Advertisers and marketers are gradually becoming residents in, rather than landlords of, the house of social media.
It’s an odd transition, but it marks a fait accompli.
After recent years (decades?) have whittled the process of consumer persuasion down to a nub through technological advances and growing cynicism, the playing field is now hopelessly skewed against everything that isn’t an authentic missionary messenger casting blessings upon a product or brand to an admiring and trusting audience.
All of that puts one new emerging company in an interesting position as perhaps the only platform-agnostic vehicle offering investors exposure to the rising tides of social media and influencer-based marketing: Clubhouse Media Group Inc (OTCMKTS:CMGR).
First off, CMGR is listed as a pink sheet stock on the OTC exchange. However, it is roughly a billion-dollar company with nearly 300 million in reach across social media platforms and rapidly growing revenues. It is on the OTC at this point simply as an artifact of the path it took to a publicly-traded status – it chose to do so through reverse merger with a clean ticker that was trading on the OTC at the time.
We would expect its status to change as the company establishes itself further. However, as we will suggest below, it may represent a unique opportunity now, before any move onto a major exchange.
In short, CMGR has already possibly taken the leadership position in the field of influencer-based marketing, which is a rapidly growing alternative, and perhaps heir-apparent, to the traditional advertising industry. And it is also perhaps the only vehicle available to investors that offers exposure to the entire social media space in a manner that includes new upstart platforms like TikTok and Clubhouse.
Social Media Investment as a Strategy
The trend towards the increasing dominance of social media over recent years – and likely increasingly into the future – is hardly controversial. But how do you invest in it?
Should you buy Facebook (NASDAQ:FB) because it wraps Facebook’s legacy platform and Instagram in the same vehicle?
How about Snap Inc (NYSE:SNAP) or Pinterest Inc (NYSE:PINS) or Twitter (NYSE:TWTR)?
Or perhaps this is a perfect point in favor of an ETF like the Global X Social Media ETF (NASDAQ:SOCL)?
It turns out that none of those strategies would give you access to the world’s fastest growing and newly dominant platform: TikTok, which already has at least 680 million active users and has been downloaded more the two billion times.
Even if you figure out how to invest in that one, there will just be another upstart that comes along and changes the game next.
This is precisely what could be so interesting about Clubhouse Media Group Inc (OTCMKTS:CMGR). It represents an investment in the trend toward the dominance of social media as a medium. Nothing else offers the same angle or exposure premise.
Clubhouse Media Group Inc (OTCMKTS:CMGR) and its Model
CMGR is not a social media network. It is an influencer-based marketing and advertising model driven by opening content creator houses, filling them with leading social media influencers, and thereby controlling a vast tract of the social media landscape, which the company can then market to major global brands as a marketing channel of unmatched potency.
According to a recent article published in a top-25 major syndicated newspaper, the company has already established a dominant presence in aggregate reach, with a currently estimated 280 million social media followers through its Clubhouse Media influencers, as well as an additional 9 million through its own branded accounts.
It offers its influencers publicists, a media team, full-scale video production resources, and full-scale styling production and in-house studio amenities to support their continued career advancement, as well as some super-sweet digs in mansions with scenic views in cultural hotspots. Influencers can also grow their follower bases by cross-pollinating with other star influencers who live in the same house.
Significantly, it is not bound by any particular platform. CMGR can grow no matter which new social media platform springs up and takes over because its influencers are some of the top “personality brands” in the world.
Since the rise of TikTok and Instagram, they have streamed over to take over that real estate. As newcomer hot social audio app “Clubhouse” (no relation) ascends, one can expect CMGR influencers to gain traction there as well.
In fact, the fund that just led the Clubhouse app’s series B investment round, Andreessen Horowitz (a16z), appears to be increasingly involved with CMGR – Andrew Omori, an a16z partner joined CMGR’s advisory board just last week. That makes sense given that CMGR can possibly help add 300 million interested potential users to the Clubhouse app and help a16z’s investment pay off.
As far as its model, CMGR uses its controlling territorial advantage across the social media landscape to lure in major brands as marketing clients. They have already signed a number of major deals and we would expect that momentum to continue and likely accelerate as the model matures.
According to Brian Freeman, chief executive of influencer platform Heartbeat, and a thought-leader in the space, CMGR’s model is a win for everyone involved: “As the content creator, I get representation. I get access to more followers. I get a place to live. I get an epic lifestyle. And from the content house perspective, they can go to an advertiser and say, ‘Hey, we’ve got 100 million followers — pick your poison. Do you want car enthusiasts? Do you want gaming enthusiasts? We’ve got something for everybody.’ The more houses they have, the more talent they have and the bigger the core brand, Clubhouse, gets, and that benefits advertisers by giving them a one-stop shop.”
CMGR also has plans to launch a venture arm that helps establish new brands as joint venture partners with manufacturers and distributors, using its access to its audience as a world-beating marketing research and intel channel.
Timing is Everything
The model being established by Clubhouse Media is unique among publicly traded companies. It can be thought of as an alternative way to play the continued rise of social media. But it can also be seen as an alternative way to invest in the smoking crater that is the advertising industry.
There are few options for this second theme.
One might look to stocks like Magnite Inc (NASDAQ:MGNI), Trade Desk Inc (NASDAQ:TTD), or Criteo SA (NASDAQ:CRTO) as innovators in the advertising space. But they lack direct leverage with the social media theme. They are all also far more expensive relative to potential future growth at this point after huge runs last year.
CMGR offers a unique angle on both the social media and advertising themes, and it has the added advantage that it has yet to see much attention, still flying under the radar. Once it finds a path to uplisting onto a major exchange, that will likely no longer be the case.
Given its size and the scale of its current operations, as well as the fact that a leading VC has already installed a partner on its board, some form of upscaled role in the grand scheme of the market may not be far off.
Oddly enough, still being on the OTC might be the best thing about CMGR for retail speculators because major funds often have bylaws or regulatory constraints that prevent them from piling into OTC stocks.
But all of that will change if and when the stock moves up.
Given its unique positioning in the exposure ecosystem, it might be a perfect puzzle piece for thematic small-cap institutional strategies if the company executes well over the next year.
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