Major social media platforms have been dominant monopolies for a long time. But in recent years, there has been a growing number of people discontented with these platforms. A lot of conservative-leaning individuals have been feeling censored by the big tech.
This has created an opportunity for companies like Rumble, slated to become publicly traded via a $2.1 billion SPAC merger with CF Acquisition Corp. (NASDAQ:CFVI). The Rumble platform bills itself as a neutral video platform and it is challenging the long-held dominance of YouTube (NASDAQ:GOOGL).
Rumble says it had 36 million monthly average users (MAUs) in third quarter 2021, up from from 1.6 million MAUS during the year-earlier period. That compares to YouTube’s 845 million MAUs on its mobile app alone. Yet, while Rumble is a tiny fraction of the size of YouTube, the company has the potential to siphon off a large audience.
Market Opportunity for Free Speech Platform
A Pew Research survey conducted in 2020 showed that close to 75% of all US adults say that social media sites intentionally censor political viewpoints that they find objectionable. This belief that big tech and social media are “out to get them” was common among Republicans. At least 90% believe that social media censor political viewpoints.
The banning of prominent right-wing personalities such as Alex Jones and Stephen Crowder only continues to stoke such speculation. Now whether or not you feel censorship doesn’t exist or that these individuals are deserving of de-platforming is beside the point. There is a large portion of the U.S. population that feels censorship is a problem. The issue is serious enough that even regulatory agencies in Republican-leaning states such as Texas are moving in with regulation.
I believe all this angst against the current dominant big tech platforms such as Meta Platform’s (NASDAQ:FB) Facebook, YouTube is creating a market opportunity for a “conservative alternative”. This is advantageous to Rumble which bills itself as the “free speech” platform. Conservative personalities could jump ship en masse to the platform bringing with them their large audiences.
For example, Stephen Crowder has 5.6 million subscribers and 1.4 billion views. He is one strike away from a permanent ban on YouTube after his second strike. The controversial comedian received a strike for violating the company’s hate speech policy. He might soon need a new home to host his content permanently and has been using Rumble as an alternative.
If Rumble can convince a critical number of right-wing personalities to permanently jump ship, that could start a snowball effect of getting enough viewers to reach a substantial scale.
Trump Partnership Just the Start
As a key part of the company’s strategy to appeal to conservative personalities, Rumble may have scored its biggest win yet. Rumble inked a deal with former President Donald Trump’s Trump Media and Technology Group, also slated to list via a SPAC deal with Digital World Acquisition (NASDAQ:DWAC). I wrote last month about the potential of the Trump-backed media venture, which I encourage you to read but, in short, it is clear to me that Trump still commands a lot of eyeballs.
As part of the deal, Rumble will host video services on the planned social media network TRUTH Social. According to Trump, Rumble will “serve as a critical backbone” to the backend of the planned website. This partnership is just the start. The challenge is to wean the audience of YouTube which is basically a monopoly in the space.
Content is king and having a substantial amount of conservative content in one place could be the catalyst that is needed.
Your Takeaway
As with all SPACs, there are a lot of risks that investors should be aware of. Right now, more than 660 of these blank-check companies are sitting with as much as $160 billion in funding raised and no place to put it.
These risks which are inherent in the SPAC process are lack of disclosures, overly aggressive forecasts, and warrants given to investors. SPAC stocks have a tendency of losing value after the hype dissipates. In fact, a large number of former SPACs are now trading below the initial value of $10. Meanwhile, SEC chairman Gary Gensler is planning to crack down on the loosey-goosey practices in the coming months.
CFVI stock has been volatile as well in recent days. This means that investors should get their chance to load up on this stock below current prices.
Like for most SPACs, I believe that investors should wait for the de-SPACing process to finish before initiating a position. I like CFVI stock as a long-term bet. It will be difficult to challenge the large established social media firms. However, Rumble has a strong appeal in a niche that is desperate for alternatives.
On the date of publication, Joseph Nograles held a LONG position in FB. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.