What happened
Shares of video platform Rumble (RUM 1.71%) were down 25% this week, as of Friday at 12:30 p.m. ET, and had been down as much as 26% at the worst. This underperformance is further accentuated by the fact that the S&P 500 was up 3.6% for the week, as of this writing, meaning Rumble can't blame poor market conditions for its drop.
So what
The news cycle at the beginning of the week was positive for Rumble. The company had two press releases -- both of which could be positive developments for its video creator community. The first release stated that the Rumble app will now allow livestream notifications, potentially boosting user engagement. And the second announced new capabilities for its advertising platform, which could increase monetization.
The news is important because Rumble needs to make its platform more attractive to content creators. According to filings with the Securities and Exchange Commission on Wednesday, the company only generated $9.5 million in total revenue for the entire year in 2021 because it's still early in its monetization journey. In other words, Rumble may not be as attractive for some content creators compared with its much larger competitor YouTube.
Incentives for content creators is something Edwin Dorsey of The Bear Cave newsletter brought up earlier this week in a post entitled "Problems at Rumble." The report alleges many prominent content creators are compensated directly by Rumble and aren't necessarily making money from the community itself, among other things. The report was a big reason Rumble stock was down this week.
Now what
Rumble strongly refuted the report, pointing out on social media that its platform is quickly gaining adoption from users and some of its top creators get better engagement on Rumble than YouTube. The company also said it it had 78 million monthly active users (MAU) worldwide as of August, which I believe is the first time that number has been shared. It's certainly a big jump from the 52 million MAU it had during its peak in the second quarter of 2022. That's at least one encouraging takeaway for shareholders.
In closing, I believe Rumble's own words in refuting the report are important for investors today. Regarding video consumption, the company said, "We expect to monetize this consumption in the future, and it is disingenuous to criticize us for carrying out the strategy that we disclosed to investors." In other words, anyone buying Rumble stock today is buying it for its user growth, not necessarily the financials.
Even some on Wall Street recommend Rumble stock for what it could become someday, not necessarily for what it is right now. And that's fine so long as investors understand up front that it could take a long time to pay off with positive cash flows.
