Communicators

2019 AGM – Melbourne – November 25th, 2019

Chairman’s address to shareholders:

“The future belongs to those who see opportunity before it becomes obvious.” In our initial study of Crowd Media Holdings Ltd. (“Crowd”), the Invincible Investment Consortium (“IIC”) identified a number of new opportunities that were compelling enough for us to invest in the company. As simple as it seems, by joining the dots, Crowd can now leverage these new opportunities.

Vision statement:

"Crowd Media will be a tech-based, vertically integrated social commerce business selling exemplary products and services that are integral to the lives of its customers.”  

Crowd Media has 3 core strengths, previously incarnated as autonomous verticals:

-          Q&A - Crowd’s proprietary tech platform that enables a written question to get a written answer, in real time, based on machine learning and without human intervention.

-          Subscriptions - Crowd’s proprietary tech platform that manages regular repeat purchases of a digital product, including payments.

-          Digital Marketing Centre – Crowd’s knowhow in the influencer and performance marketing space, used to drive e-commerce; it is in this area that Crowd has been significantly strengthened with IIC’s recent investment.

Following IIC’s strategic investment, Crowd’s new 3-year plan drives substantial growth by continuing to leverage each of these strengths, but (a) using them in new ways, and (b) integrating these verticals synergistically for compounded leverage. Example, combining Q&A with Natural Language Processing (“NLP”) to deliver better customer service, thereby improving loyalty/retention or upselling.

Horizon One: 0-12 months (think of this phase as “we will move boxes”): With the primary objective of being closer to the consumer, the focus shifts to Direct to Consumer (D2C). This is how we capture a larger slice of the retail spend. Crowd will sell products and/or services that it either owns, or part-owns, or is strategically aligned with.

Crowd will begin with London Labs (“LL”), the Invincible Brands GmbH trial, and potentially three other trials that should be at exclusivity stage by the end of December:

1. Equity participation; T2 Convertible Note participants will invest up to $2m into Crowd. Crowd will use a portion of these funds to acquire a strategic stake in LL; LL, in turn, will use this growth capital to launch in the USA. Some of the invested funds will flow back to Crowd to support LL’s digital marketing, conducted by Crowd.

2. Web sales: Being a part-owner, Crowd will take over the LL website internationally; Crowd will operate the website, lead the digital marketing effort to drive customers to the website, and work towards supporting the customer with Q&A on a WhatsApp or Live Chat platform. Where possible, digital content will be delivered by Subscription. Commercially, LL will act as a Supplier, and Crowd will act as Digital Retailer, billing the customer directly. LL will be paid at wholesale for product sold, giving Crowd a healthy gross margin. Payment terms will be at 30 days, giving Crowd a strong cashflow advantage. Fulfilment and logistics will be managed by LL or a 3PL, with similar payment terms. Crowd will thus operate this vertical with a healthy GM and a favorable cashflow benefit. This leverages all 3 of Crowd’s core strengths.

[It should be noted that any dealings between LL and Crowd have been negotiated on an arms-length basis and that I have, and will continue to, exclude myself on any voting concerning these related party dealings.]

This activity moves Crowd into the high-margin luxury beauty space, utilises existing infrastructure, and leverages Crowd’s knowhow and tech. It generates quality revenue with a high margin and attractive cashflow benefits. Most importantly, through equity participation, it cements the strategic alliance and guarantees Crowd additional upside by capturing a share of the added value brought into LL by Crowd.

Also beginning in November, Invincible Brands GmbH engaged Crowd to run a series of marketing tests across Romania, Hungary, Spain and the UK for one of its brands. This will be operated on sound commercial terms, at arms length, and (for the record) I have excluded myself from these negotiations. After 3 months the learnings will be reviewed and evaluated. We expect an additional revenue of up to $500k from this.

Horizon 2: 12-24 months (think of this phase as “we will move virtual boxes”): By the beginning of 2021, or possibly sooner, Crowd will shift its focus to the more scalable sale of services via collaborations, partnerships, or strategic alliances modeled on the LL arrangement above. Initially this will be in the (regulated) travel insurance and fintech space.

[Reasoning: We know how to access the 18-35 year old traveler and we know they are under-insured. By partnering with an existing disruptor (already identified and in discussion) we can very rapidly scale their business in the EU - something they cannot do alone - and use our tech to accelerate lower-cost customer acquisition, improve retention, and improve operational efficiency.]

Crowd can also access the same sub-35 group and drive them to a digital banking service. This could be provided through an alliance with an existing provider, again already identified and in discussion. We have ideas on how to do this in a well-differentiated fashion, possibly using the “rounding option” to support a compelling ethical/environmental foundation. Our Q&A tech and our Subscription tech can each add significantly to the value chain of both services, not just in selling (eg. “just landed in Dubai? Need insurance?” SMS or Whatsapp message) but also in removing friction with getting a quote, customer support, claims support etc. Again, this leverages all 3 of Crowd’s core strengths in an extremely scalable and largely automated model.

Horizon 3: 24-36 months (think of this phase as “we will move virtual boxes you can hold in your hand”): The current influencer marketing landscape is static, it's a monologue - a post is made, it’s the same post for everyone, and there is no subsequent engagement other than by the follower sending a message or leaving a comment etc. Example: Imagine an F1 enthusiast who follows Lewis Hamilton on Instagram. Hamilton makes a post, follower leaves a comment, and unquestionably never gets a response…

Crowd sees an opportunity to take this to the next level with a two-stage process.

1. Augment this exchange (which is effectively a written Q&A, using our existing tech to deliver an authentic response) with a verbal plugin, NLP. This heartless exchange now becomes a ”conversation with benefits” - it will be quicker, easier, and more engaging and can even include the (simulated) voice of Lewis Hamilton. Technically, it’s as substantial as moving from the telegram to the telephone.

2. Next, augment this conversation with a dynamic visual platform using holographic tech. Now, the influencer (think Lewis Hamilton again) is replicated virtually on-screen. The user is in an immersed reality, engaged in a seemingly-authentic conversation and a seemingly-authentic visual response. As a marketing tool, this is as significant as moving from the phone to Facetime…the influencer is now capable of holding thousands of different conversations at the same time. This takes the “user generated content” and bounces it straight back for maximum effect.

As a side note, this can be a travel app - think of a virtual tour guide, using geo positioning to deliver information that the traveler can then question; or a health service provider, a virtual nurse; a child can learn history from a virtual Napoleon and ask questions….this is surely a Holy Grail? This is what Crowd will be in 3 years time, and never before has the company name been so appropriate as this is MEDIA.

The verticals:

1. Q&A, to be combined with NLP.
2. Subscription.
3. Digital Marketing – delivery of content to drive product sales (LL etc.)
4. Digital Marketing – delivery of content to drive service revenue (Travel insurance, banking)
5. Digital Marketing – immersed reality, integrating all verticals.

In concluding, please look at me – you see me smiling? - I started my previous business BECCA in 2001 and we sold it 15 years later to the Estee Lauder Company for AUD $300m. The reason I am smiling, the reason I am so EXCITED about this business, is because I know what I can do with it. Together with my investment partner Robert Quandt we bring a set of skills that will transform Crowd – it’s already started – the share price has almost doubled in less than 3 months.

We are committed to working closely with CEO Domenic Carosa and his team, and of course our co-director Sophie Karzis, to build this business into one that all Shareholders will proudly say “I was an early investor in Crowd, and once the new team came in, I never looked back!”

As you are the owners of this business I thank you, again, for your loyalty and support. I hope you embrace our vision, and in return I hope to reward you handsomely as we move forward with this 3 year plan.

Steven Schapera

Non-Executive Chairman

Crowd Media Holdings Ltd

CROWD MEDIA HOLDINGS ltd

ACN 083   160 909

crowdmedia.com   

AMSTERDAM

95B Piet Heinkade 1019 GM Amsterdam Netherlands  

MELBOURNE

Level 4, 44 Gwynne St. Cremorne, VIC 3121 Australia