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JMDA: Initiating Coverage on Jerrick Media Holdings

01/22/2020

By Zacks Small-Cap Research

OTCQB:JMDA

READ THE FULL JMDA RESEARCH REPORT

‣ Jerrick (OTCQB:JMDA) is a five-year-old company, which spent the startup phase developing a revenue-generating platform, built primarily for the creator and the broader creative community. Via an acquisition, the company recently started to generate meaningful revenues. Its main source of revenue is expected to be from its new subscription services sold to web-based content creators and the brands that are anxious to access the creators’ audience. It could now be at the beginning stages of rapid growth.

‣ Jerrick’s platform, Vocal, supports all forms of rich-media content: text, video, audio, images, products, and more. The platform has an easy-to-use open canvas content editor. Users can embed a variety of digital content including YouTube videos, Instagram posts, Spotify playlists, podcasts, and more directly into Vocal’s editor. The invention of the smartphone first allowed users to aggregate digital content, resources and services. Now, the Vocal platform provides users with aggregated digital content, resources, and services on a more targeted basis. Vocal is the next iteration of this aggregation trend, empowering the creative community with powerful storytelling resources and tools, which can be accessed more efficiently and effectively than could its predecessors, and from any device, whether on mobile, desktop or tablet.

‣ Jerrick has created a next generation platform for creating and sharing multimedia content on the web. Vocal was built in conjunction with Sydney-based development group Thinkmill, led by its founder Jed Watson. Its flexible architecture was built from the ground up using Keystone, a cost-efficient, and highly scalable development framework. Vocal’s technology offers a number of differentiating factors that can enable it to compete effectively with the likes of WordPress or Medium for both eyeballs and creators. Vocal’s scalable technology is easy to update and built to support future development, which should result in much lower operational costs than its legacy competitors.

‣ Revenues are primarily generated from content creators and brands, not readers. There is no display advertising on the site or cost for readers to read/view content, both increasingly unprofitable business models. Not having a paywall encourages visitors and views, which supports revenues from brands through native advertising. Jerrick collects first-party data that can be used to help brands target audiences in third party systems such as Facebook, Instagram, and Snapchat, which works to optimize conversions on branded content campaigns. Through Jerrick’s acquisition of Seller’s Choice and its e-commerce based clientele, Vocal has expanded its technology into the direct-to-consumer marketplace, providing invaluable data to brands and the opportunity to work with Vocal for Brands.

‣ Viewership on the site is enhanced by proprietary search engine optimization (SEO) built into Vocal’s architecture. As creators amplify their content through their own social media channels, the optimization is further enhanced. Creators can get more views and greater discoverability by publishing content on Vocal as opposed to other sites geared toward short form content, which have limited search capabilities and discovery tools, as well as limited opportunities for content monetization.

‣ While platforms such as Medium, Patreon, Vimeo, and Automattic have burned through $100’s of millions of dollars and not reached profitability, Jerrick looks to reach operating breakeven at approximately $1.5 - 2 million in quarterly revenues. This could be reached as soon as the end of this year depending on how subscriptions ramp, based on its next generation technology, low cost architecture, and unique user generated content strategy. Additionally, on January 22, 2020 the company released a new offering for creators and brands–Challenges–which is expected to be a key revenue driver in 2020.

‣ Per an S-1 filed on September 27, 2019, the company is planning a $6-$7 million capital raise to support growth both internally and through acquisitions. At the same time, it will be rebranding and changing its name to Creatd, as well as uplisting to the NASDAQ, where it has an active application. Management expects the uplisting to take place in first quarter 2020. This cash raise should see it through to cash flow breakeven barring any outsized acquisitions.

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