Grom Social is Evolving into the Trustworthy Children's Entertainment Brand that All Parents Crave

Stephen L Kanaval  |

As technology advances and evolves, it is harder and harder to keep it away from children. And, as many parents know, the internet can be a troublesome landscape for fragile minds. A few weeks ago, we wrote an article about the perilous amount of clickbait on Youtube, and one company that had a platform geared towards keeping kids safe on the internet. But, as we looked closer at Grom Social Enterprises, Inc. , we saw it was much more than that, so we spoke with their CEO and Chairman Darren Marks about the company and its scope.

Equities: For our readers, how would you describe Grom Social GRMM and the full scope of the business?

CEO & Chairman Darren Marks: “First of all, we describe ourselves as a multimedia technology platform that entertains children in a safe environment. If I were to break it down a little bit in more detail, it's three subsidiaries. We have, first and foremost, and what we think is going to be the biggest part of our business in years to come, Grom Social, the Facebook  (FB) for kids’ platform."

Equities: I understand that Grom Social has quite a notable origin?

Marks: "Yes, that was created by my son Zach when he was eleven after we kicked him off Facebook, and Zach having a 147 IQ - very tech savvy and a gift for writing basic code and things at a young age - he figured out a way that kids can go on to a platform, be safe but also communicate, make friends and learn how to use the internet, how to be good digital citizens, and how but deal with the real issues that are occurring online like being bullied and managing your digital footprint."

Equities: Grom Social is now growing rapidly. Could you elaborate on that?

Marks:"To date our primary focus has been to build the size of our database. Compared to other companies in our industry, we believe we have created this database very economically and efficiently compared to our peers who had access to hundreds of millions of dollars to grow their companies."

"We've had 17 million people including parents sign up for Grom Social and other Grom owned platforms since the inception of the company. We are one of the safest platforms out there for children because of our proprietary filtering and registration processes. We even bring it a step further by having 24-7 live eyeballs monitoring the site. We produce our own content - like Netflix  (NFLX)- which I believe is part of our success as the kids are seeing content that they can't see anywhere else, which is a critical thing."

Equities: Do you engage parents through this platform?

Marks: "We have tremendous reporting capabilities to parents as well, which we do through an award-winning app called MamaBear. The app enables parents to monitor social media inside of Grom and outside of Grom. The MamaBear app allows you to set up basically any parameter - to check a child's whereabouts in real-time, or set up geographical perimeters, and it is just a great way to keep in touch with your kids. So, we're giving benefits to both the child and the parent with this Platform, and it's been incredibly successful. Our average logged-in user time is around an hour. We have become a global brand as well."

Equities: Of course, children spend a lot of their day in school and obviously receive exposure to the internet in school. Have you made strides towards this market?"

Marks: "Yes, for this we own and operate another division called Netspective, which generates between $800,000 and $900,000 in revenue, is cash flow positive and is part of our Grom Educational Division. Netspective monitors and filters the web, which essentially keeps kids safe on the internet in federal buildings, schools and libraries. Currently we provide filtering services to approximately 3,700 facilities with a big presence in Texas and California. Our benefit is being able to reach up to 2 million children a year who can log into our system, so it's a great way for us to continue to build our base."

Equities: Overall, how would you describe the business model of these various operations?

Marks: “We are essentially pre-revenue at Grom Social, however, we are now taking steps to monetize this database. We are building a subscription model where kids can be VIP members. We also employ an advertising model, which is COPPA (Children's Online Privacy Protection Rule) compliant, kid-friendly and parent approved. We also have the ability for characters to introduce products to the children. We also can bake new things into the content, so it's not just a typical ad or video. We have very organic ways of introducing things to the kids, based upon their likes and dislikes, so we can actually bring them things that they're more inclined to enjoy because of the analytics and algorithms that we own.


"In addition, we have identified numerous ways to monetize our base in the future. For example, let's say a big multi-billion dollar mass media company like Nickelodeon or Disney has content they have produced with not enough support to get advertisers behind it. We can breathe life into that content because of how big our user base stands, and then they can have a different way of using content that has essentially been shelved, scaling it through our platform and creating revenue for it."

Equities: As your commitment to organizations like the United Nations Global Compact shows, this is obviously more than simply about revenues?

Marks:"Absolutely. Revenues aside, we have made a commitment - and not wavered on that commitment at any point of this company's existence - to the safety of children, and we believe that commitment is one of the keys to our success. By using loveable characters, we teach children important things like how to be a good digital citizen, how to not jump on the bullying bandwagon, and how to eat healthy and exercise and not spend all day on the internet."

Equities: One aspect of the business that we have not discussed yet is Top Draw Animation. Could you discuss that?

Marks: "Top Draw is a world class, award-winning, 2D animation company based in Manila - it is actually an old Hanna-Barbera Studio - where we currently produce animation for Disney  (DSNY). We do a show called Penn Zero, Tom and Jerry for MGM, My Little Pony for Hasbro, and a show on Netflix for Nickelodeon called The Hollow. We work with DreamWorks also. It is roughly a $7 plus million dollar a year business. Very profitable, as you can see in our financials year after year, we are looking at +30% EBITDA for that subsidiary. Also, we just announced an additional $3 million in business across the wire through our press releases."

Equities: How does Top Draw work with the rest of the business?

Marks: "It is a natural fit as a content producer for some of the biggest multimedia companies in the world. Moreover, it helps us with our content on Grom. And, if you look at it as a whole company, it's a platform that very much fits into where the industry is today. TV ratings and TV viewing is declining rapidly because everybody wants on-demand programming. And that's why everybody is diving into owning and operating their own platform, but the reality is not everybody can do that effectively. So, now we become part of the distribution of content for these big companies like Disney because they can say, 'We're going to do distribution through Grom for this particular base.'

Equities: How do you see the company’s trajectory changing in the rapidly evolving world of content?

Marks: "There are multiple ways we can grow as the world of content grows and changes. I think, as we expand and start to partner - and you'll start to see things coming out with us partnering with some pretty substantial names in the industry - our business will be able to offer so many different ways to grow and distribute content or information. For example, we can provide school systems and companies with direct access to parents and, with permission, access to deliver content directly to children. Plus, we can produce the content, so if you really look at what we have, it's very much in mind of where this industry is going right now."

Equities: What are your thoughts on YouTube as a medium to reach children?

Marks: "We do post content on our YouTube channel, but that’s never going to be a primary distribution channel because at the end of the day there are no regulations on YouTube. Due to the algorithms, a child can be watching Barney and then something else pops up. While we love the user-generated content model, it's not really teaching children nor keeping them safe. So, we believe having our own platform is better and even more profitable."

Equities: How else are you seeking to leverage your platform and drive content?

Marks: "We are coming out with an app. Over the years, we have a lot of user-generated comments and we went back to our base about 18 months ago and said, 'Hey, we are going to create an app, how do you want to view content? How do you want functionality? What do you really want in an app?' So, we took this data and produced the app that is launching in a few weeks that will have similar Snapchat  (SNAP) ()functionality- easy to navigate - with a user-generated content model that is monitored and filtered, but really an all-things-Grom that we currently do. And, we believe this is the next evolution of the Grom Social brand - We have 520 produced live actions shows in our library that we own, so we have plenty of content - and we believe this is how kids will want to view content and communicate with their friends.

"This is a big, big deal for us. The way it was designed was very much in line with existing advertising, content and subscription-based models. So, the model will be very familiar. Also, with the app we will have the ability to stream live sporting events, music and have interactions with athletes even. This could be an important thing for us as we could introduce a sport or event that does not traditionally have much of a youth following and make it resonate with our base. So, it's a really unique concept that we have come up with that we think is going to push us to an even higher level as a company."

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Symbol Name Price Change % Volume
FB Facebook Inc. 177.75 -4.29 -2.36 17,331,221 Trade
NFLX Netflix Inc. 291.44 -5.49 -1.85 6,331,189 Trade
DSNY Destiny Media Technologies Inc 0.19 -0.03 -13.05 1,200
SNAP Snap Inc. Class A 15.55 -0.53 -3.30 19,967,482 Trade
GRMM Grom Social Enterprises Inc 0.15 -0.01 -6.43 11,250

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