I posted a number of times about valuations and gave examples in technology that is way different than any other sector. One of a number of examples I posted was Discord 1-2 years ago.
Let's revisit, but first...
What is Discord?
Discord is a free VoIP (voice-over-IP) application designed primarily for gamers, and shares much of the functionality of Skype (which we know a lot of adults use). It was originally released to the public in May 2015
Why do gamers use Discord?
Discord lets friends communicate directly via voice, video, or text, and join servers where larger communities can interact together. Gaming is definitely Discord's focus, at one point the service even gave free away PC games to paid subscribers before realizing it couldn't beat Steam
What's the difference between Discord and other team chat apps like Slack?
"I like to describe it (Discord) as a ‘real time Reddit’ because of the way that you join many specific servers (subreddits) and join ongoing conversations (posts). Slack is not like this a lot because it focuses on building a service that is curated for businesses and internal communications so in turn, Slack comes off more like a conference call or a corporate chat room."
– Noah Weidner, Discord user
https://www.chanty.com/blog/discord-vs-slack/
Discord has 100 million monthly active users who spend 4 billion minutes in conversation each day. As I mentioned yesterday, there are now more than 2.5 billion active gamers around the world so they have at least 4% of the market opportunity. Not bad, but keep in mind that is active daily users. There are likely 2-5x that number of users.
Something good to know, Discord upped the number of users who can simultaneously view a live stream from 10 to 50. You see, that number is not infinity and beyond even though Discord has more than 1000 lines of code.
Discord raised $379M total funding with their latest round being this Summer with $100 million as it plans to move beyond gaming.
That raise puts Discord at a valuation of $3.5B
With that valuation, they must be making tons of revenue and making big profits, right?
Wrong, Forbes estimates Discord make $70 million last year. Go back and look at the years prior for fun.
Dang, they are valued at 50 times revenue with actually no clear strategy of how they will grow revenue
Valued at say 9 times the money they raised
Defies logic, right?
Wrong, tech stocks, unlike most sectors, are valued differently
What is their PE?
You're kidding right?
I can tell you Salesforce is 95
Discord: -
If you remember...
Salesforce was unprofitable for most of the company's lifespan
Like many others
For many years, Facebook didn't even have strategy of how they would grow revenue
Guess which company does?
Starts with a V
Young growing tech companies can command and support high valuation as opposed to other sectors
Verb is developing a pattern of increasing digital revenues and people are watching how fast they double
Also what market potential is. If Verb was just in Direct Sales, that market opportunity is huge, but we see this year, their suite of products is much broader
Discord is going in the opposite direction of VERB as they want that broader market opportunity
Speaking of broad, go back and read what the analyst said last year about Verb
"
- The products are intuitive, easy and frankly, fun to use
- The market is far broader. It can be used effectively by anyone form a crafter selling on Etsy (ETSY-NR) to any sales-based organizations, consumer brands, ad agencies, online marketers, advertisers, sponsors, social media influencers, enterprise users - large and small, religious organizations, health care providers, network marketing and multi-level marketing companies, media companies, major motion picture studios, social media companies, schools and training facilities, and virtually any other person or organization that seeks to attract, engage, and communicate with prospects, customers, consumers, fans, followers, patients, students, friends, and subscribers, among others, online, utilizing automated, interactive video technology."
The financial models analysts use, as they say themselves, "understates future new products and growth through acquisitions and probably understates the tax benefits"
Now what if you now add those new products and Solofire in, since the deal closed and there are real new products and integrations?
And discounting of ~25% "out of an abundance of uncertainty" goes away, as products are out, sales are up and lots of money in the bank
What you have is a multiple of revenue and that multiple is influenced greatly by the market opportunity along with proven products and sales
Remember Discord really does have an abundance of uncertainty and they are doing alright
That 50x multiple is coming, just a matter of when
But wait, there is more...
So how does a Twitch user use VerbLive?
Can a Discord user drop VL into their channel also?
What's the cost?
whoa! Hold on there horsey...
Let's not get ahead of ourselves
But something to think about
Gaming industry likes to generate tons of revenue and always looking for new ways
Even Discord would like to, but haven't quite figure it out
Yes they have a subscription version Nitro for $4.99 that gives you some features the free version doesn't have
Yes they have a store to sell Discord merch
But how can Twitch, Discord or whoever make mo money?
What better way then a gamer putting a link into the window and saying click here and buy my...
This is very different than let's say, on youtube and the person says, don't forget to subscribe and I'll put a link below in the comments for more info or to...
One is active selling and one is passive
Guess which one works?
Let's say you have 20 people watching live stream and you put a link out there in the video
"Come on guys, click the link"
"Thanks George for buying that hat..."
"What about the rest of you?"
"Stuff is cool..."
"Come'on you deadbeats"
Active selling to gamers
I remember in the VERB interview with Winnie
Rory said if you want to do video conferencing there are other tools out there for free like Zoom
VerbLive is for people that want to make money. What to sell.
Reminded me of Mr. Wonderful. Cut the chatter. Let's make money.
All the chit-chat on Zoom is wonderful, but if you can't make a sale, you wasted a lot of your time
This is what I like with VerbLive. If you are using it to sell, the x dollars a month is nothing
Verb could do some interesting things with their sales model in the future beyond a per month fee or block of minutes
They could charge per viewer
They could charge by click
They could give VerbLive away for free and take a revenue split of sales.
Ads are a whole another ballgame
What's the difference between a recorded VL session posted on Facebook, Twitter, etc and the Ads you see today?
One is interactive and one is not
Some analyst are going to figure out soon what you investors knew for the last few years
Oh, one more thing...
There was something said in that Winnie interview that was game changing
Anyone remember what it was?
That one change, which is a huge change, changes everything and you are starting to see it.
It also changes the valuation...
Let's revisit, but first...
What is Discord?
Discord is a free VoIP (voice-over-IP) application designed primarily for gamers, and shares much of the functionality of Skype (which we know a lot of adults use). It was originally released to the public in May 2015
Why do gamers use Discord?
Discord lets friends communicate directly via voice, video, or text, and join servers where larger communities can interact together. Gaming is definitely Discord's focus, at one point the service even gave free away PC games to paid subscribers before realizing it couldn't beat Steam
What's the difference between Discord and other team chat apps like Slack?
"I like to describe it (Discord) as a ‘real time Reddit’ because of the way that you join many specific servers (subreddits) and join ongoing conversations (posts). Slack is not like this a lot because it focuses on building a service that is curated for businesses and internal communications so in turn, Slack comes off more like a conference call or a corporate chat room."
– Noah Weidner, Discord user
https://www.chanty.com/blog/discord-vs-slack/
Discord has 100 million monthly active users who spend 4 billion minutes in conversation each day. As I mentioned yesterday, there are now more than 2.5 billion active gamers around the world so they have at least 4% of the market opportunity. Not bad, but keep in mind that is active daily users. There are likely 2-5x that number of users.
Something good to know, Discord upped the number of users who can simultaneously view a live stream from 10 to 50. You see, that number is not infinity and beyond even though Discord has more than 1000 lines of code.
Discord raised $379M total funding with their latest round being this Summer with $100 million as it plans to move beyond gaming.
That raise puts Discord at a valuation of $3.5B
With that valuation, they must be making tons of revenue and making big profits, right?
Wrong, Forbes estimates Discord make $70 million last year. Go back and look at the years prior for fun.
Dang, they are valued at 50 times revenue with actually no clear strategy of how they will grow revenue
Valued at say 9 times the money they raised
Defies logic, right?
Wrong, tech stocks, unlike most sectors, are valued differently
What is their PE?
You're kidding right?
I can tell you Salesforce is 95
Discord: -
If you remember...
Salesforce was unprofitable for most of the company's lifespan
Like many others
For many years, Facebook didn't even have strategy of how they would grow revenue
Guess which company does?
Starts with a V
Young growing tech companies can command and support high valuation as opposed to other sectors
Verb is developing a pattern of increasing digital revenues and people are watching how fast they double
Also what market potential is. If Verb was just in Direct Sales, that market opportunity is huge, but we see this year, their suite of products is much broader
Discord is going in the opposite direction of VERB as they want that broader market opportunity
Speaking of broad, go back and read what the analyst said last year about Verb
"
- The products are intuitive, easy and frankly, fun to use
- The market is far broader. It can be used effectively by anyone form a crafter selling on Etsy (ETSY-NR) to any sales-based organizations, consumer brands, ad agencies, online marketers, advertisers, sponsors, social media influencers, enterprise users - large and small, religious organizations, health care providers, network marketing and multi-level marketing companies, media companies, major motion picture studios, social media companies, schools and training facilities, and virtually any other person or organization that seeks to attract, engage, and communicate with prospects, customers, consumers, fans, followers, patients, students, friends, and subscribers, among others, online, utilizing automated, interactive video technology."
The financial models analysts use, as they say themselves, "understates future new products and growth through acquisitions and probably understates the tax benefits"
Now what if you now add those new products and Solofire in, since the deal closed and there are real new products and integrations?
And discounting of ~25% "out of an abundance of uncertainty" goes away, as products are out, sales are up and lots of money in the bank
What you have is a multiple of revenue and that multiple is influenced greatly by the market opportunity along with proven products and sales
Remember Discord really does have an abundance of uncertainty and they are doing alright
That 50x multiple is coming, just a matter of when
But wait, there is more...
So how does a Twitch user use VerbLive?
Can a Discord user drop VL into their channel also?
What's the cost?
whoa! Hold on there horsey...
Let's not get ahead of ourselves
But something to think about
Gaming industry likes to generate tons of revenue and always looking for new ways
Even Discord would like to, but haven't quite figure it out
Yes they have a subscription version Nitro for $4.99 that gives you some features the free version doesn't have
Yes they have a store to sell Discord merch
But how can Twitch, Discord or whoever make mo money?
What better way then a gamer putting a link into the window and saying click here and buy my...
This is very different than let's say, on youtube and the person says, don't forget to subscribe and I'll put a link below in the comments for more info or to...
One is active selling and one is passive
Guess which one works?
Let's say you have 20 people watching live stream and you put a link out there in the video
"Come on guys, click the link"
"Thanks George for buying that hat..."
"What about the rest of you?"
"Stuff is cool..."
"Come'on you deadbeats"
Active selling to gamers
I remember in the VERB interview with Winnie
Rory said if you want to do video conferencing there are other tools out there for free like Zoom
VerbLive is for people that want to make money. What to sell.
Reminded me of Mr. Wonderful. Cut the chatter. Let's make money.
All the chit-chat on Zoom is wonderful, but if you can't make a sale, you wasted a lot of your time
This is what I like with VerbLive. If you are using it to sell, the x dollars a month is nothing
Verb could do some interesting things with their sales model in the future beyond a per month fee or block of minutes
They could charge per viewer
They could charge by click
They could give VerbLive away for free and take a revenue split of sales.
Ads are a whole another ballgame
What's the difference between a recorded VL session posted on Facebook, Twitter, etc and the Ads you see today?
One is interactive and one is not
Some analyst are going to figure out soon what you investors knew for the last few years
Oh, one more thing...
There was something said in that Winnie interview that was game changing
Anyone remember what it was?
That one change, which is a huge change, changes everything and you are starting to see it.
It also changes the valuation...
20
