Traders hoped online gaming company Skillz (NYSE:SKLZ) would help transform the industry. However, Skillz has failed to take off as management had planned, and SKLZ stock has imploded over the past year. Shares are down more than 85% over the past 12 months.

Trading interest remains high however; on Thursday, the stock popped 15% on nearly 20 million shares of volume. Clearly, people haven’t given up on a potential comeback for Skillz. But there’s not much reason to think the rebound will stick.

For several years, Skillz spent heavily on advertising, marketing, and other growth-related expenses. And investors were willing to forgive the company for running large losses because it would hopefully achieve profitability once it reached operating scale.

However, this plan seems unlikely to work out. As Skillz grew, its operating losses failed to shrink. SKLZ stock slumped dramatically over the past year, and it seems investors might not be willing to fund these growth ambitions anymore.

As of March 31, 2022, Skillz had $484 million of cash and marketable securities on its balance sheet. However, it ran an operating loss of $135 million in Q1 of this year alone. At that rate, Skillz’ remaining cash balance won’t last all that long. As a result, Skillz has said that it will be working on optimizing its expenses as it tries to find a path toward profitability. The era of Skillz growing its marketing budget without restraint has ended.

But the Q1 results show the danger in this. The company’s revenues grew just 12% year-over-year versus the same quarter of 2021. Even more troublingly, Skillz’ revenues declined sequentially from $109 million in Q4 of 2021 to just $93 million in Q1 of 2022.

Unfortunately for Skillz, it had to spend $117 million on marketing to bring in that $93 million of revenues. Clearly, a business has a massive problem when it is spending more just on sales and marketing than its entire top-line revenues.

And, with the company cutting back spending and revenues now in decline, it’s not apparent how Skillz can possibly turn things around. When revenues are just $93 million a quarter, and total operating expenses are $229 million a quarter, what path forward remains?

Historically, Skillz has had to heavily incentivize its player base with user perks and bonuses to keep them gaming. With the company starting to focus on reducing costs, the company’s revenues have already rolled over.

Maybe there is a much smaller niche business here for the company’s most loyal gamers, but the idea that Skillz is going to be a large mass-market gaming brand seems implausible at this point.

And that being the case, SKLZ stock has minimal investment appeal. Given the company’s massive burn rate, expect more equity dilution in coming quarters, which will limit any potential rallies in the share price.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.