Social media is getting an upgrade with Web 3.0 and Metaverse. Back in the early 2000s, several social media sites like Facebook and MySpace popped up. But only a few ended up surviving. However, now the social media space is gradually nearing saturation. This year, Facebook reported its first-ever decline in daily active users.
DatChat Stock Business
DatChat Social Network+ platform allows you to network, communicate, and share information and images while maintaining privacy through screenshot protection. You are in control of your privacy, which is one of the drawbacks of the internet. Incorporated in 2014, DatChat is a blockchain, cybersecurity, and social media technology company. It is exploring the application of blockchain technology in messaging and emails.
In a saturated social network market, DatChat is a new entrant. It is looking to change the way individuals communicate through social media. DatChat markets itself as a private social network. Private and social, these two opposite words are what sets DatChat apart from the rest.
DatChat Platform
DatChat is building a new platform where you can share and protect non-fungible tokens (NFTs), documents, audio and video files and messages. With this, it seeks to lay the foundation for a decentralized advertising network for Web 3.0 and Metaverse applications.
Now that you know what the company does, it’s time to dig into some investor business. What are the risks and growth opportunities for DatChat? Is it a good investment?
The Risks and Opportunities of DatChat Stock
DatChat is a micro-cap company and is still at a nascent stage. Like all social media companies, DatChat will earn revenue from advertising, and for that, it needs a sizeable audience. So far, it is not earning revenue. The company has not posted its active user base or performance metrics. It is still working on getting the talent pool, with its major operating expense being compensation and professional consulting.
Its CEO Darin Myman served as CEO of two other companies, Wally World Media (closed in 2019) and BigString (got acquired in 2013). DatChat founder Peter Shelus is the tech brain behind the platform. The platform has got some good reviews from its users on Google Playstore.
With a market capitalization of $38.6 million, the company is yet to generate fundamentals that can attract retail investors. A microcap stock is always a high-risk stock as the business has not achieved any tangible growth milestones. On top of this, DatChat is in the social media business, which has a low entry barrier. This means competition is tough. The risk of investing in DatChat is very high as you don’t know whether it will be able to scale its user base.
But there is an opportunity too, which again is a “what if” scenario. If DatChat manages to develop a platform that hooks its user base, it would probably become an acquisition target of social media giants like Facebook or Twitter. Back in 2014, Facebook paid US$19 billion to acquire WhatsApp even though the ad-free messaging app didn’t make much revenue. It was a classic case of buying out the competition to maintain market supremacy. If DatChat becomes the next WhatsApp, you could sell your shares for a hefty premium to the acquirer.
Now for the big question.
Is DatChat a Good Investment?
If you are a risk-averse or value investor, then DatChat is not an investment for you. The company is still building a business that had not earned any revenue yet. Right now, it is only burning cash. It launched its Social Network+ platform in October 2021. You have to give it another five to seven years to see if the business picks up.
Another risk with micro-cap stocks is liquidity. DatChat stock doesn’t have a high trading volume. So if you buy the stock, there is a possibility that you might not be able to cash out immediately like other large-cap stocks. But if the company enters the growth phase and gets recognition, it could grow severalfold.
If you are willing to take the risk and buy Dats stock, only invest money that you can afford to lose.
Disclosure: The author holds no position in DatChat, Inc. Freedom Stocks has a disclosure policy.
