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Sunday, February 5, 2017

People are asking the WRONG questions about Rappler’s financial performance

Some buzz of late has surrounded “social news network” site Rappler in light of “explosive” revelations issued by blogger Thinking Pinoy in his analysis of financial statements “leaked” to him by pals from the Philippines’ Securities and Exchange Commission (SEC).
The main aspects of Rey Joseph Nieto’s a.k.a. Thinking Pinoy‘s analysis of these documents that attracted the most attention and spawned the most chatter was the millions of pesos in losses Rappler has been incurring over the last several years since its launch in 2012 and the foreigners who own substantial shares of its parent company Rappler Holdings.
Those two pieces of insight are not exactly breaking news. Speculation surrounding Rappler‘s owners and its shady business objectives had already long ago been explored by Manila Times columnist Bobi Tiglao in his two-part series of articles Why does Maria hate Mocha? and Media firm Rappler scorns Constitution by getting foreign money. Though not credited by Nieto in his Thinking Pinoy piece, Tiglao had, back in October 2016 when those pieces were published, already clearly articulated the fishiness of Rappler’s existence and highlighted the hypocrisy that emanates from the stark disjoint between what it claims to be its journalistic “values” and the reality of the core of its own business model and shareholding structure.
As to the way Rappler has been stuck in a multi-million peso cash hemorrhage since 2012, it does not take much to infer that from readily-available information and day-to-day observation of the activities its CEO, Maria Ressa, and her staff of hipster “journalists” engage in. For the most part of the years it had been online, Rappler did not display banner ads nor solicit subscriptions to premium content behind a “paywall” the way other mainstream news sites like the New York Times have been struggling to mount. It does not operate a bricks-and-mortar business presence that sells tangible products in the same way sales of traditional newspapers remain the bread-and-butter of Inquirer.net‘s business. Yet, it spends real money to employ warm hipster bodies and seat them in trendy hipster offices.
As Nieto asks at the end of his exposé, “Rappler’s funders are two government destabilizers. Now why did these financially savvy destabilizers giver Rappler money? For profit? For financial returns?”
Then again, investors giving money to unprofitable tech companies has long been the norm. Take Snap, for example. The parent company of popular chat app Snapchat is the latest buzz in Silicon Valley reportedly filing for an Initial Public Offering (IPO) in which it plans to raise $3 billion.
If this goal is achieved, Snap would be valued overall at up to 20 billion dollars. Not bad considering its founder Evan Spiegel once “stared down” Facebook founder and CEO Mark Zuckerberg’s offer to take it over for $3 billion.
What is remarkable about Snap’s market value is that it does not seem to be hinged on profitability. Indeed, as c|Net reports…
Snap has never turned a profit since beginning commercial operations in 2011. As of December 31, it had an accumulated deficit of $1.2 billion. The company warns it expects future operating losses, and “may never achieve or maintain profitability.” To sum up: it’s never made any money and maybe never will.
May never achieve or maintain profitability…
Indeed, Snap employs more than 1,800 employees and is forecast to increase that number to sustain its growth. The metric most often quoted as its key asset is its user base and not much else. A quick search through various business and technology news sites yields very little insight into what exactly justifies its 20 billion dollar “value”.
Again, enter Tiglao’s October 2016 articles. Though he did not elaborate on this he did briefly touch upon the most plausible explanation around why “savvy investors” would invest in a money-losing operation like Rappler…
Ever wonder what Rappler’s “mood” charts are for? A source alleged that Rappler has been selling this “big-data,” the links between news stories and reported moves, to US firms.
Though largely discredited now, the idea that “big data” could be used to predict the future — and win elections — was all the rage in the early- to mid-2010s. This blimp of a notion, likely peddled by “big data consultants” in shiny suits to “business-intelligence”-hungry corporations and, later, hapless clients in politics crashed in a fiery blaze following the historic loss of Hillary Clinton to Donald Trump in 2016. In that fiery blaze the credibility of the industry and the “analysis” of big-ticket mainstream media turned toast.
The real story behind Rappler’s funding and the mystery of why anyone would invest millions in an inherently insolvent hipster “social news network” is likely to be around the same themes — the idea that Rappler could be used as a sophisticated intelligence-gathering tool for political machination masquerading as a glossy bastion of modern, ethical, next-generation “journalism”.
“Obviously, it is not big data analytics that wins the election. Candidates do.” — Stanford professor Michal Kosinki (quoted by Bloomberg.com in No, Big Data Didn’t Win the U.S. Election)

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