Technology

Explained | Trump’s social media venture gets a funding boost

In October, the social media and technology firm announced its merger with DWAC and unveiled its plan to launch a social network, named ‘TRUTH Social’.   | Photo Credit: Chris Delmas / Agence France-Presse — Getty Images

The story so far: On December 4, Trump Media & Technology Group Corp. (TMTG), founded by former U.S. President Donald Trump, and Digital World Acquisition Corp. (DWAC) announced that the latter has raised $1 billion promised investment from “a diverse group of institutional investors”.

DWAC, which has signed a merger agreement with TMTG, plans to use the funds to support the former president’s new social media venture.

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Why was TMTG founded?

Trump, who was active on social media platforms like Twitter, Facebook and Instagram with millions of followers, was permanently banned from these platforms after the January 6 attack on the U.S. Capitol.

TMTG was founded in February 2021 “to create a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley”. Eight months later the social media and technology company announced its merger with DWAC and unveiled its plan to launch a social network, named ‘TRUTH Social’.

“I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech. We live in a world where the Taliban has a huge presence on Twitter, yet your favourite American President has been silenced,” Mr. Trump had said in a release.

The social network, which is expected to roll out in the first quarter of 2022, will be used to send out ‘TRUTHS’ (or posts). TRUTH Social intends to take on the aforementioned platforms and at the same time provide Mr. Trump an avenue to reach his followers. He had 89 million followers on Twitter and 57 million followers on the Meta platforms, before the ban.

How TMTG used DWAC to get investment?

Creating a social network requires investment and the former President understands that. “Since it is both hard and expensive to build a new platform totally independent of Big Tech’s infrastructure, it would have to be an extremely well-funded, multi-year undertaking,” Mr. Trump had said in a release.

The agreement with DWAC, not only brings investment to the former President’s firm but also helps transition the private company to a publicly-traded one.

DWAC, a special purpose acquisition company (SPAC), went public in September, raising about $293 million. SPAC’s are created to raise investment through an initial public offering to acquire an existing operating company.

After the $1 billion investment, DWAC has approximately $1.25 billion that it intends to use to fund the operations of the new combined business entity.

“As our balance sheet expands, TMTG will be in a stronger position to fight back against the tyranny of Big Tech,” Mr. Trump said in a statement.

Although, DWAC said in a recent regulatory filing that it has received certain preliminary, fact-finding inquiries from regulatory authorities.

The Financial Industry Regulatory Authority requested a review of trading in DWAC’s stock that preceded the announcement of the merger agreement. DWAC also received a request from the Securities and Exchange Commission which sought documents relating to meetings of DWAC’s Board of Directors, the identities of certain investors, and certain documents and communications between DWAC and TMTG, it noted in the filing.

What impact TMTG will have on other platforms?

In addition to TRUTH Social, TMTG plans to launch a subscription video-on-demand service, TMTG+, which will feature ‘non-woke’ entertainment programming, news, and podcasts.

The launch of TMTG+ may further intensify competition in the video streaming space, where established players like Netflix and Disney+ are already exploring new grounds.

Mr. Trump’s social media venture potentially aims to get a portion of “Big Tech’s” global audience. As of Q3 2021, Netflix has 214 million paid members, and Twitter has 211 million average monetizable daily active users.

TMTG+ is projected to reach 40 million subscribers by 2026, and TRUTH Social is expected to reach 81 million users by 2026, according to an investor presentation by TMTG.

TMTG also sees opportunities to create ‘cancel-proof’ alternatives in other key areas ranging from web services to payment processing, the former President had said in a release.


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Printable version | Jan 29, 2022 8:50:32 AM | https://www.thehindu.com/sci-tech/technology/explained-trumps-social-media-venture-gets-a-funding-boost/article37878325.ece

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