Video-sharing platform Rumble (RUM +0.07%) is on a mission "to protect a free and open internet." On Nov. 14, the company reported financial results for the third quarter of 2022, giving shareholders greater insight into the company's operations.
But one number is more head-turning than all of the rest: In Q3, Rumble had 71 million monthly active users, up 97% year over year and up 61% just from last quarter. Here's what it all means for Rumble stock.
NASDAQ: RUM
Key Data Points
What's going right for Rumble
Through the first three quarters of 2022, Rumble has only generated $19.4 million in revenue. But cut the company a little bit of slack. It's early in its monetization journey and still building out its advertising technology. Therefore, it's not surprising to see a relatively small amount of revenue, compared to its lofty market capitalization of $2.7 billion.
One thing's for sure: You can't monetize anything if you don't have an audience in the first place. But encouragingly for shareholders, Rumble has one. The platform averaged 71 million monthly active users in Q3.
For perspective, it had only about 2 million monthly active users in the same quarter just two years ago. Therefore, Rumble has a large and growing audience from which to generate revenue.
That said, Rumble's active user base does come with an asterisk. Its user base of 71 million aren't necessarily registered accounts. Rather, the company measures its active user base by unique traffic to its website and app. Just a visit to the website -- something I did while familiarizing myself with the platform -- appears to count by Rumble's definition.
Given this dynamic, it's possible that the spike in Rumble's monthly active users in recent quarters is related to the company going public. An event like this can raise awareness and can't be ruled out as a (temporary) contributing factor driving traffic to the company's platform.
It's something to monitor in future quarters. But Rumble's 71 million users is still the most impressive number for the company right now, nonetheless, and is worth celebrating for shareholders.
The long road ahead
Rumble appears to have a very large active user base. However, there's still a long road ahead to creating enduring shareholder value.
The company aims to provide a platform free of censorship, which often leads to a polarized debate regarding free speech -- one I aim to avoid here. However, I would like to note that Rumble isn't the first company to wade into these waters. Two other familiar social platforms are Twitter and Parler.
In its conference call to discuss Q3 results with investors, Rumble management mentioned Twitter's new owner Elon Musk. Rumble co-founder and CEO Chris Pavlovski said, "We have someone like Elon Musk doing a very similar thing where he is advocating for free speech."
You may believe that Musk has made good changes to Twitter during his brief ownership. But it's worth noting that about half of the top 100 advertisers on Twitter have left the platform in the last couple of weeks, according to Media Matters for America, which isn't good for business.
It's possible that advertisers are less willing to do business with Twitter because it's censoring less content. The same could hold true for Rumble. It may struggle to attract advertisers because of its aversion to censored content.
Another company ideologically aligned with Rumble is Parler, which calls itself the "global free speech app." But in early 2021, the app went offline after Amazon's AWS stopped providing cloud services. This is why Rumble is undertaking the expensive endeavor of building out its own cloud infrastructure. It wants to ensure that it's immune to this risk.
However, Parler was also banned from the app stores of Alphabet and Apple for a period of time. Therefore, even if it had its own infrastructure, it still would have had its distribution adversely effected.
There are rumors that Apple and Alphabet could, likewise, ban the Twitter app, something that -- if it actually happened -- Musk already said would necessitate Twitter making its own smartphone. Even though Twitter would still be available on the web, it's still important to be available as an app in a mobile world.
The point is, even if Rumble successfully attracts loyal users and builds resilient cloud infrastructure, it could still face monetization and distribution risks, as other platforms have experienced.
In conclusion, if you're a Rumble shareholder, celebrate its outsized user growth in recent quarters. That's impressive. Monitor user trends in upcoming quarters in case usage starts to fade as its recent media buzz dwindles.
However, if you're on the sideline with Rumble stock, understand that it still has substantial challenges to overcome in the years ahead. Personally, the aforementioned risks are too big for me to be bullish about Rumble as an investment.
