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Will Trump’s Media Startup Pay Off?



A person checking the app store on a smartphone for “Truth Social,” Oct. 20.



Photo:

chris delmas/Agence France-Presse/Getty Images

There’s one problem with the stream of reporting likening the new

Donald Trump

digital startup to “meme stocks” such as

GameStop

or the AMC movie chain, whose share prices exceed what even the most forgiving Wall Street analysts are willing to rationalize.

Meme stocks, in this newspaper’s pithy summary, are those that “become wildly popular among online traders for reasons other than their business prospects.” But the new Trump business, currently known as

Digital World Acquisition Corp.

, is a startup. It has no existing business to analyze, only its unknown potential. Thus there’s no real basis for leaping to the assumption that the market is merely irrational in valuing the company between $2 billion and $8 billion, the trading range it has occupied since debuting a week ago.

Why might some think this a reasonable ballpark especially compared with other highly speculative business valuations the market has embraced, such as Tesla’s? The reason might jump out at you if you think about it. If he plays his cards right, Mr. Trump has a way of capturing a portion of the enormous value he has been creating for other media outlets, from the

New York Times

to MSNBC.

How might an analyst begin to eyeball the riches up for grabs? In the 2016 election, Mr. Trump was estimated by the data analytics firm mediaQuant to have generated $5 billion in free media coverage, twice as much as

Hillary Clinton,

whom we might take to be representative of a normal candidate. So that’s $2.5 billion in extra attention media outlets gave Mr. Trump in pursuit of ad dollars for themselves.

After his 2016 victory, cable-news ratings and ad sales didn’t enter their customary postelection free fall. MSNBC would go on to have its best year ever. This year, prime-time ratings are down more than 50% at CNN and MSNBC and 37% at Fox—the collective equivalent of $500 million in lost profits thanks to less Trump.

Or take the “failing” New York Times. Its stock was up fourfold due largely to what industry consultant Ken Doctor calls the Trump bump. The 170-year-old newspaper saw its subscribers increase to 7.5 million from three million; the 144-year-old Washington Post, another Trump foil, saw its own numbers triple.

You would be right to harbor doubts about whether Mr. Trump can put in place a management team to realize any of this implicit value across the digital sectors he’s targeting, from social media and streaming to podcasts. His partners are mostly unknown financial engineer types. His turn as head of a publicly traded casino company in the 1990s was a catastrophe for shareholders.

Then again, monetizing his peculiar synergy with hostile media outlets has been his apparently successful business model since leaving the White House, mainly through merchandise sales and campaign donations, albeit with only peanuts going to him compared with what his silent media partners still are able to generate by flogging his visage to their audiences.

A SPAC, or special purpose acquisition company, to refresh your memory, is a particular kind of stock. A listed entity with no assets attracts funding from investors in anticipation that it will buy potentially valuable assets with the money.

Some reports, in analogizing the Trump SPAC to a meme stock, note that its subsequent trading has been considerably above the $875 million value assigned in Mr. Trump’s own press release announcing the deal. It’s far from unusual, though, for investors in the stock market to put a different value on a novel business proposition than accountants would.

As with every business, there’s execution risk, but the potential is here because of the irresistibility of Mr. Trump to the mainstream media. He doesn’t have to be especially astute to know they will quickly enter into a voyeuristic relationship with his new outlets, driving traffic to his offerings even as they rationalize their actions by disapproving and disparaging him, which only serves to cycle up more traffic for both parties in the strange marriage of Mr. Trump and his media revilers.

If he plays it right, Mr. Trump could be laughing all the way to the bank—and so could his mainstream media partners, even as they flail around in cognitive dissonance because of their codependence with Mr. Trump.

Worth considering is one more outcome. Mr. Trump, whose ownership of the new company is estimated to be 50% or more, only now seems to have discovered the knack other ex-presidents have found for turning their White House stints into pots of gold (his own tour until last week had been a disaster financially). With a promising new online media empire to watch over, he might well decide not to run in 2024 because he’s found a safer way to satisfy his quest for attention.

Journal Editorial Report: The week’s best and worst from Kim Strassel, Mary O’Grady, Mene Ukueberuwa and Jillian Melchior. Images: Shutterstock/Getty Images Composite: Mark Kelly

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Appeared in the October 27, 2021, print edition as ‘Will Trump’s Startup Pay Off?.’




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