Several days ago, Vinco Ventures (NASDAQ:BBIG), a “mergers and acquisition company focused on digital commerce and consumer brands,” closed its merger with Lomotif, a short form video-sharing app similar to TikTok. Given the latter’s incredible reach and popularity, on paper, BBIG stock has significant upside potential.
Unfortunately, reality can be a cruel mistress. To be fair, BBIG stock moved a bit higher in the immediate wake of the merger closing announcement. However, since hitting a peak this year of $5.25, Vinco Ventures shares find themselves down over 35%. With such a highly speculative market environment, BBIG risks losing its fanbase should it lag excessively.
Nevertheless, the video-sharing element within social media is intriguing. First, as our own Mark Hake wrote, Lomotif “claims to have over 31 million monthly active users (MAUs).” Second, the underlying business caters to one of the most relevant trends in social media.
According to a 2020 analysis by Wyzowl, people shared video content at twice the rate of any other content format. Further, the company “found that 84% of people were convinced to buy a product or service based on the brand’s video.”
Potentially, that sets up advertising revenue synergies for Lomotif, which in turn bodes well for BBIG stock. By taking more market share from short form video content leaders like TikTok, the competitor brand could dramatically increase its relevance. Combine that with the low share price and social media fervor of BBIG and you could see another massive opportunity.
However, this is a speculative proposition to say the least.
Fickle Nature of Social Media Apps Clouds BBIG Stock
As I’m writing this, one of the latest news items supporting the bullish narrative for BBIG stock is an announcement Lomotif signed a licensing deal with Universal Music Group. That gives the video-sharing platform and its users access to Universal’s large music catalogue. Naturally, this should increase engagement.
A quick Google search reveals that UMG artists include Taylor Swift, Amir Tataloo, Seventeen, Kanye West, Niska, Lady Gaga and many, many more. For full disclosure, I hardly know any of these acts, but that matters not one bit. Apparently, they’re very popular with the generation Z crowd, and that’s ultimately the key for BBIG stock.
Still, I think careful skepticism is the way to go for Vinco Ventures. I’m not opposed to some risk capital thrown in here, so long as you’re not gambling more than you can afford to lose. But despite the many positives, the overriding headwind for BBIG stock and its ilk is the fickle nature and oversaturated market of social media platforms.
According to Influence Marketing Hub, internet and mobile users have at least 103 social media platforms to choose from. That’s quite a figure, making it so easy for a relatively smaller outfit like Lomotif to get lost in the crowd.
Sure, Lomotif has over 31 million MAUs, which is nothing to scoff at. However, rival TikTok has about 100 million MAUs — just in the U.S. Overall, global users collectively downloaded TikTok approximately two billion times. Therefore, unless we have some numbers to back up the thesis that Lomotif will continue to blossom, it risks falling prey to the fickle nature of social media.
Being on the lower rung of the top 50 social media platforms just doesn’t have an appealing ring to it.
As well, Mark Hake reported a dearth in Lomotif’s financials, implying that in a way, you’re flying blind with BBIG stock.
BBIG Stock Needs Something Unique
Generally speaking, to survive in the highly competitive realm of social media, you need something distinct about your offering. Facebook (NASDAQ:FB) has its near universal ubiquity. On the other hand, Twitter (NYSE:TWTR) is a master of succinct messaging, especially allowing regular folks to interact with high-profile personalities.
Snap (NYSE:SNAP) has its charming take on short form messaging and content that appeals to young people. And TikTok has turned talented individuals into genuine celebrities when they otherwise might have languished in obscurity.
In other words, each of these platforms gives the user a distinct reason to be on them. As a direct competitor to TikTok, Lomotif is intriguing because of TikTok’s global pull. But to Hake’s point, without supporting evidence of the underlying BBIG’s rich premium, I’m going to have to take a pass on this.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.