Rumble

Moat: 2/5

Understandability: 3/5

Balance Sheet Health: 3/5

Rumble is a high-growth, video-sharing platform designed to help content creators monetize their content, which allows them to express their own opinions.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview

Rumble Inc. operates a video platform where creators can upload, share, stream, and monetize content. It aims to provide a more independent platform with a greater focus on creators and their content as opposed to more established social media platforms. It describes itself as a “free and open internet”, providing options for creators to control how and where their content is used. Rumble offers a variety of options such as video hosting, live streaming, and video advertising and it aims to be a competitor to Youtube and other established platforms.

Revenue Streams

Rumble’s revenue model is comprised of various streams:

Advertising: This includes video advertising and programmatic advertising across their platform, with the aim of maximizing advertising dollars for creators,
Licensing and Other: Rumble generates revenue by licensing its content or services to third parties.
Subscription Fees: Rumble generates revenue from users who subscribe to premium content and features.

Trends in the Industry

The online video-sharing market is highly competitive and dominated by large players.

Growth: This is a rapidly expanding market fueled by increasing demand for video content and growth of content creators.
Competition: Fierce competition exists not only from YouTube, but also platforms like TikTok, Instagram, and Facebook.
Monetization Challenges: Platforms are constantly searching for better ways to balance monetization and user experience.
Content Moderation: Platforms face mounting pressure to balance free speech with guidelines against harmful content.

Competitive Landscape

Rumble competes with a variety of players in the online video space:

Established Platforms: YouTube, TikTok, Instagram and Facebook command very large market share and have well-established user bases. They often offer a wide range of content and features.
Emerging Platforms: Companies like Odysee, Bitchute, and LBRY attempt to differentiate themselves by offering more control to the content creators.
Traditional Media Outlets: Some traditional TV and media houses offer alternative distribution, however, they mainly have large budgets and infrastructure.

What Makes Rumble Different?

Rumble positions itself as a platform for creators who seek more independence and control. Rumble says that it seeks to prioritize free speech, and that it doesn’t censor content creators or their content. As a result, it has been criticized for being a platform that caters to hate speech and conspiracy theories. Rumble has some major differences from other platforms.

Creator-Centric Approach: Rumble gives creators more revenue share and more control over their content compared to many mainstream platforms. They also allow creators to control how their content is distributed and used by others.
Free Speech Focus: It has positioned itself as a haven for free speech, with a tolerance for controversial content.
Less Censorship: Rumble has stated that they believe in minimal censorship, which is attractive to certain content creators.
Controversial Content: As they take a lax approach on censorship and moderation, Rumble has seen growth in traffic from controversial content creators.
Multi-Platform Capabilities: Rumble content is available on mobile, web and TV, aiming for a wider reach.

Financials

Rumble’s financials have several important things to understand. The main one is that it’s a relatively new public company, with the history from the previous business combination being limited. Also, many metrics are being reported on a quarterly basis, or a pro forma basis to show the full effect of the business combination which is making comparisons against previous years difficult, the growth rates are very high, but these are still not adjusted to be yearly growth and also there are no guarantees if these growth rates are going to continue in the future.

Rapid Growth: The revenue growth is very high, particularly in advertising as the company grows the number of its active users.
Increasing Expenses: Operating expenses are also increasing quite rapidly, as RUM invests heavily in sales and marketing as well as new technologies and infrastructure.
High Net Losses: While the revenue growth is strong, Rumble is still not a profitable company and their net losses are still big. The key driver of these losses are R&D expenses which are relatively big and their other operating expenses.
Recent Drop in User Engagement and Revenue: In the last quarter, Rumble has seen a drop in user engagement, and this caused a drop in revenue on the advertising side of the business. It is important to see how it evolves in the following quarters.
Diluted Earnings: As there are many warrants, options and preferred shares that could be converted into stock, it’s important to consider how diluted are the results. It is important to consider those when projecting earnings and potential share price. The company’s current balance sheet is a little bit weak, mainly due to its high cash burn and negative equity values.
Cash: The company currently has $145 million in cash and short term investments. The company is also actively using its credit line, as seen by the increase in debt. The company may be unable to have access to capital if it runs into financial issues.

Moat Analysis 2 / 5

Rumble’s moat is relatively weak. While it has identified specific differences it has with its competitors, these do not create a strong and sustainable competitive advantage.

Limited Network Effects: Although they promote the “open internet”, they do not have a very strong network effect because the platform is not based on a community, but on the content. Moreover, they compete in the same way as Youtube and other social media platforms, which creates direct competitors with a very strong network effect.
Limited Switching Costs: Switching costs are low because both creators and users can switch platforms, without considerable costs, both in time or money. This makes it difficult for the platform to retain its users and to obtain new users.
Intangible Assets: Brand recognition and reputation are weak, as Rumble is a small competitor. They do have some intellectual properties such as patents, but these are not particularly noteworthy to consider as a strong moat.
Cost Advantages: This is also limited, and mainly due to small operational size. This means that if competitors decide to be more competitive, it is difficult for Rumble to follow the same path with a limited infrastructure.

Moat Rating: 2 / 5

Rumble has not yet proven that it can generate a competitive advantage. There is a very high risk that competition could eat its profits or take over its current users or creators. It has some specific differences that it tries to focus on, however, these are not enough to ensure a sustainable competitive advantage.

Risks to the Moat

Several risks could damage Rumble’s moat, even if it developed.

Content Moderation Issues: If it moderates content more than other platforms, it could damage its unique identity. If it fails to moderate harmful content, it can lead to bad media, government, or legal problems.
Competition: The video-sharing market is highly competitive, and new competitors will continually try to enter the market, offering better or cheaper services and technologies. Existing competitors can also enhance their offering, limiting RUM’s growth opportunities.
Technological Change: New technologies, algorithms, and features can diminish the competitiveness of Rumble’s current system.
Regulatory Changes: Stringent and rapidly changing regulatory policies, especially regarding online media, could increase compliance costs and limit Rumble’s growth.
User Engagement: The platform could see a decline in the users’ engagement, which may directly impact revenue on advertising. If users find that the platform doesn’t have the type of content that they are looking for, or the platform makes changes that the user doesn’t like, then the users may move to other platforms.

Business Resilience

Rumble is very vulnerable to negative events. The business depends on content and viewership, so if either of them drop, then the company’s financials can be very badly damaged. The company also relies on a small number of key contracts, and if it were to lose them, this would also significantly impact the results. Finally, a very big portion of their revenue comes from advertising, which is highly volatile, and difficult to predict. As a result, the company might be at the mercy of different external effects, and will be difficult to protect itself from sudden losses or downtrends.

Understandability Rating 3/5

Rumble’s operations are fairly easy to understand. Anyone familiar with online video platforms such as Youtube and TikTok can easily understand the company’s operations. However, the nuances of the legal framework and the underlying business models as well as the unique nuances in the financial statements make it slightly complicated to understand it fully. The new nature of the business, as well as complicated acquisitions and many non-recurring expenses, add further complexity and make it difficult to clearly understand it.

Balance Sheet Health Rating 3 / 5

Rumble’s balance sheet is moderately healthy. The company has a good amount of cash available, but its profitability is still low, and its net losses are very big. If the company doesn’t address the negative net losses and improve cashflow, the balance sheet will likely be damaged. They also utilize credit lines, so they have debt, and that too is rising rapidly. Also, they have many warrants that could potentially dilute the stock. While they have some tangible assets, the value of intangible assets is large and difficult to quantify. Finally, they are a small cap company, which has the potential of growing rapidly or crashing rapidly. So the balance sheet is not the best or worst in the world.