One of the more interesting projects in tech today is the work being done to create conservative-leaning alternatives to major pieces of internet technology. Much of this effort has centered around social networking, with projects like Parler and Gab and Gettr becoming well-known to folks who pay attention to new platforms.
But there are other, more ambitious efforts afoot. For example, there is a service built to replicate Stripe led by a conservative media personality. Former president Donald Trump is working to merge his own technology company — Trump Media & Technology Group — with a SPAC as well. And perhaps most prominently, Rumble is taking on YouTube and the larger cloud.
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How well these efforts will fare in the long-term is not clear. Most startups fail, and taking on the largest and richest tech companies directly is an ambitious proposition.
Some notable individuals are involved. Well-known tech investor Peter Thiel backed Rumble, as did J.D. Vance, now a U.S. senator thanks in part to Thiel’s investment in his campaign. Rumble has parlayed its prominence in conservative circles to host Republican debates, exclusive content tailored to its audience. The YouTube alternative has also snapped up conservative influencers, providing a sort of refuge from Google’s own offering for those disenchanted with what Big Tech has on offer. (Rumble also offers sports-related content.)
Competition is good, and if some folks want to build tools and services that they think will resonate with an underserved audience, godspeed. But what we learned this week is that such efforts are often very expensive. New data from the Trump Media & Technology Group (TMTG) and Rumble make that abundantly clear.
This morning, let’s parse new data from TMTG and Rumble that will help us better understand how far-right-leaning social media services with long-term goals of building less restricted digital infrastructure are faring.
How much does that cost?
Rumble is a real company doing business as a publicly traded entity. TMTG is a bit more nascent. It’s SPAC presentation deck waxes about its potential, but when we see its latest results, it’s clear that the company is incredibly small.
Per an SEC filing, TMTG generated revenues of $2.31 million in the first half of 2023. For comparative purposes, YouTube generated $7.95 billion worth of Q3 2023 advertising revenues, or around $88 million each day in the quarter.
Against TMTG’s revenue, it had operating costs worth $9.85 million in the first two quarters of 2023, and a net loss of $22.98 million for the period. In all of 2022, TMTG had revenues of $1.42 million, leading to a net loss of $50.5 million for the year.
A breakout success TMTG is not, but as the company is looking to merge with a SPAC to raise capital, perhaps we are more seeing a proto-company than anything more concrete. Rumble, then, is the better company to look at when we want to vet how much market demand there is for a more conservative internet social and infra project.
Rumble reported earnings Monday, providing the market with a look at its Q3 2023 results. Here are the key data points from that disclosure:
- Rumble is seeing rising usage of its service: The company counts 58 million monthly active users, 40 million of whom are based in the lucrative U.S. and Canadian markets. Total “minutes watched per month” grew by 19% in Q3 2023 to 10.7 billion, compared to the year-ago period.
- Rumble’s revenue is growing quickly: The company’s Q3 revenues of $18 million were up 64% compared to the year-ago period, faster than its total watched minutes, indicating that Rumble is doing a better job over time to monetize its existing audience.
- Rumble’s expenses remain far in excess of its income: Against its $17.98 million top line in Q3, Rumble had costs of service, which include “content, hosting, [and] other” of $39.75 million. In total, the company’s expenses came to $58.20 million in the quarter, leading to a $40.22 million quarterly operating loss and a net loss worth $29.02 million in the three-month period.
- Rumble is consuming lots of cash: Rumble’s operating cash burn in the first three quarters of 2023 came to $59.83 million. In total, its cash reserves fell by $71.29 million through Q3 2023.
- Rumble has enough cash for a few more years of building: Even with that burn in hand, Rumble wrapped the third quarter with $265.88 million worth of cash, down from $356.68 million one year ago.
Presuming we can call Rumble’s costs of service its cost of goods sold, we can easily infer that the company is gross-margin negative. How did the company wind up so seemingly upside down? Rumble explains:
Cost of services was $39.8 million for the quarter, compared to $12.3 million in the third quarter of 2022. The increase was due to an increase in programming and content costs of $26.1 million, hosting expenses of $0.7 million, and other service costs of $0.7 million.
It’s not cheap to gather the content-making troops, in other words. Depending on how one-time versus continuing those content costs are, Rumble could be intelligently investing to build a long-term archive of material that it can monetize for years to come, or could be overpaying for material that it cannot fully yank revenue from in its present form. Potato, potato, I suppose, depending on how you view the company’s thesis.
But what is clear at this point is that TMTG and Rumble are struggling to cover their expenses just in the realm of social media. If they want to do more work, like building out commercial-grade cloud infra, they will need a lot more capital and will need to endure greater operating costs at the same time. Major cloud providers, for example, are spending billions per quarter to expand their public cloud offerings.
We’re not trying to be rude. Rumble is moving ahead with its Rumble Cloud project this year, as it noted in its earnings report:
Launched the beta release of Rumble Cloud with a robust product set which includes cloud compute, storage, and networking. Rumble Cloud is well-positioned to provide a new revenue stream for Rumble by capturing a share of the public cloud market by serving a growing segment of businesses that are looking for alternatives to ‘big tech.’
TMTG for its part listed Rumble Cloud in its own SPAC deck describing what we think are ambitions to build its own, related service. In Rumble’s case, cloud revenues are part of its single revenue result and are not broken out further, so we can’t comment on their size — yet, at least.
Observing the largely failed social experiments of conservative America is good fun for the business cynic, just as TMTG’s SPAC legal issues seem more bumbling than savvy and are therefore almost humorous. But Rumble demands to be taken seriously; it has the cash to keep building for some time, and even some ideas on how to price its cloud service in a manner that could prove popular.
We’ll keep our eyes on future Rumble earnings reports, of course, just as we’ll keep waiting for TMTG to go public, if it can even manage that much.
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