I've been tracking the rollout and uptake of the app each time it is updated on iOS (which is quite frequently) - and while it's clear they are doing very well in the US - this is really only the beginning of their market penetration.
There is a high volume of traffic through the website and the app and it has all been via word of mouth and positive reviews (which is why they are closing revenue contracts with companies like Lego, Macmillan Books, Pottery Barn, Scholastic, Canon, Walt Disney, Walmart and Nike).
Chairman John Dougall said in his last letter to shareholders that he has personally taken several technologies "from zero to over $100,000,000 per annum. I believe that the Tinybeans offering has global potential."
I'm inclined to agree with his assessment of TNY’s global potential just by looking at the stats. Here's a cut from earlier this year (TNY in blue is compared to its next closest competitor Lifecake in red, who was actually acquired by Canon – yes taken over by the multi-billion dollar Japanese printer company Canon):
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Before I forget: during my research I found out that Google (yes, that Google) offer Tinybeans Premium Subscriptions for free for the first year as a perk to their US employees. I thought that was pretty neat.
Now keep in mind TNY haven't even officially begun to look at countries outside the United States - "our current focus is on the 35 million young families in the USA. We’ll look at other markets once we capitalise on the significant potential of the US" - but it's already gaining viral traction in other nations due to the unique privacy proposition and decline of Facebook.
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Turns out that privacy is important – especially when it comes to family. Tinybeans empowers people with legitimate concerns about entities such as Facebook to take back ownership of their data. Family is arguably the most important thing in our human lives, so it naturally follows that people take this seriously.
I've previously said that we are witnessing a momentous shift from traditional social media monopolies to more trustworthy niche providers (such as Tinybeans). Similar to how we are also witnessing trust shift from the 'Big Four' banks, VISA & Mastercard to new consumer-friendly brands and services such as Afterpay.
People overestimate the power and agility of a generic platform like Facebook, which has already suffered reputational and brand damage. Millennial parents are rightfully concerned about privacy, and nobody wants to overshare on a non-secure network. The user reviews of TNY speak for themselves.
Is there evidence of this? Look at the Net Promoter Scores so far. This is the best tool we have when it comes to social media to gauge the loyalty towards and popularity of a platform.
Tinybeans has a Net Promoter Score of 80.
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What does Facebook have? I’m glad you asked…
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Now some of you are probably thinking – how long can people possibly keep using this app? Well, there are ~131 million children born each year and plenty more parents to come in the future. TNY has very high retention rates for users compared to social media platform averages. User acquisition has predominantly been through word of mouth referrals.
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There is potential and scope to expand the platform to focus not just on infants – but tracking the entire journey of the early life of a child.
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Once a customer signs up, the brand loyalty is very high. Over 90% of Tinybeans members would purchase a product or service that Tinybeans recommends. It has the first touch of the millennial parent demographic (much like Afterpay) and these people are just coming into their prime income-earning years. That means more dollars across the board. The 'special event' sales for brands reminds me of the Afterpay "Afteryay Day" kind of deal. Here is an example of their e-commerce potential.
The new content platform that was also just announced further validates TNY as the number one repository in the world for parents and families to consume content (and targeted advertising).
At 33 million AUD market cap, this is still very much undervalued. Tech company valuations work a bit differently to conventional stocks most people are used to. Social media networks, in particular, derive their value from the size of the network. Given the highly targeted nature of the app to the lucrative millenial parent demographic, the value of each user is probably significantly higher than comparative generic social media companies.
Metcalfes Law would dictate that if the number of users in a network doubles (which it has after reaching 3 million users since IPO) then the value of said network actually goes up by quadruple. Therefore, TNY should be trading at four times its 2017 valuation - or a price target of around $4 AUD per share.
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Even if you ignore this, when you look at other social media companies, TNY remains severely undervalued and a very compelling investment proposition. I note with interest that Pinterest just IPO'd in the United States @ 10 billion USD. Need I say more?
Most people seem to overlook that TNY since IPO has tripled the users; built out a world-class team; reduced costs across the board; signed new partners like Disney and Lego; increased revenues; and accumulated over 40,000 5-star ratings on the App Store.
Now imagine if they switched on their marketing efforts for mainland Europe or Asia? That growth would be HUGE. And I dare say families in Europe and Asia are at least as invested - if not more so - in recording and maintaining a family journal that functions as a secure, digital keepsake. A digital keepsake that will never fade away like an old photo book. Do not underestimate the tremendous power of keeping a family history and heritage. It's part of the human experience.
Finally, TNY have repeatedly reaffirmed their commitment to turning operating cash flow positive during calendar year 2019 and appear very much on track to achieve this based on the last few Quarterlys.
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And all this is why I think this is still a strong BUY.
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