The
following interview of George
Fleming of SoMedia Networks (TSXV: VID) & (SMDWF) was conducted by phone and email in
the week ended April 12th. Subsequently, SoMedia announced the launch of a full
service YouTube Video Ad production
platform for Google Partners. As of
April 16th, Peter Epstein has no prior or existing relationship with any
company mentioned herein. Prospective investors should conduct their own due
diligence including consulting with their own investment advisors. A good place
to start is at SoMedia’s Investment Center,
where one can find an informative video by President & COO Ben Pickering.
Please tell readers, in a single paragraph, what exactly SoMedia does?
SoMedia provides access to professional, full-service video production everywhere in North America. Through the use of cloud-based platforms and sophisticated crowdsourcing management systems, SoMedia has solved the challenges of scale, volume and reach in video production. We enable digital agencies, online marketers and large advertising and marketing platforms to seamlessly offer access to video production to their clients, with guaranteed quality and consistency, no matter where they are located. [Note: Please click here for Sample
Video Ads]
New online technologies come and go. Sometimes being a first
mover backfires. What makes you think that SoMedia can compete with the likes
of Google & Yahoo?
The
companies you mentioned are getting more serious about video ads but none are
focused on production. Companies like Google/YouTube, Facebook and Yahoo! are
focused on monetizing video ad content, not creating it. Partnering with
SoMedia enables them to offer affordable and accessible video ad creation to
their advertising clients, which fuels their business.
Some might still fear that competition is too big a risk. Is
SoMedia viable as a standalone company if giant(s) enter the space?
Video production has existed for a long time as a fragmented
market of small production companies and a few larger agencies / studios.
SoMedia is disrupting this space and will put a lot of the independents out of
business as we consolidate market share. The total addressable market is in the
billions of dollars and certainly large enough for SoMedia to thrive as a standalone
company. There are no big players that seem likely to enter the space and if
they wanted to do so it would likely be through partnership or acquisition. We
have a big head start and the validation of industry leaders.
What would a new entrant need to accomplish to unseat or
under-price SoMedia?
SoMedia
has invested significant resources in developing not only its large, vetted
network of videographers, editors and creatives, but more importantly in the
technology to manage this distributed workforce across large volumes of
projects. Significant capital, know-how and time would be involved in
replicating what we have developed. Moreover, we have integrated with 20+
leading SaaS platforms as the only scalable video production solution available
to their clients, and we have developed a large reseller channel to aggregate
demand plus developed an ad production platform for Google partners. A new
entrant would not easily be able to recreate this critical foundation.
SoMedia is enjoying positive buzz, its stock price is up and it
has been written about in flattering articles & interviews. What are the
key risks?
The risk
is simply being able to continue to execute on the opportunity and to access
the capital necessary to do so. Video marketing and advertising is rapidly
evolving and we need to continue to keep pace and deliver unique solutions to
marketers.
Do you envision a tipping point in video ads this year? Next
year? Has it already happened?
Calling a
tipping point is like trying to call a market top or bottom. We are definitely
on the upswing in terms of demand for video and the need for a scalable
solution to production challenges as the use of video continues to accelerate.
A number of articles such as this one support the idea that the tipping
point is near if not already upon us.
What needs to happen to make SoMedia a HUGE success? What would
that look like in terms of business metrics / growth / market penetration?
Becoming
the go to source of video ad production or marketing video production for
agencies and internet marketers and by partnering with large video ad networks
and content marketing platforms. By continuing to grow our base of resellers we
are on our way while accelerating the rate of repeat video purchases by these
resellers is on ongoing effort that is accelerating on its own as video
marketing and advertising adoption speeds up. The biggest immediate opportunity
in front of us is to capitalize on integrations with the 20 leading SaaS
platforms we’ve already completed and begin initiating content marketing and
demand generation programs – so beginning to look at customer / partner
acquisition through these platforms can provide huge upside.
Does SoMedia need additional equity capital this year? If
so, might that be the last raise required
before achieving self-sufficiency?
SoMedia
will continue to raise capital when its attractive to do so. As the first mover
in a new category that is growing rapidly our shareholders expect us to capture
as much market share as possible and grow the potential of the company.
Might there be a benefit derived from making acquisitions
of select private companies?
Yes there
are opportunities for us to make acquisitions that broaden the breadth of video
content production we can provide or to expand to add video marketing solutions
together with video production
Are you’re healthy margins destined to slip? Perhaps due to
increased infrastructure, competition or higher SG&A?
We have healthy gross margins on a per video basis and we
actually have room to bring our costs down further by potentially offshoring
editing, so we don’t foresee gross margin deterioration. SG&A expenses
affect operating / net margins, but over time, as revenue accelerates, our
SG&A as a % of revenue will decline and we forecast a healthy net margin as
well. At this point the company must invest in sales in marketing to grow the
business and capitalize on the market opportunity.
Is there a way in which SoMedia could be sued? Most Independent
contractors probably do not carry insurance of their own.
Although
there is never any certainty we have developed layers of contracts and
agreements between clients and between creative designed to protect us.
We don’t do any work without these agreements being signed first.
In other interviews, SoMedia has been compared to Uber. Is
there a comparison you can make other than Uber?
The Uber
comparison is a good one to explain how we leverage technology and act as the
interface for end users to access a distributed network of service providers.
Another comparison drawn in the Cantech interview was to WordPress, the website
development platform. This is an apt comparison in terms of how we are
disrupting the market for video production in the same way WordPress did for
website development by making it no longer a requirement to have highly
specialized skills (html, etc.) in order to build a website. Likewise we have
made the traditionally complex and expensive process of creating video
something that is now accessible to businesses of all sizes and budgets.
Are there misconceptions about SoMedia that you would like to
address?
While our
business is all about scalable solutions for video production, SoMedia is a lot
more than the world’s largest video production company. To enable scalable
video production it requires a sophisticated SaaS front end tied to an advanced
crowd sourced management system we call Crowdsource Workforce Management. We
also provide sophisticated tools – video players and analytics – to assist with
online video marketing and we have developed integrated solutions for video
production and deployment to the largest online marketing and advertising
platforms.
For
more information on SoMedia,(TSXV: VID) & (SMDWF) please
click here for a corporate fact-sheet
Thank you Mr. Fleming for your time.
