finance. They came up with a plan to prove their point and perhaps blacken a few eyes on Wall Street in the process.
This interest was further stoked as the price of the stock began to jump, rising 788% between Jan. 21 and Jan. 27. Along with a generous dose of national media coverage, the meme and meme stock spread further, with more converts and sympathizers. Now, other heavily shorted stocks like AMC and BlackBerry are getting the same treatment, with people piling in and hoping to raise the price and push out the hedge funds.
It’s not yet clear where any of this ends. If there is one law of financial bubbles, it’s that what goes up must eventually come down. But how that happens has yet to be written.
What is certain is that WallStreetBets has proven how seductive these kinds of stories really are. It shows unequivocally how many people are searching for something that brings them hope and how many are willing to join in the fight against those that they see as overly powerful. One of the most powerful things that a marketer (or anyone) can do is give people something to believe to and offer them a vision of a better world.
This is a lesson that we should all take to heart.
