In Part 1 of this series, we highlighted that many people didn’t know that their personal digital data was being accumulated and sold. We also detailed how consumer data privacy legislation is going to rattle companies that mine and broker your personal data. In Part 2, we discussed how your personal data is mined and sold, what it could be worth, and how even the largest brands are not compliant with current and pending data privacy legislation. Welcome to Part 3 of Give it Away – The Million You Never Made, where we’ll show how Freckle (FRKL-TSXV), a Sophic Capital client, has a data privacy-compliant application that will fill the void left by traditional data brokers that cannot meet regulatory requirements around the collection and monetization of YOUR personal data.
A Speckle of Personal Data Compliance
Freckle is the only personal data company that adheres to consumer compliance regulations like the California Consumer Privacy Act (CCPA) and Europe’s General Data Protection Regulation (GDPR). Freckle accomplishes this through its Killi application, where users select what personal information they choose to add and then monetize. Brands, platforms and companies pay Killi users to complete consumer surveys that add additional layers of behavioural data to their persona. The more personal information Killi users share, the more money they can earn. Killi users can change their privacy preferences, supplying as much or as little personal info they choose at any time. Should the Killi user choose to forego future monetization of their data and delete the application, all personal data used by Killi is also deleted.
Killi does not prevent data brokers from collecting user data; there are thousands of companies amalgamating data unbeknownst to the consumer. However, data sources used by data brokers will be responsible for managing the opt-in and opt-out rights for consumer data collection and monetization. Since there is no U.S. national standard concerning data privacy and several U.S. states are drafting their own legislation, many data sources are likely to generate less revenues going forward rather than deal with the unique data privacy requirements of potentially 50 states. But legislated consumer opt-out rights are not the only negative catalyst that the data sources and data brokers will likely endure as consumer data privacy legislation goes live.
Just like Uber enables consumers to monetize their vehicles and Airbnb allows consumers to monetize their homes, Killi enables consumers to monetize their personal data; the data that publishers, platforms, and data brokers have long exploited for profit without paying you. We previously stated that most consumers have not cared about their personal data, but as they become aware of the value of their personal data and Killi’s ability to monetize it, we believe more consumers will opt-out of the collection and monetization of their personal data through data sources and data brokers. Killi allows consumers to control what data they choose to share. Because Killi users choose what personal data to share and monetize, they effectively opt-in and can opt-out at any time. This means that Killi is GDPR and CCPA compliant. Brands love privacy compliant, high-fidelity, consumer data and will pay Killi users for it. Killi and the consumers split revenues 50/50.
Another Piece Making Killi More Valuable
Offline attribution allows brands to accurately quantify how effective their advertising campaigns have been in driving targeted customers into desired locations. Freckle does this, sourcing location data from 190 million mobile devices generating 100 billion consumer location events each month. Combining location data with the data underpinning advertising, Freckle’s analytics can determine what advertisement, what advertising medium and what vendor drove a consumer to a location. While there are others that also provide this service, they all have their own algorithms. However, by Freckle adding Killi’s high-fidelity, consumer data, they are able to add an identity layer that is compliant with current and proposed privacy regulations that adds more insight than other companies in the space. This is a major competitive advantage that Freckle has not seen elsewhere.
To scale Killi, Freckle plans to acquire more users. Currently the Company is focused on driving higher average revenue per user (ARPU), reducing churn, improving retention/lifetime value and lowering the cost per acquisition (CPA) of a new user. At a certain point there is an “ah-ha” moment when CPA falls below ARPU and retention increases, making every dollar spent on CPA accretive to the bottom line. These metrics are improving, and the Company is getting ready to expand Killi rapidly in both North America and internationally.
To retain users, Freckle will incorporate international partners to increase the number of survey opportunities for consumers. The bi-product of more surveys is that consumers receive more money, closing the gap between CPA and ARPU. All downstream metrics for a KIlli user improves in direct correlation to an increase in money to consumers, meaning for each new penny acquired by a user there is a corresponding reduction in churn, a corresponding increase in retention, as well as a corresponding improvement in lifetime value and virality. The Company, currently operating Killi in USA and Canada will also look to expand internationally to add additional markets to this matrix thereby creating additional options for lower CPA – bringing CPA and ARPU closer and closer together. The Company may also ask users for richer data like a driver’s license, credit card information, and other personal data that can easily be uploaded to the application, which can increase ARPU for the consumer. All personal data that is currently collected and sold can all come under the control of the consumer for them to monetize. People like getting paid, and offering more money is an incentive to keep them using Killi. The longer a Killi user monetizes their data, the more revenue generated (i.e. total lifetime value).
Competitive Landscape is Shrinking
Freckle has three main competitors. Foursquare acquired Placed from SNAP for an undisclosed sum (Bloomberg reported that SNAP paid $125 million for Placed). Placed determines the efficacy of certain ad campaigns by tracking users’ real-time movements, paying users or offer other types of rewards. Factual is an offline attribution competitor as is Cuebiq.
Viewability measurement companies have all been acquired, creating a direct parallel to what we believe will happen to those operating in the offline measurement space.
Viewability Measurement Companies:
- Oracle acquired Moat, a provider of measurement, analytics, and intelligence, for an estimated $850 million;
- Vista Equity Partners acquired a majority stake in Integral Ad Science, technology that maximizes the ability of every brand impression to capture consumers’ attention. The investment size was not disclosed but speculated to be $850 million;
- Providence Equity Partners acquired a majority stake in DoubleVerify, a provider of marketing measurement software, data and analytics that authenticates the quality and effectiveness of digital media. The deal size was estimated at $200 million.
Offline Attribution Companies:
High Insider Ownership
One of Sophic Capital’s key investment tenets is high insider ownership. We like businesses where management has invested a significant amount of capital alongside shareholders. Freckle checks this box nicely. CEO Neil Sweeney, who ran 3 prior start-ups including JUICE Mobile, which was sold to Yellow Pages for $35 million, invested approximately $7 million of his own capital into Freckle. Management and insiders own about 76% of the Company, meaning they are motivated to make the business succeed and make the best financing decisions alongside investors.
THE Reason to Invest
We know of no other way to invest in the growing consumer data privacy regulatory space. Many companies are exploiting consumer data without permission and without compensating consumers. Privacy regulations like GDPR and CCPA are causing third-party data sources, data brokers, and brands to re-evaluate their operations to become compliant. Freckle’s Killi app is the only GDPR-, CCPA-compliant identity tool that we’re aware of that allows consumers to monetize their data.
Download Killi and Start Getting Paid the Million You Never Made
The information and recommendations made available through our emails, newsletters, website and press releases (collectively referred to as the “Material”) by Sophic Capital Inc. (“Sophic” or “Company”) is for informational purposes only and shall not be used or construed as an offer to sell or be used as a solicitation of an offer to buy any services or securities. In accessing or consuming the Materials, you hereby acknowledge that any reliance upon any Materials shall be at your sole risk. In particular, none of the information provided in our monthly newsletter and emails or any other Material should be viewed as an invite, and/or induce or encourage any person to make any kind of investment decision. The recommendations and information provided in our Material are not tailored to the needs of particular persons and may not be appropriate for you depending on your financial position or investment goals or needs. You should apply your own judgment in making any use of the information provided in the Company’s Material, especially as the basis for any investment decisions. Securities or other investments referred to in the Materials may not be suitable for you and you should not make any kind of investment decision in relation to them without first obtaining independent investment advice from a qualified and registered investment advisor. You further agree that neither Sophic, its, directors, officers, shareholders, employees, affiliates consultants, and/or clients will be liable for any losses or liabilities that may be occasioned as a result of the information provided in any of the Material. By accessing Sophic’s website and signing up to receive the Company’s monthly newsletter or any other Material, you accept and agree to be bound by and comply with the terms and conditions set out herein. If you do not accept and agree to the terms, you should not use the Company’s website or accept the terms and conditions associated to the newsletter signup. Sophic is not registered as an adviser or dealer under the securities legislation of any jurisdiction of Canada or elsewhere and provides Material on behalf of its clients pursuant to an exemption from the registration requirements that is available in respect of generic advice. In no event will Sophic be responsible or liable to you or any other party for any damages of any kind arising out of or relating to the use of, misuse of and/or inability to use the Company’s website or Material. The information is directed only at persons resident in Canada. The Company’s Material or the information provided in the Material shall not in any form constitute as an offer or solicitation to anyone in the United States of America or any jurisdiction where such offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation. If you choose to access Sophic’s website and/or have signed up to receive the Company’s monthly newsletter or any other Material, you acknowledge that the information in the Material is intended for use by persons resident in Canada only. Sophic is not an investment advisor nor does it maintain any registrations as such, and Material provided by Sophic shall not be used to make investment decisions. Information provided in the Company’s Material is often opinionated and should be considered for information purposes only. No stock exchange or securities regulatory authority anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. Sophic and/or its principals and employees may have positions in the stocks mentioned in the Company’s Material and may trade in the stocks mentioned in the Material. Do not consider buying or selling any stock without conducting your own due diligence and/or without obtaining independent investment advice from a qualified and registered investment advisor. The Company has not independently verified any of the data from third party sources referred to in the Material, including information provided by Sophic clients that are the subject of the report, or ascertained the underlying assumptions relied upon by such sources. The Company does not assume any responsibility for the accuracy or completeness of this information or for any failure by any such other persons to disclose events which may have occurred or may affect the significance or accuracy of any such information.
The Material may contain forward looking information. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,” “projects,” “plans,” and similar expressions, or statements that events, conditions or results “will,” “may,” “could,” or “should” occur or be achieved or their negatives or other comparable words and include, without limitation, statements regarding, projected revenue, income or earnings or other results of operations, strategy, plans, objectives, goals and targets, plans to increase market share or with respect to anticipated performance compared to competitors, product development and adoption by potential customers. These statements relate to future events and future performance. Forward-looking statements are based on opinions and assumptions as of the date made, and are subject to a variety of risks and other factors that could cause actual events/results to differ materially from these forward looking statements. There can be no assurance that such expectations will prove to be correct; these statements are no guarantee of future performance and involve known and unknown risks, uncertainties and other factors. Sophic provides no assurance as to future results, performance, or achievements and no representations are made that actual results achieved will be as indicated in the forward looking information. Nothing herein can be assumed or predicted, and you are strongly encouraged to learn more and seek independent advice before relying on any information presented.