Vita Mobile Systems (VMSI) is up 67% today at the time of this article fueled by the news that “VITA develops artificial intelligence to drive traffic and boost propagation of content.” What they are in essence saying is that when they go live after their beta test their growth will not be organic but tied to artificial intelligence. Now this growth is focused around content not users but ultimately content is the thing that attracts users and leads to more content. The VITA app is similar to WAZE, the app that Google (GOOG) purchased for $1.1 billion. Waze is a geo location based app that we all use to deal with traffic. It uses algorithms to predict the best path to a destination but VITA takes predictions and algorithms to a whole new level as it can “recognize feelings like happiness or sadness and pull related crowdsourced content and appropriate emotional messaging to reach people searching for those trends.” Pulling from recent news, the Olympics elicit an emotional response, and many people are searching for athlete Mikaela Shiffrin who is capturing the hearts and minds of Americans who are probably wondering where she is from. The VITA app will understand this emotional response and display user images of Vail Colorado and the ski area where she grew up and trained. This is just an example of how VITA can use these other social media platforms like Facebook (FB), Twitter (TWTR) and Snap Chat (SNAP) to cross pollinate users to become exposed to this new anonymous social media platform that attracts users that just want to make a difference in the network.
Viral Marketing
While VITA doesn’t come out and say they expect this app to go viral that is essentially the definition of being exposed to 2 million impressions a day. In the release CEO Sean Guerro was quoted as saying “We expect our proprietary social media marketing algorithms to have a significant positive impact on our marketing efforts to reach up to 2 million people per day. We believe having these proprietary AI marketing tools incorporated into VITA from day one will give us a great opportunity to quickly captivate the public interest and build our user base.” Once this app gets exposed to the investing public its easy to see how this could feed stock appreciation as new users enamored by the newness potential of this new social media platform would want to own a slice of its future success.
What the App Does
Supplementing typical social media habits, getting a pictorial representation in real time of events happening in certain locations is the primary objective. The map based interface allows users to zoom in on emoji’s that represent different events like a happy face for something good a sad face for something bad, or symbols for a fire or accident. Everyone seems to document car accidents and witnesses but there is no home for this data. This is a dream come true for insurance companies as they could go back and view all the geotagged evidence. These pieces of captured content don’t have a home on current social media, but they do on VITA.
Market Stats
Sizeable development has gone into this project. According to the quarterly report VITA shows $2.69 million in development costs on the balance sheet. The market capitalization is roughly $70 million with 3.0 billion shares authorized and 968,265,132 outstanding. There are only 79,472,792 million shares in the float and this represents 8.2% of the outstanding. From stock purchase agreement 800 million shares are subject to a lock up for a minimum of 30 months. Another interesting point about the structure is that North Coast Ventures has 40 million free trading shares which roughly represent half the shares of the float. Based on trading volume since the acquisition they seem to be sitting patiently on the sidelines. A thorough review of the balance sheet shows no toxic convertible debt and any of the debt currently on the books was a result of funding in support of the VITA business.
Consolidation Play
Facebook acquired Oculus for $2 billion pre-launch. Google acquired Android for $50 million pre-launch. Periscope wasn’t the only pre-launch acquisition for Twitter. The acquisition of Periscope was one of several pre-launch acquisitions for Twitter in an effort to boost user engagement through adding ambitious startups. This reflects the apps hope to increase its user base and revenue through acquisition and addition of new tools. Twitter Acquired Periscope for $87 million pre-launch. All of these pre-launch acquisitions were natural add-ons to these companies. These acquisitions helped each of these companies expand their product offerings beyond their core platform.
Investment Summary
VITA could be the next big thing in social media. They resonate with certain key buzzwords like geo location, artificial intelligence, and crowd sourced content. VITA has a fully functioning app currently going through Beta testing and looks like there will be more buzz coming on that in the near future. The company has invested millions to develop this platform. The share structure is very accommodative and its thin market depth makes it a perfect candidate for price appreciation. Northcoast Ventures appears to be on the sidelines as they aptly realize that this could be another billion dollar acquisition if they get traction in the marketplace. With AI built into the platform this launch has the cards extremely stacked in its favor to be able to use other social networks to build its own platform is unique and revolutionary. Although the company didn’t come out and say they think this is going to go viral all indications look that way. This investment is a great play on social media and artificial intelligence. The key is to get in early before the beta version comes out because there is a very good chance this could go viral.
DISCLOSURE: PSInvestor.com has NOT been compensated for the above article, but are LONG shares bought on the open market. To read the full disclaimer, please click here.
