Crowd Media outperforms expectations via pivot towards conversational commerce

Global media and marketing company Crowd Media (ASX: CM8) reported a mixed bag of full-year results on Friday, as it continues to conduct wholesale changes as part of an “operational transition” that has seen its fortunes turned around over the past nine months.

In a statement to the market, Crowd Media reported revenues of almost $16.5 million in the past financial year and a marginally positive earnings before interest, tax, depreciation and amortisation (EBITDA) of $140,000 – an improvement of $2.8 million compared to the previous year. Overall, Crowd Media reported a net loss of $1.9 million after slashing over $8 million in operational costs.

Moreover, in a bid to diversify its revenue channels and pivot towards a more scalable business model, Crowd Media has set up a new consumer-facing division, Crowd Direct, a distribution business that directs various consumer goods to online customers.

The company said the new unit generated $350,000 from a “standing start” on the back of early partnership deals with the likes of Amazon, KINN-Living, Teadora, London Labs, Vital & I am Kamu.

According to Crowd Media, the rationale behind exploring new horizons is to “sell exemplary products integral to the lives of European-based millennials” with the media and marketing company keen to leverage its digital presence to distribute premium brands to customers across the European Union.

The company is now testing and tweaking various settings to “home in on the secret sauce” required to sell uniquely differentiated products, according to Crowd Media chairman Steven Schapera.

Furthermore, the company explained the impact of COVID-19 had left it with little choice but to focus on homecare, hygiene and health products, hence the deal struck with Vital Group in June 2020.

Talking conversational commerce

As part of the continued development of its question and answer (Q/A) platform and to reduce costs while boosting scalability, Crowd Media revealed more than 60% of all questions being asked by customers were now being handled automatically by artificial intelligence (AI). This is significant because a full AI capacity would slash costs and raise scalability.

Citing a “number of regulatory headwinds” and a drop-off in use of SMS messaging, Crowd Media referred to 2020 as a “transitional year” with 2021 projected to be marginally stronger as the company continues its strategic reshuffle.

The extent of Crowd Media’s internal shakeup has been extensive; pivoting its active focus away from mobile services towards what the company called “conversational commerce” and the technology infrastructure that is driving this tech niche.

Conversational commerce refers to a specific thread of the tech tapestry that includes e-commerce done via speech and using technology such as speech and speaker recognition, natural language processing and AI.

The company said its transition was leveraging synergies across the entire business, in addition to forging new alliances, with the ultimate goal of positioning Crowd Media in high growth market niches.

“When complete, the company will have effectively transitioned from being a product-centric business in a declining space to a tech-based, vertically-integrated social commerce business selling exemplary products and services in a growing space,” said it stated.

New horizons

Carrying out the ‘Three Horizon’ growth strategy it presented to shareholders at its annual general meeting late last year, Crowd Media declared it is seeking to move from a consumer focus in 2020 to selling digital products via collaborations in the travel insurance and fintech spaces in 2021.

By the end of 2022, Mr Schapera said he expects to “find the holy grail of influencer marketing” by obtaining the ability to enable conversational commerce between follower and influencer, and by augmenting this relationship with a digital visual experience.

More specifically, Crowd Media said it intends to link its existing Q/A chatbot with third-party digital effects engines that will allow customers to conduct video calls with digital representations of famous celebrities, non-playable characters and even famous historical figures via their devices.

“The influencer market is a highly competitive and dynamic one. As with almost any market, it favours the incumbent, but we have good reason to believe we can squeeze our way in,” Mr Schapera said.

In a very candid and optimistic assessment of near-term market evolution and performance, he added: “We have picked a diverse assortment of products to identify and test the area of opportunity. Our real interest is to be at the table when technology shifts the market tectonically to conversational commerce. Then, we will be the incumbent, and hold a truly sustainable competitive advantage.”

Moreover, in a separate letter to shareholders, Mr Schapera went into further detail regarding Crowd Media’s re-galvanised operations and horizon-seeking shift towards speech-recognition over the past 12 months.

“We have streamlined every single aspect of the business during FY20 and evolved into a lithe, lean, and nimble business run by entrepreneurs, not corporate managers.”

“We have identified and flushed out opportunities, defined measurable objectives that are coupled to timelines, developed the strategies and strategic alliances to meet these objectives, and executed with speed and professionalism,” Mr Schapera said.