For the past several years, the issue of cannabis legalization has become a dominant topic of discussion in North America. From a cultural and social standpoint, momentum and popularity continues to move in favor of decriminalizing the drug, with an overwhelming majority in support of wider legalization. This has led to the legislative and political landscapes shifting rapidly to reflect the sentiment of their constituents. It also helps that the first states to legalize cannabis for recreational use have largely reported promising results on just about all fronts. This has created a dynamic in which support is building upon itself. As more positive data comes out, the cannabis community’s voice for legalization gets louder, and politicians react in kind.
But as fascinating and significant as these developments have been, there is one major group that has been largely absent in this revolution: big business. As we’ve covered extensively on Equities.com, the legalized cannabis market is potentially a generational opportunity for investors and businesses, one estimated to be in the range of $35 billion and $50 billion. But big corporations have been the most reluctant to embrace this opportunity. Even forward-thinking industries like Silicon Valley have been uncharacteristically conservative when it comes to cannabis.
Which brings us to MassRoots, Inc. (MSRT), arguably the most successful company to date at breaking down the proverbial industry walls and taking cannabis to the mainstream. How has MassRoots been so successful? Because at its core, MassRoots is a technology company. And its innovative approach has been too compelling to be ignored.
The company operates the leading social network and digital platform for cannabis users, and is often described as Facebook (FB) for cannabis. MassRoots’ online community is quickly approaching a million users—a game-changing milestone the company expects to hit early in the second quarter of this year. Once achieved, MassRoots will be positioned better than anyone else to harness and leverage the cannabis community’s growing desirability from advertisers and political influence.
Harnessing the Cannabis Community
MassRoots’ success thus far has been anything but quiet. The company has made splashes along the way, taking on Apple (AAPL) to get its popular app back into the App Store, pitching to notable investors like Shark Tank’s Kevin O’Leary, and most recently, causing a stir when it presented at CES 2016, the tech industry’s largest show of the year.
the company is only building on that traction as it prepares to meet with billionaire business tycoon Sir Richard Branson, Founder of Virgin Group, in a few weeks, all the while forging ahead in its progress to become the first cannabis technology company to be listed on the Nasdaq. In December, the company launched its web platform, opening up its content and data to search engines like Google (GOOG). The strategy paid off, as traffic surged to 624,000 page views and 81,000 unique visitors for the month, opening a new revenue and user growth channel for the company.
“We're doing something that has never been done before,” said Isaac Dietrich, CEO of MassRoots. “We’re innovating and creating a whole new product, and I think we're breaking down barriers. We have the scars to prove it. In reality, operating a cannabis-related business is far more difficult than operating a business in any other industry because we face challenges that no other industry faces. But more so than anything else, we've been able to turn negative events and twist them into positives that move the company forward in tremendous ways. It’s really just about staying true to ourselves, being honest.”
“Right now, we're at 725,000 cannabis consumers on the platform,” Dietrich told Equities.com. “We expect to cross a million users by 4/20 of this year, and once we hit a million users, it’s a defining moment where people really start taking us seriously because we have over a million people on our platform. As a business, that will enable us to renegotiate larger advertising contracts. But that will also allow us to leverage our community to help make an actual impact on the elections slated for the ballot this year because 40% of the US population is going to be voting on cannabis. So everything is kind of going to be our opportunity to break into the mainstream.”
For any social network, the size of the user base is key to success. Dietrich points to Facebook’s ability to fend off competitors like Google+ as an example.
“For MassRoots, that’s where all of the value lies,” he said. “We've seen in the past that communities and network effects is one of the most powerful barriers to entry there is out there. When Google+ launched against Facebook, it was seen as a Facebook killer. But it completely failed since Facebook already had all the users on its platform. Similarly, when Facebook launched, they tried to take out Snapchat two years ago. It completely failed because Snapchat already had that community. We feel very strongly that if you have a community all engaging about a central topic on a central user platform, it is one of the most powerful network effects and barriers to entry.”
More Than Just a “Facebook” for Cannabis
The social aspect of MassRoots’ digital platform is what sets it apart from its competition. There are a number of successful directory and business locator websites in the cannabis industry that have been able to attract advertising dollars from dispensaries and product vendors, but there hasn’t been a company as successful as MassRoots at developing its social community.
“We're developing specific features for cannabis consumers that larger social networks like Facebook and Twitter (TWTR) would not develop for such a small portion of their user base,” Dietrich said. “Yes, you can form a Facebook group and talk to people with like-minded interests, but it's not geographically targeted and it's not a specific-use case. As an example, right now, we're working on direct messaging with weed emojis. What we found is that on the MassRoots app the smoke, flame and tree emojis have been used over a million times and that our consumers wanted a wider set of emojis to better express themselves.”
Informative and educational content is also a major component of how the company serves its community. Articles and data on everything from how to roll a joint to how specific cannabis strains make you feel help to spur conversation with the existing community, and at the same time, attract more casual users seeking that information. It’s also rolling out localized advertising features that allow dispensaries and shops to target nearby consumers.
“We’re hyper-focused on serving and developing features for our niche community, for the millions of cannabis consumers there are out there,” Dietrich said. “We’ll never get as big as Facebook or Twitter. We’re never going to grow to the hundreds of millions of users but where we feel that by developing the best platform we can for the tens of millions of cannabis consumers there are in the United States that that can still be an extremely valuable business.”
Succeeding as a Non-Traditional Tech Company
In many ways, the reluctance of big business to enter the cannabis market serves as a double-edged sword. It’s advantageous for companies like MassRoots because of the clear runway to build its business without having to go against a much deeper-pocketed competitor. However, it’s also hampered by being excluded from the collaborative ecosystem the tech industry is fond of espousing. For Dietrich, it’s been quite a perplexing experience.
“Silicon Valley holds itself as one of the most progressive places in the country, but when it comes to cannabis they promote very aggressive policies,” he said. “We have met with dozens of Silicon Valley VCs and all of them say the same thing, that we have a great business model but they're unable to invest in anything that is cannabis-related because it's illegal under federal law. At the same time, some of our greatest struggles have been against technology company like Google, like Apple, like Facebook, which still prohibit cannabis-related advertising. That is really stifling the growth of the industry. All along, all we wanted is to be treated like every other tech company.”
But as Dietrich said earlier, that isn’t going to change who he is and what MassRoots is about. The company is very much about serving cannabis users, and as the industry goes more mainstream, it’s important to keep that balance between attracting casual users without alienating the more active consumers.
“I consume cannabis on a daily basis. I’m proud of it,” he said. “I don’t find the term stoner offensive. I know that we're not supposed to use the word marijuana and we’re not supposed to say stoner. We’re definitely keyed into that in many ways, but at the same time, the people on MassRoots right now are primarily those daily cannabis consumers. For businesses, if cannabis is your business that is your target demographic.For someone like a stoner, they're not walking into a dispensary and buying a joint and the dispensary doesn’t see them for six months. They walk into a dispensary spending at least $50 or $100. They're still the most valuable demographic for dispensaries and for cannabis brands.”
“We embrace the fact that we have those consumers on our platform,” Dietrich adds. “If you're a business and you're looking to make money it's probably a good idea that you advertise with us.”
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