In the 2019 review,  TNY management were not particularly transparent.   No year-on-year advertising figures were provided, which shows advertising revenue in a far less positive light than the annualised figures provided.  it took me some time to look back over the previous quarterly updates, and I discovered revenue hasn't really doubled.  it has only gone up 22% year on year. 

RED FLAG. 

The review has the headlines: 

Doubling Advertising revenue!

Annualized NPS of 70!

3.6M registered users!

Digging deeper, there are some uncomfortable facts:

1) Going by the figures, Q2 2020 advertising revenue has grown only 22% yoy.

2) Monthly active users for Q2 2020 grew 25% yoy.   

Going by these figures, revenue growth for 2021 will fall well below 50% I believe.  I thikn the share price is banking on significantly higher growth.

I AM OUT.  

AGM TNY Report

This is just a brain dump – excuse formatting / type os.

I had a discussion with Stephen O’Young, one of the founders regarding their strategy around advertising, and he said the Tinybeans strategy is to apply the “walled garden” approach, similar to Facebook, where they retain all data in house, and do not share with advertising customers.   The alternative approach would be open source, akin to Amazon / Tradedesk JV, where anonymised data is shared to inform advertisers on other platforms / media.  This approach assures the privacy of user data, however, I presume Tinybeans could pivot in the future to open source fairly easily.

Advertising inventory – Presently Tinybeans do sell advertising space via Adsense (Google).  I commented this is annoying for some users, and Stephen reported they are working hard to fill the advertising inventory inhouse to ensure it is relevant, but this will take time. 

Stephen presented on his history with Tinybeans, and explained how the idea of Tinybeans came about, which was when  he was looking for information to support his son who was experiencing speech delay when he was 2-3 years of age, but was unable to find the information he was seeking.   Tinybeans was created to provide an information platform to guide parents through their journey, and to recommend / provide information as they need.   Photo sharing in not the core purpose of TInybeans, and this is important to note when considering the optionality of the business. 

Ultimately, the vision is for Tinybeans to become a trusted recommendation engine, that links users with products and services as and when they need them.   This is why the platform is being expanded into a “recommendation engine” of sorts. 

New features introduced / created:

1)      Polls – used to collect data on family needs/ habits, and provide useful feedback to parents on what their peers think of particular issues.

2)      Holiday wishlists – A new tool that enables parents to create gift wishlists for family members to follow.

3)      3rd part apps – You can now use Tinyberans to sing in to particular apps (akin to facebook / gmail).  You can do this now with chatbooks, and it is planned to roll this out across more apps.

I think they are building out an impressive team, providing a capability the main competitor, Mixi Group does not have. 

A case study of Lego was discussed, outlining how 20 life milestones were generated, placing the Lego brand at front of mind to users at these milestones.  

The key market opportunity of grandparents was highlighted, with grandparents spending $500 M PER DAY on grandkids in the USA, that is a big market opportunity that is underappreciated.

They appointed a head of Brand Marketing, having just started 2 months ago, she went through her strategy to build the Tinybeans brand into the future.  Collaborating / building baby registries, alliances with pre-existing community groups are part of her initiatives. 

Tinybeans has been focusing on monetising the platform, at the expense of acquiring users up to this point.  However, they are recruiting a team to focus on user acquisition, which is now the key to Tinybeans success going forward. Eddie advised he expects to be able to report progress on this in Q3.  

Currently, all tinybeans advertising revenue is fee based, but over time, this may become a mix of fee and commission. 

Market share:  Eddie (CEO) estimates Tinybeans is winning about 5-10% of the newborns . family market.

Interesting titbit: At the end of the meeting, the Chairman, John Dougall mentioned in passing that one of the co-founders of Instagram is advising management and the board on strategy around user engagement/acquisition. 

SO summing up:

Tinybeans are well advanced in developing the systems and people to deliver the monetisation of  the app, developing content, and building a valuable database.   They are now turning their attention to developing a team/systems to boost their performance in acquiring / retaining users.   This is the critical piece of the puzzle that we need to watch closely over the next 12 months. 

Tinybeans largest competitor is a Japanese company, mixi group, which has the FamilyAlbum" app.   

It has a higher user rating, higher ranking, and greater downloads than tinybeans.  The company has grown users from 3 million in June 2018 to 5 million in 2019 (this is international figures, and around 3 million of those users are most likely Japanese).  That is 65% growth over the year, and they appear to be the market leader in the US - or rapdily approaching leadership.   CORRECTION: The FamilyAlbum side fo the business is earning LESS THAN $0.1 M AUD per Quarter atm. 

Tinybeans has a battle on its hands - monthly active user grow must be watched closely.   

Update: Mixi Group is not in good financial health atm.   Their core business, mobile gaming, is in serious decline, with a 40% revenue fall yoy.  Mixi Group had to cancel their dividend, and don't have a lot of cash on the balance sheet.   Mixi group need to revive their core business, and may not have the resources to monetise and grow the FamilyAlbum (Lifestyle side) of the business.   It will be interesting to watch how they change their app to monetise it.   

TNY needs to generate a virtuous cycle of growing, and engaging users. Then using data analytics to target adveftisers, and generate revenue, then investing in growng and engaging their users.

If they can achieve this, they can significantly grow their average revenue per user (ARPU).  Here is how tinybeans compares to its peers in ARPU:

Facebook: $136 USD

Twitter: $66 USD

Snap: $12 USD

PInterest: $10 USD

Tinybeans: $2.80 USD

It is pretty clear, that if Tinybeans can execute, they will be able to increase the monetisation of the platform significantly.       

I have gained confidence in tinybeans bsuiness model and approach.   What I like:

1) Founder led.  

2) Data is owned by users, and is secure.   Retaining confidence in the platform is critical long term. 

3) Tweaks and upgrades to platform engagement has seen user retention grow from 58% in 2019 to 76% at the end of 2019.   This is a huge turn around, and I think is a very respectable number given the cohort.   This should continue to rise given the lag in recording this data, and recent paltform engagement improvements.   

4) Customer retention improvements is allowing the active user growth to remain above 30%, with growth accelerating in the most recent quarter.  

5) Targeted audience - Given the very specific young family niche, this is a very valuable platform (I believe) for advertisers, given advertising can be highly targeted.  I would expect the outcomes for advertisers of baby care / toddler care to receive high ROIs in advertising on this platform.   ARPU of Facebook is about $35 USD per user in the USA.   TNY is currently about $4 USD.   I believe, given the cohort, TNY can get a lot closer to the ARPU of FB.    If it can achieve $17 ARPU, thsi alone will translate to $16 M AUD without any growth in users.   

The above points make, I believe, a great investment.   However, there are risks around execution around user engagement.   If users abandon the platform, it si game over.     Watching active user growth rates is critical - it the tide significantly slows, or another platform emerges, exit fast.  

FURTHER INFORMATION - REVENUE BREAKDOWN

I do not belive premium user growth of numbers are very improtant.  You'll see why in the pie charts attached.   Premium user revenue was 39% of revenue in 2017, it is 19% in 2019.    IT IS ALL ABOUT ADVERTISING REVENUE GOING FORWARD.

I see a time where premium subscriptions are ended, with one user type.   Time will tell.   

UPDATE: quarterly report

Tinybeans are advertising for 5 sales & media positions in NYC, including a VP of sales (off linkedin).  These personnel will add well over $1 million in costs.    

They have $1.05 Million in the piggy bank and are burning cash at a rate of $400k per quarter - this is rapdily falling as the business scales.  Advertising revenue is taking off, and now is the primary source of income.   

Although it takes 3-6 months to hire the right people, the advertising revenue growth rate will meet the increase in cost within 6 months.   

The liklihood for a capital raise has substantially fallen, as advertising revenue will reach its seasonal peak in Q2, resulting in breakeven status earlier than I anticipated.