The New Criterion: driving to a different beat

Backed by car maker Ford, chat show host Larry King, a white rapper and a Bollywood songstress, Hear Me Out offers a ‘hands-free’ alternative to Facebook and Twitter. But not all automotive-related ‘internet of things’ plays have enjoyed smooth driving conditions

Hear Me Out (HMO) 15c

Your crusty columnist really must widen his social circle from his ageing acquaintances, as he had never heard of US rap artist Danielle Bregoli or Indian actor and singer Chinmayi Sripaada.

Bregoli – a.k.a. Bhad Bhabie – and Sripaada are listed as key social media influencers on Hear Me Out, a social media channel dubbed the voice version of Twitter.

Bregoli has chalked up 100,000 followers on HMO, while Sripaada is not far off on 79,000. But they face stiff competition from former US talk show host and inveterate social media user Larry King, who has agreed to post original content on HMO in return for 150,000 HMO options at a strike price of 20c.

As its name implies, the Israel-based HMO seeks to replace (or complement) the Facebooks and Twitters with a platform for 42-second video musings: anything from news commentary to jokes and sharing music clips.

The reasoning goes that one’s voice is more authentic than written posts, which have become subverted by trolls, disguised advertising and the fake news syndrome. “We feel the voice is an authentic signature and that’s what we want to bring back,” says CEO Moran Chamsi.

The 42 second rule isn’t a reference to Douglas Adam’s famous answer to the meaning of life, but a scientifically calibrated limit to allow users to post something profound without losing the attention of the audience.

It’s just as well, because as with Twitter (which recently doubled its allowable word length) there are plenty of folk in love with the sound of their own voice.

Speaking of such, HMO plugs into the growing acceptance of voice activated instructions, with 20 per cent of mobile queries now done with the vocal cords (OK, Google?)

HMO’s key prospects lie with the automotive sector and the ‘connected car’. Just as radio survived because folk can listed to their favourite jocks during their clogged morning commute, drivers can use the platform in a way they can’t avail of Facebook or Twitter (not legally, anyway).

One Sydney broker uses HMO to dictate a market report to 1800 clients.

In partnership with the Nasdaq-listed wireless chipset mob DSPG Group, HMO this month launched its in-car prototype called HOOP at the CES in Las Vegas, one of the world’s biggest consumer electronics fairs. HOOP, which does not require a ‘connected car’ to work, enables drivers to use their device while their hands are where they should be – on the wheel.

In 2016, HMO partnered with Ford to implement its technology for the car maker’s Applink Synch platform. After a pilot in Ireland and the UK, Ford approved HMO for the US market.

Now that sounds promising.

As with so many app-based plays, HMO’s monetisation path is less clear and certainly can’t be explained in 42 seconds.

Suffice to say, it includes  personalised advertising, charging for premium profiles and licensing and white label deals with car makers.

HMO shares have sagged since listing in December 2016 at 20c apiece, after an oversubscribed $5.6m IPO. But at least the technology has been built already and the company doesn’t appear desperate to raise more funds.

“The tech is built so there’s not a big ongoing spending commitment,” Chamsi says.

As of November, the HMO app had been downloaded from the Google Play store 500,000 times.

Connexion Media (CXZ) 1c

Now here’s a cautionary tale about another well supported, automotive-related ‘internet of things’ play that drove down the wrong road.

Backed by heavy hitters including General Motors and former Toyota Australia chief John Conomos, Connexion was to have revolutionised the morning commute with miRoamer, an internet radio capable of picking up stations anywhere in the world.

GM Connexion also developed a fleet management tool called Flex. In mid 2016 partner GM launched the product, known as Commercial Link to its US vehicle customers and last year expanded availability to Canada and Mexico.

What could go wrong?

While the subscription-based Commercial Link earns modest revenue, GM says sales have fallen short of its internal expectations. But at least the car giant is willing to invest more money to improve the take-up rate.

As for Miroamer, it looks like it will be a while until motorists can enjoy the Beeb or the Voice of Russia while negotiating the Harbour Bridge snarl or the Tulla merge.

After 12 months of management turmoil marked by two CEO departures (including founder George Parthimos) and the exit of chairman Conomos, Connexion has changed direction by buying a private I.T mob called Security Shift.

The deal involves Connexion investing in $1.8m of new Security Shift shares and Security Shift’s vendors receiving $1.19m of new Connexion shares.

On Dec 8 Connexion launched a one for six rights issue at 1c apiece, to raise a princely $1.2m. In June last year the company raised $5m in convertible notes (since redeemed).

In the September quarter, Connexion recorded $220,000 of cash receipts but burnt $440,000 for an end of quarter cash balance of $367,000 (the company subsequently pocketed a $1.5m research and development refund).

The company says the quarter marked a “significant turnaround in business trajectory and financial performance”.

As with so many other tech minnows  it’s hard to pinpoint what went wrong at Connexion, but as a rule of thumb investors should  assume that any product will take twice as long to develop than management claims -- and cost three times as much.

The profitable Security Shift deals in cyber security and IT governance risk and compliance. Sadly there’s no mention of Bitcoins and blockchains – the sure-fire way to put a rocket up a share price.

Tim Boreham edits The New Criterion

tim.boreham@independentresearch.com.au

Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.