Miami, FL - When you read the words ‘social media’ what do you think of? Odds are your thoughts turn to your Facebook (NASDAQ: FB) page, your LinkedIn (NYSE: LNKD) account or your Twitter feed. You’re connected. You’re social. You’re aware of what’s trending globally. You’ve got it going on and all without having to leave the comforts of home. Consider these statistics; a recent study by the Pew Research Center shows that adults under 50 are more likely to use social media than any other demographic. In the peer group aged 19 to 28, 83 percent use some type of social media platform on a daily basis. Women are more likely than men to tweet, use Instagram, log onto Facebook and connect to Pinterest. In fact, 67 percent of Facebook users are women under the age of 50. Another demographic to consider is that urbanites are more likely to utilize social media than their rural counterparts. Like your favorite bar or club, social media platforms have become the place to meet your friends, make new friends and network.
There are, of course, the Goliaths in the industry; those companies that have set the precedent for growth and creative genius behind the popularity of all things social. Companies such as Facebook, Google and Yahoo! have opened the door and, inadvertently, made room for all of the smaller, perhaps tougher, David types to enter the fray, one of them being MEDL Mobile Holdings Inc. (OTCBB: MEDL).
The best social media programs translate the consumer’s social time into a brand premium, reaching a return on investment up to four times as high as the return on investment on a television commercial. MEDL is expert at monetizing its client’s social time and has taken monetization to another level with its new app, Hang w/. The new app allows real-time streaming of video from one phone to a multitude of phones at the same time. The viewer sees a short add at the beginning of the transmission and another at the end. MEDL’s clients receive a percentage of the advertising revenue based on the number of followers. Hang w/ is in beta testing at this time but once it hits the market there will be no looking back. The new app is set to revolutionize how we view celebrities, family, friends and their social lives. The company has developed unique mobile apps for such brands as Taco Bell and Verizon and will have no problem garnering lucrative advertisements from some of the most recognized brand names.
MEDL has a unique advertising and marketing strategy that allows for monetization. The company derives significant revenues by charging fees to sponsors for app advertising and then allowing a third party to take over the app with deeply embedded advertising and marketing. MEDL wholly owns the library of apps that it seeks to monetize, unlike traditional advertising networks. Although the company’s primary business is monetization of apps, Hang w/ will place the company firmly in the social media venue with enough strength to take on the Goliaths in the social media tech sector.
When you buy into a social media company you are typically paying a higher price to own part of a company that may or may not last. Historically, Internet based companies that don’t offer an actual product, have a tendency to weaken when the next really cool fad emerges. Most social media companies have over inflated valuations such as LinkedIn. After its last quarter report, the company now trades with a P/E ratio of 800 and a price/sales ratio of more than 16.5. Those numbers would apply to a company that has had years, and I mean years of explosive growth. Yelp, another social media company, rose 2.34 percent last week riding on LinkedIn’s earnings. The company is already seeing slowed growth, with top-line growth of about 40 percent expected in 2013.
The question is how long the overvaluation will last? I don’t think it can be sustained but that is my opinion. The unsustainable valuations of social media stocks in 2012 is worth remembering as Twitter is being valued at around $11 billion in its latest funding round and hopes to go public in late 2013 or early 2014. Taking into consideration the badly skewed value of social IPOs in the past year it would be wise to look before you leap into what might be a case of lambs being led to the slaughter.
On that note, Companies such as MEDL have plenty of room for growth and are definitely not overvalued. In fact the stock is undervalued at this time when you consider the phenomenal growth the company has experienced in the past year, the products it offers and the products in the pipeline. It is small enough that it will not overgrow its niche any time soon and is valued at a sweet entry point. Seriously, I would consider this play before jumping into high priced, overvalued companies that have already proven to be major theme park rides for too many investors this past year. Another nice incentive is that MEDL, through its App Incubator believes in giving people the chance to shine from their app ideas. None of the Goliaths I have researched offer anything like that to consumers.
The bottom line is that MEDL has much more to offer than an E ticket ride. Beware companies with novel business models and little or no profit. They can lead to investors getting slaughtered like so many lambs. It happened this past year on more than one occasion.
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