Clubhouse Media Group Inc (OTCMKTS:CMGR) was featured in a popular podcast yesterday. In the interview, the company’s president, Chris Young, made an interesting case for the company that deserves a closer look.
First off, for those not familiar, CMGR has become a bit of a point of controversy for being a highly promising billion-dollar company still trading on the pink sheets, and for sharing a similar name with an up-and-coming new social media app.
However, it’s useful to set those storylines aside and take a fresh look at what the company actually is and what it is likely capable of becoming and doing as a truly unique stock.
What we find is a diversified social media model that seems set to evolve toward a big opportunity in consumer branded product sales.
What is Clubhouse Media?
Clubhouse Media Group Inc (OTCMKTS:CMGR) bills itself as “the future of influencer media and marketing, with a global network of professionally run content houses, each of which has its own brand, influencer cohort and production capabilities.”
However, we would suggest this is a characterization that may miss the point for prospective investors. The big money that may roll in the door here in the quarters ahead is likely not going to be derived purely from marketing deals with outside brands, though there will certainly be some of that.
According to the podcast interview, as noted by Young, “We are a combination of a few things: we are a talent management agency for social media influencers. We are a digital studio, so we create intellectual property that we license and distribute. We also have a private equity where we acquire companies that are complementary to our business model in the social media space.”
The big point here should be obvious. What is Clubhouse Media? It’s a company built around monetizing a monstrous social media footprint – nearly 300 million at last count.
But we would argue that it’s worth thinking about how that reach can be most powerfully monetized: brand growth. And we aren’t talking about marketing someone else’s brand.
An Element of Cultivation
Clubhouse Media Group Inc (OTCMKTS:CMGR) has a huge reach right now. But part of the value proposition is that this reach can grow a lot further, and quickly. It has already been growing rapidly over the past 6 months, more than doubling in that time.
And this may be an accelerating curve. The podcast is instructive on this point. Said Young, on selecting and cultivating major influencers:
“Ultimately, they are creative, they all have a niche, and their fans connect with them,” explained Young. “Yes, you can build an influencer, but they have to be pure and real,” he added. “We find the people that already have those fundamentals and we put them together with other influencers and they cross-pollinate their followings.”
This element of cross-pollination is probably underappreciated by the market given the company’s model.
You clearly can “build” a massively popular influencer if the prepotency is there – ie, if you are starting with the raw material of a charismatic, authentic, and creative person. If that person is brought in front of a large audience looking for just such a force of personality, then voila! And there’s one place in this world where that magic explosive reaction is likely to take place more than anywhere else – in Clubhouse Media’s creator mansions.
Gravity applies under these circumstances, as far as we can tell – ie, once an up-and-coming influencer gains traction with a few hundred thousand new followers, a lot more people are likely to find them and follow along.
Kylie Cosmetics: A Case Study
The story of Kylie Cosmetics offers a great point of departure for thinking about how to monetize a large and demographically distinct social media following.
Kylie Jenner became a major force on social media and realized the power of that reach, founding a cosmetics company to monetize it. Shrewd indeed.
Over a short period, that cosmetics line became worth over a billion dollars. Kylie Cosmetics was valued at nearly $1.2 billion when it sold a controlling stake to Coty, Inc in November 2019. That value was built by first cultivating a massive influencer following.
However, it’s important to note that CMGR’s follower reach, in total right now, far exceeds where Kylie was when she orchestrated this strategy.
In other words, Clubhouse Media is in a superior position to where Kylie was then, and it has a partner from the world’s leading VC firm and a legend in mass media already on board.
Asked about the monetization plan going forward, Young responded, “We’re going to continue to run our agency and management model to help promote other companies and brands, and we get paid through that. We have a few mini-series that we are shooting ourselves and distributing, and that will likely be purchased by some distribution platforms. We’re also in the middle of looking at some acquisitions.”
We would take this last statement most to heart in evaluating the name.
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