Twenty-two year old Mark Zuckerberg was widely proclaimed foolish for not selling Facebook for $1 billion in 2006. It’s now worth around $1 trillion. There are but two major challenges for Trump Media & Technology Group (“TMTG”) (DWAC), led initially by TRUTH Social, in growing its market value to $1 trillion within the next decade, and one of them is already all but solved. In this article, we review the TMTG business model, the market opportunity, the two big challenges that must be overcome, and why 10 years from now your pocketbook may deeply regret if you don’t start accumulating shares this year.

According to Rolling Stone, Trump Casinos failed. Trump Steaks failed. Trump Magazine failed. Trump Vodka failed. Trump Airlines failed. Trump Beverages failed. The list goes on. But what the list of failures fails to include is that throughout the failures, the power of Trump’s brand continued to grow (i.e., any publicity is good publicity, or so the saying goes).

Overview: Trump Media & Technology Group

It was announced on Wednesday that “Trump Media & Technology Group and Digital World Acquisition Corp. (DWAC) have entered into a definitive merger agreement, providing for a business combination that will result in Trump Media & Technology Group becoming a publicly listed company, subject to regulatory and stockholder approval.” According to the release, TMTG’s mission is:

“to create a rival to the liberal media consortium and fight back against the "Big Tech” companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.”

The corporate competitive structure of TMTG goes beyond simply TRUTH Social as an alternative to Twitter (TWTR) and Facebook (FB) (where TMTG’s Chairman, Donald Trump, has been banned). It also includes news (to rival CNN (T)), entertainment (to rival Netflix (NFLX) and Disney Plus (DIS)), and a technology stack (to rival Amazon Web Services (AMZN), Microsoft Azure (MSFT), Google Cloud (GOOGL) and others).

TMTG is a Growth Stock

As per the peer group and the mission, TMTG aspires to be a growth stock (we say aspires because the company is essentially just a vision at this point). And like all good growth stocks, it requires three things to succeed: A large total addressable market (“TAM”), high sales growth (not necessarily profits!), and a strong visionary leader that can get things done. These three things will likely not be a problem for TMTG (more on these in a moment).

Intense Pent-Up Market Demand

Despite his long list of business failures (as described earlier) TMTG’s chairman has a strong track record of demonstrating very strong demand for his social media content. For example, prior to being banned, his ability to attract users on social media platforms (similar to what TRUTH Social aspires to be, such as Twitter and Facebook) has been extremely strong.

And on a go forward basis, TMTG believes there remains very strong demand for a Trump backed social media platform (such as TRUTH Social).

And for a little more flavor on the intense demand for what TMTG hopes to offer, the stock price has gone up so much in the first two days since its announcement, that trading has been forced to halt multiple times.

As a reminder, TMTG’s SPAC merger with Digital World Acquisition Corp was just announced on Wednesday, and the shares were trading at only around $10 each just prior to the announcement (the volatility has been incredible!).

Massive Total Addressable Market (TAM):

As the worldwide digital revolution continues, technology’s move to the cloud is absolutely enormous, and the value creation for social media companies (mainly through data capture, advertising and sometime SaaS recurring revenue subscription models) has been gigantic, to put it mildly. For a little perspective, here is some data on the size of the digital audience that TMTG hopes to compete for.

In a nutshell, TMTG aspires to create a “rival to the liberal media consortium,” and that includes everything from social media, to news, entertainments and wide-ranging technology (ranging from server clouds, payment processing, information security, and seemingly everything in between). Again, TMTG wants to rival the Big Tech status quo.

And with regards to growth stocks (such as those mentioned above) all of the best opportunities have massive TAM opportunities (so they can keep growing at a high rate for a very long time). And considering the massive market size and pent-up demand, there is clear reason to believe the opportunity is there for TMTG. The question is whether TMTG can capitalize on it, or not.

The 2 Big Challenges:

One of the most common mistake of technology startup companies is the belief that if you build a better solution—the world will beat a path to you front door. False. Rather, building great technology solutions requires competence and capital—and these are not insurmountable—especially when there is intense pent-up demand. Rather, the two big challenges TMTG must overcome on its march to a “$1 trillion +” market cap are (1) gathering a critical mass of users, and (2) averting the certain onslaught of attacks from the incredibly massive and unquestionably powerful oligopoly know as “Big Tech.” For example, think what Amazon, Google, Apple (AAPL) and their allies (such as Stripe) recently did to Parler in their quest to destroy competition.

1. Gathering Critical Mass

One of the reasons why Twitter (TWTR) is so powerful is because it has a critical mass of users that can magnify the reach of its content through an incredible network effect. There are already many companies that loosely attempt to compete with Twitter, but they generally fall far short because they don’t have the critical mass that Twitter does. For example, the fragmented competition includes companies like Gab, GETTR, Telegram and others. The big problem is that people haven’t aggregated into one to achieve enough critical mass to compete with Twitter. What prevents TRUTH Social from having the exact same problem?

Unlike other social media companies, TRUTH Social will have the infamous and fragmentation-unifying power of former President Donald Trump. And for perspective, while there were plenty of Twitter accounts with more followers than Trump, few had the reach an impact of his content, as many users read closely but technically never followed his account.

TRUTH Social has the ability to gather the critical mass necessary to succeed simply though the intense favorability Trump has with a huge swath of the US (and global) population (as shown in the earlier graphic: “Would you use a social media platform that was backed by former president Donald Trump?”). Furthermore, gathering this critical mass will allow TMTG to expand beyond TRUTH Social, as it aspires to do, into entertainment, news and the holy grail known as the “technology stack” which is currently owned and weaponized by Big Tech and its allies to the detriment of anyone that dares to oppose them (again, think Parler).

2. Unrelenting “Big Tech” Attacks

The second, and most significant, challenge TMTG will face is the inevitable and unrelenting attacks from the extraordinarily wealthy and powerful “Big Tech” oligarchy and its allies. They will attack TMTG from both a business competition standpoint and from a political philosophy standpoint. Specifically, Big Tech may prohibit TMTG from accessing the servers (or tech stack) it will require, they may remove TRUTH Social from App Stores, and they may cut off TMTG’s ability to access and raise money electronically (as they often do through companies such as Stripe, GoFundMe and even Big Banks to some extent, see links for examples), to name just a few.

Regarding the “tech stack,” a social media app (such as the one TRUTH Social aspires to be) requires extraordinary server usage and access—something that is basically controlled by Big Tech. Specifically, Amazon Web Services, Microsoft Azure and Google Cloud have a monopoly on access to this type of technology stack power that will be required, and they can basically shut it off over night on a whim simply if they don’t like you (this is what happened to Parler). And none of the secondary tech stack people will step in to help because they are Big Tech allies with largely the same political views. This will likely be the single greatest challenge for TMTG if/when it starts gaining any momentum. It would be silly to assume TMTG isn’t aware of this, and it would be silly to assume they are not already working on contingency plans for when they do get kicked out of the cloud by Big Tech. TMTG is likely working diligently behind the scenes to build their own technology stack (as we saw in the earlier graphic in this report about the Corporate Competitive Structure), but it takes a lot of time and a lot of money (because they don’t have anywhere near the economies of scale as Big Tech).

Another big challenge is the app store. People love apps, and it will be quite easy for Big Tech companies like Apple (AAPL) to make up an excuse to kick TRUTH Social out of their app stores. This will be a significant challenge that TMTG will need to overcome.

Accessing capital electronically will be another major challenge (and opportunity) for TMTG. Some of the fastest and most successful companies today are basically Fintech companies like Stripe, Shopify (SHOP), GoFundMe, Square ((SQ) same CEO as Twitter—Jack Dorsey) and others. And they all have a track record of discriminated against companies with opposing political viewpoints (see links provided earlier for examples). This will be another massive challenge for TMTG, however a massive long-term opportunity as well.

In our view, the long-term vision of TMTG will be fulfilled if/when they can build out enough technology to challenge Big Tech in terms of webhosting (AWS, Azure, etc.), to also challenge (or bypass) the app stores and to bypass Big Tech’s electronic payment companies. This is an absurdly lofty goal, but the opportunity and demand is clearly there for TMTG to succeed.

TMTG’s Path to a $1 Trillion Market Cap

One way for TMTG to reach a $1 trillion dollar market cap in 10 years would be for its user base to reach 1 billion (less than Facebook, but more than Twitter), its average revenue per user (“ARPU”) to reach $40 (less than TikTok, more than YouTube, but not unreasonable considering inflation and scope), its revenue growth rate to be around 25%, and the shares to trade at around 25 times sales. Under this scenario, which is feasible, it would be reasonable for the shares to trade at a $1 trillion market cap based on peer comps, and considering the massive total addressable market (“TAM”) opportunity and demand.

For perspective, here is a look at a few of the most valuable social media companies in the world, in terms of ARPU.

As you can see above, this is a massive market with massive revenue generation potential (as well as massive and intense competition). And considering the scope of TMTG (which is wide, and for which there is massive demand), TMTG’s opportunity is huge.

For more perspective, here is a look at the revenue growth rates and price-to-sales ratios of a few of these (and other) top growth companies (many of which trade at even higher multiples).

(source: StockRover, (SNOW) (NET) (UPST) (CRWD) (PLTR) (OKTA) (SE))

TMTG has a lofty wide scope (in terms of products and services it hopes to deliver) and intense pent-up demand.

Again, at this point, TMTG is essentially just a vision. A very lofty idea. However, there is a lot of evidence to suggest the market opportunity is there (for a $1 trillion plus valuation), considering the massive TAM and intense pent-up demand. People laughed at Zuckerberg, Bezos, and Tesla’s (TSLA) Elon Musk when their companies were in their infancies, burning cash and essentially generating no profits. And while TMTG’s chairman is no Zuckerberg, Bezos or Musk, he has had a lot of successes too as a businessman, plus a track record of shattering expectations against the odds.

Conclusion:

TMTG will not have any trouble raising capital to build and continuously improve and expand social media and technology offerings (for example, with the way the stock price is going, a secondary offering would already net massive cash gains, and considering the intensity at which TMTG’s audience wants to succeed). The true challenge will be whether the business can overcome the massively powerful and obscenely wealthy Big Tech oligarchy that will will do everything in its power to attempt to stop TMTG from succeeding. Whether TMTG can overcome these challenges (to achieve its $1 trillion plus potential), or whether it becomes just another failure (in a long list of failures) is yet to be seen.

We expect to begin building a position in shares of this stock before the end of this year. Investing is a disciplined, long-term process, and if TMTG successfully shocks the world—it’s feasibly a $1 trillion plus company within the next decade.