• The main players of social media are seeing a major reorganization, and the biggest social media platforms are seeing users decline
• New alternatives are emerging, such as Substack, Gab, Lemon8, Mastodon, BlueSky, Threads, and Rumble (and many, many others..)
• Users and advertisers both are shifting their attention to new ways to engage on social media

Elon Musk shocked the social media landscape with his private takeover of Twitter, now rebranded as X.  The platform was already heated in controversy surrounding the political persecution of those who didn't agree with the admins, as the Twitter Files have shown.  But the mass migration had already started.  Users from each side of the fence will argue that users are moving in the opposite direction.   For example, Musk critics claim that his policies have been bad for Twitter, and advertisers are leaving in droves.  Musk supporters claim he has cleaned up the injured bird and cared for it to fly again on it's own.

X is available to purchase in private markets, but a secondary market remains unestablished, so investors seeking to invest in X would need to engage in a process of price discovery, which is difficult when private companies do not release financial information.

The Monopoly in the room is (META) Platforms, formerly known as, a.k.a. Facebook.  Although they just released stellar results and the stock exploded higher, we believe that in the next weeks and months information will come to light which will reverse that trend, and some of it is already out there:

These documents, AND OTHERS that were just produced to the Committee, prove that the Biden Admin abused its powers to coerce Facebook into censoring Americans, preventing free and open discourse on issues of critical public importance. Only after the Committee announced its intention to hold Mark Zuckerberg in contempt did Facebook produce ANY internal documents to the Committee, including these documents, which PROVE that government pressure was directly responsible for censorship on Facebook. Based on Facebook’s newfound commitment to fully cooperate with the Committee’s investigation, the Committee has decided to hold contempt in abeyance. For now. To be clear, contempt is still on the table and WILL be used if Facebook fails to cooperate in FULL.

META is no stranger to controversy, but the issue of Free Speech has been heating up with the hearings involving RFK, Jr. blood relative of famous US President JFK.

Free Speech is not the only issue, government surveillance is another.  Edward Snowden released documents showing the US Government used and continues to use Social Media platforms to spy on Americans.  The release of the "Twitter Files" proved it, showing direct communications between the Biden White House and Twitter regarding the suppression of positive content of political enemies (conservatives).

What are the alternatives?

People are clearly fleeing platforms in favor of others but it's a two way street.  For example, with the takeover of Twitter, there was a huge influx of users to Twitter as well as an outflow.  We wanted to highlight a few interesting social media alternatives which are compelling, both private, and both raising (or have recently raised) in private markets via Reg CF or Regulation Crowdfunding.

Substack

The focus of Substack is writers, the platform is a blog that's subscription driven.  It allows content creators to charge for content, similar to Patreon.  During the pandemic when many influencers were getting booted off Twitter and other platforms for spreading "Misinformation" (Which was all later proven to be very accurate information!) went to Substack.

Wired says, "Substack Is Now a Playground for the Deplatformed" (paywall link) and it goes on to mention influencers such as Alex Berenson, Bari Weiss, and Glenn Greenwald.  Billionaire and former Democrat Steve Kirsch has spent tons of money and time researching COVID Vaccines, and was banned when presenting his data.  So he went to Substack, and has found a home there, see one of his recent articles.  

Their share offering ended successfully, see here.

Gab

According to it's website, Gab.com is:

Gab is a social network that champions free speech, individual liberty and the free flow of information online. All are welcome.

Gab is raising $5m in a Reg CF offering @ funding portal Venture Capital Cross.   

According to some across the alt - blogosphere, Gab's appeal is growing due to the scandals, censorship, surveillance, and overall distrust of the major platforms.  From Global Intel Hub:

Gab emerges as organic alternative free speech platform for social media

According to SEM Rush, Gab and Substack wouldn't even be in the top 28.  It's unclear exactly how many users are on Gab, some estimates have the number around 5 Million.  Even if it was 10 Million, there's still huge room to grow.

Truth Social

This platform is controversial because of it's polarizing founder, Donald Trump.  However, it does have a big following.  Truth Social went public in a SPAC transaction with Digital World (DWAC) - in order to save you time, if you want to read the negative analysis on DWAC, just take a look at the last 5 articles here on Seeking Alpha, such as this one:

While Digital World Acquisition Corp. (NASDAQ:DWAC) appears poised to settle with the SEC in a plan to allow the SPAC deal to finally close, Truth Social is still struggling to make any real business progress. The social media platform owned by former President Donald Trump has seen a lot of its purpose as an independent platform disappear. My investment thesis remains ultra Bearish on the SPAC deal trading nearly 50% above the SPAC deal price after the big rally on the SEC settlement news.

The bottom line with Truth Social is that it seems to be not getting a consistent foothold on launch / growth.

Investment Thesis

Regardless if you like the business model of Substack or Gab, a trend is emerging.  Large Mega Caps represent the greater majority of social media users.  Regardless if you include services like Whats App as "Social Media" it doesn't change the fact that the big platforms control the narrative, and control the ad dollars.

Every scandal, every hearing on Censorship, is good for the alt-platforms.  There is a great awakening happening on the internet which is encompassing across all sectors - social media is simply a 'medium' to transfer that information.  Social Media companies have policies that are diverse and at opposite sides of the spectrum.  Congress held it's first public UFO hearings, and is passing a law to release secret information regarding non-human technologies, a topic we recently covered in an article on SA. 

There is no shortage of shocking information, whether we are talking about politics (Biden Scandal), Censorship (RFK Jr.), or Social Media itself (Twitter Files).  Based on all these factors, we believe the Mega Caps will fall, and the small alternatives will grow (and thus, rise).

We would hold or short META, as there continues to be more damaging news releases such as this from Fox, 1 day ago as of this writing:

While Digital World Acquisition Corp. (NASDAQ:DWAC) appears poised to settle with the SEC in a plan to allow the SPAC deal to finally close, Truth Social is still struggling to make any real business progress. The social media platform owned by former President Donald Trump has seen a lot of its purpose as an independent platform disappear. My investment thesis remains ultra Bearish on the SPAC deal trading nearly 50% above the SPAC deal price after the big rally on the SEC settlement news.

Rep. Jim Jordan, R-Ohio, shared another batch of newly subpoenaed documents that he said "reveal Facebook bowed to the Biden White House’s pressure to remove posts" from the social media platform on Friday.

A lengthy social media thread dubbed "The Facebook Files Part 2" began with the link to a Wall Street Journal report headlined "Facebook Bowed to White House Pressure, Removed Covid Posts."

Jordan then wrote that in the summer of 2021, "the White House was mount­ing a na­tion­wide push for Amer­i­cans to get vaccinated for Covid-19. Part of that push in­cluded a pub­lic and SECRET campaign to get Facebook to more ag­gres­sively po­lice vac­cine-re­lated con­tent, including TRUE information."

We would go long Gab, and Substack, and other social media companies raising capital direct from their users.  The problem is that the publicly traded alternatives, such as (PINS), (SNAP), and (TCEHY) are facing similar problems when compared to (META).

When Elon released the Twitter Files, he did so on Twitter - which forced users who wanted to read that information to Twitter.  These smaller platforms are only one scandal away from explosive growth.

Although Crowdfunding does have investment limits, it does provide a way for retail investors to participate in that growth.  The investment thesis also considers economies of scale, it's much harder for a 400 Bn company to grow 10% than a 250m company.  Perhaps soon more alternatives will emerge allowing new ways to communicate and share information.  Until then, we see a big shakeup coming in the Mega Cap Social Media space.