Ask the majority of the Western world and it is unlikely that they would recognize the name YY (YY). Ask the same question in China and the Far East however and it is unlikely that anybody would not recognize the term. YY is a social media network that differentiates itself from the incumbent networks of the region through a range of features, primarily by allowing its users to stream live content for groups or teams of viewers. During these live streams, viewers can interact with both the content provider and each other through the YY platform. They can also compensate the provider for whatever it is they are streaming, be it karaoke, tutorials of video gameplay. The most recent figures reveal YY to have a user base that exceeds 400 million users, with 70.5 million monthly active users and 10.0 million peak concurrent users. YY listed on the NASDAQ in September 2012, and as the current market valuation of $3.95 billion. Of the past two years, the company has grown faster than Sina (SINA), the company behind China's most popular social media site Weibo. In the west, the three incumbent social networks are Twitter (TWTR), Facebook (FB) and Google's (GOOG) Google +. At present, it seems unfathomable that any network could gain a high enough share of these networks' user base to become relevant to Western society. YY however, has proven that this is not the case. If a social network can differentiate itself from those mentioned, in the sense that it can offer its users something that Facebook, Twitter and Google cannot, and it has a shot at becoming relevant. One company currently attempting to do so is Nudg Media (NDDG).
Nudg Media runs Nudg.com, a brand-new social media platform. The company describes itself as establishing an innovative business model intended to bridge cutting edge social media and e-commerce into a marketplace that connects friends family consumers and vendors in new and exciting ways. What does this mean? Nudg has designed its platform to bring two major elements the online world together - social networking and e-commerce. It intends to do this by combining all the standard features of a social media platform, including posting content, online messaging and profiling, with an online marketplace that, through next-generation social technology including voice/text messaging, video email, video calling, VoIP calling and mobile technologies, allows users to access real-time information about products and services.
A look at the platform reveals a clean, simple and intuitive interface, that incorporates much of the usability of its competitors. Such similarity draws the question as to whether Nudg can compete with Facebook and Google+, but it is likely that these are not the companies with which Nudg will be competing for eyeballs over the next 2 to 5 years. Rather, it will be from companies like Groupon and LivingSocial that Nudg draws users. The Nudg platform allows its users to form what the company refers to as "zones". Simply put, the zones functionality allows users to organize groups of friends, colleagues or other individuals, and choose, on publication, which of these zones can view content. The feature allows individuals of certain professions for example, to connect with individuals of the same or similar profession and share professional content among the members of the zone without it appearing in the newsfeeds of their personal connections. Similarly, this means an individual can separate their personal and professional online presence from one another, without having to switch between networks.
This zone feature also offers Nudg a unique revenue stream. It allows the company to deploy targeted marketing campaigns aimed directly at the relevant zones. For example, a sports nutrition company could pay Nudg to distribute marketing material within a zone of sports enthusiasts or gym goers. While this is not dissimilar to Facebook targeting marketing material at users who are parts of a particular group, the criteria with which Nudg classes a zone will likely translate to increased promotional efficacy. The reasoning behind this is that in order to join a group on Facebook all the user has to do is "like" that particular group. In contrast, Nudg's zones of groups of individuals who actively share content with one another that relates to what advertisers are looking to promote.
Another concept that should drive user base growth for Nudg is its augmented reality coupon feature. An augmented reality coupon feature allows users to point their smart phones at buildings or streets and be presented with coupons that appear to hover in front of or above establishments offering discounts on goods or services. This offers the company the chance to generate revenues from streams currently unavailable to Facebook, Google and Twitter. The location specific nature of the coupon system, which also includes proximity alerts for specific merchants, will enable Nudg to charge a premium advertising fee for client access to its user base.
In short, the company is, at heart, a social media network. However, just as YY is differentiated itself from its major competitors by offering a live streaming facility, Nudg is offering an e-commerce and web-based marketplace facility to its users. If the company can execute its strategy, it could attract a large user base and a short period of time.
There are, of course, risks associated with investing in any early stage technology company. In addition, the high level of competition for social media users amplifies this risk. Attracting a user base and expanding the business of this nature can be a costly endeavor, and it may be 2 to 3 years before Nudg generates annual retainable earnings. The clear and simple revenue streams (augmented reality advertising and targeted promotion) suggests that the process may not take as long as it has taken for Facebook or Twitter, but there will likely still be considerable lag between user base growth and revenue growth. During this lag, Nudg will likely have to fund its operations through various financing rounds, the majority of which will likely come in the form of share issue. Investors should be aware that any such issues would dilate the value of an early stage holding.