Trump’s TRUTH social challenges will weigh on DWAC’s stock price

Launch of Former President Trump’s TRUTH Social on Apple

AAPL
App Store on Monday, February 21. After a flurry of downloads, the number of them dropped dramatically. This is likely due in part to various technical issues on the site, as there are around 1.5 million people on the waiting list, but it could also indicate that high demand will not materialize. Given the current rate of downloads, TRUTH Social will be hard pressed to live up to the predictions it made to investors.

Downloads down 97%

Sensor Tower monitors various mobile app metrics and has tracked TRUTH Social since launch. Based on data from the last week, it shows that downloads have dropped by 97% from the initial burst in the first week.

  • February 21-27: 866,000 downloads
  • February 28-March 6: 138,000
  • March 7-13: 128,000
  • March 14-20: 58,000
  • March 21-27: 41,000
  • March 28-April 3: 30,000
  • April 4-10: 34,000
  • April 11-17: 28,000

Stephanie Chan, Sensor Tower’s Mobile Insights Strategist, said, “It’s difficult to predict how TRUTH Social will perform in the future, as we’ve seen app popularity rise at launch and then decline, as well as vice versa in cases such as than Parler, which has been gaining momentum years after its launch in late 2018.”

She added, “The app faces the additional challenge of entering a competitive space, especially one that relies on a network effect, which will require, among all the technical hurdles, a significant and sustained marketing campaign to overcome.”

On the Apple App Store, TRUTH Social has fallen from number 19 to number 33 in the Social Media category over the past few weeks. It sits between Talkatone: WiFi Text & Calls and Messenger Kids.

Key Trends to Note

  • Downloads have dropped every week but one in seven weeks
  • Last week saw lowest number of downloads
  • Downloads dropped 97% in less than two months
  • Cumulative downloads are only 1.32 million

Well below management projections

On Dec. 6, Digital World Acquisition Corporation or DWAC, the SPAC merging with President Trump’s new media company, included a presentation to investors in an SEC filing (scroll down the bottom of the filing). One of the graphs, if not the most important, is the last one showing revenue projections from 2022 to 2026. The reason it is so important, in addition to estimating revenue, users, and average revenue per user, or ARPU, is that it helps justify a stock price that has skyrocketed since the announcement of the merger.

In the last slide titled “Revenue Projections”, there are assumptions for TRUTH Social, the Twitter-style social media site, and TMTG+, a subscription service similar to Netflix.

NFLX
or FOX Nation. The slide contains an estimate of the number of users or subscribers, how many could be monetized for TRUTH Social, and the ARPU for both offerings. The chart also shows how much total revenue it would generate.

Total number of TRUTH Social users (likely year-end numbers)

  • 2022: 16 million
  • 2023: 41 million
  • 2024: 56 million
  • 2025: 69 million
  • 2026: 81 million

Unless downloads resume, the number of downloads for 2022 will be well below the projected 16 million.

  • Assume 35,000 downloads per week for the rest of the year
  • Which is above the average of the last four weeks
  • 37 weeks left in 2022
  • The total downloads for the year will not even reach 2.6 million

As can be seen in the numbers from Sensor Tower and using my assumptions for the remainder of the year, TRUTH Social may only have 16% of what management expected.

Implications for SPAC’s share price

It’s no surprise to see TRUTH Social running into implementation and deployment issues. This is typical for any startup creating a new app that targets millions of users.

However, the SPAC Digital World Acquisition Company (ticker: DWAC) which plans to merge with Trump’s social media company has a pre-merger valuation of around $1.8 billion and nearly $10 billion when the additional shares that will be allocated after the merger are included. .

Although TRUTH Social is the smallest revenue component of Trump’s Media and Technology Group, it’s probably the easiest segment of the business to set up and run. The other segment, TMTG+, which aims to compete with companies such as Netflix and Disney, will be a much tougher technological challenge. If TRUTH Social does not move, it could significantly damage the stock price outlook of TMTG+ and DWAC.

Karen J. Nelson