In many cases, social media companies come and go. The ones that have staying power are those that come up with some new, valuable way to allow users to interact with one another. Creating a replica of Facebook to compete with Facebook brings nothing new. When Instagram came into the foray though, its twist on social media was so popular that Facebook felt the need to buy them out. Even with social media a hotter topic than ever, many of the platforms that comprise the market also have a dark side to them. They are bastions of loneliness. Instead of talking with friends while sitting at a restaurant, users are often interacting digitally. This reality makes meeting new people a challenge and establishing strong relationships with those outside of an established network even harder.

Blue hopes to change all of that. The company’s concept centers around its Blue smart card, which costs $34.99. It looks like a credit card, but instead of enabling digital payments, the card carries a user’s personal information on it. When a user’s card is scanned by another person’s phone, it can transmit the cardholder’s profile picture, contact details, social media profiles, music playlist, and more. The card also enables external links to other social applications, and it allows you to use Venmo directly with the other person. Most of this is possible by using the Blue app, but even without it, there are still benefits. Scanning without the app will cause the cardholder’s information to be added to the scanner’s phone contacts.

Blue also wants to encourage face-to-face interaction between users. To facilitate this, the app will use geolocation to notify users when they are near to or crossing paths with other Blue users. Management is also working with retail and service businesses so that when Blue account holders walk near certain stores or restaurants, the company will notify users of specials or discounts available in those locations. This functionality helps local businesses by bringing in clients they might otherwise not have seen that day (or ever).

These features all open up an attractive stream of income upon which Blue can capitalize. In addition to the one-time charges from selling the smart cards, it can also generate sales from online advertising and affiliate marketing, from working with enterprise clients, and through brand relationships of various types. Using hyper localization to draw consumers into their doors is likely to be a big appeal for many firms.

So far, the company is still in its early stages. In both 2018 and 2019 (years ending March 31), the firm generated nothing in the way of revenue. Its net loss in 2019 was $122,168, while its operating cash flows were -$93,992 for the year. The year prior, these figures were $179,381 and -$174,920, respectively. Official results for 2020 have not yet been provided, but management has made some statements as to performance. In a period of just six months, the company claims to have generated $412,700 in revenue from 392,400 visitors who, in aggregate, placed 23,100 orders through its platform. The company’s goal for the current calendar year is to hit 10 million social interactions. That goal might seem like a high hurdle, but in the six months referenced, the business saw 10,000 social interactions per day on average. With continued growth, 10 million in a year might be achievable.

There really isn’t one particular market that Blue best fits in. One area discussed by management is the ‘smart card’ industry. Smart cards are just what Blue’s card is: cards carrying advanced information that is meant to be shared. This particular market was estimated by one source to be worth about $2.62 billion. The annualized growth rate predicted for this space moving forward is 11.5%. I would make the case that this at least sets the floor for the market opportunity facing Blue’s investors. However it’s unlikely anywhere close to the ceiling because of the social networking effects the company offers.

Perhaps a better way to assess the company’s prospects is to look at the social media/networking industry. According to one estimate, there are around 3.8 billion social media users in the world today. Another source, shown below, pegs this figure at 2.96 billion currently and predicts that the market should rise by 4.4% next year to around 3.09 billion. 

Through advertising, service fees, and more, companies in the social media/networking market have done incredibly well for themselves. For Blue, this is a positive sign, but it’s also important to keep in mind that not all social companies are the same. LinkedIn, for instance, charges fees for its premium tier. Facebook and Twitter, on the other hand, are completely free to use. The variability in models makes it difficult to fit Blue in any one area. Perhaps the best way to give a more narrowed-down view of the opportunity, then, is to focus on what will likely be its largest source of revenue in the long run: advertising.

PwC (PricewaterhouseCoopers) pegged the total US digital advertising market at $107.5 billion in 2018, which represented growth of 21.8% over the $88.3 billion seen in 2017. Zeroing in, social media advertising revenue was $28.9 billion for the year, a 30.6% increase over what was generated one year earlier. Although these strong growth rates were actually lower than what was seen in prior years, entering into any industry with double-digit annual expansion can be an exciting and lucrative prospect.

To keep moving Blue forward, the management team at the firm is trying to raise a significant amount of capital. Its goal is to raise between $60,000 and $1.07 million. In exchange for participating in the deal, investors will receive a SAFE that will convert into equity in the future. This conversion will happen at whatever the implied valuation of the company is at the time, subject to a valuation cap of $14.75 million. Unlike most SAFEs, this one does not give the holder any sort of discount upon conversion. In order to participate, investors must contribute at least $100 apiece. As of this writing, the company has only $22,515 contributed to its raise.

There are three main individuals who make up the Blue team. The first is the visionary behind the business: founder, CEO, and President of the business, Jose Montero. Prior to founding the company in 2016, he worked as a Personal Training Sales Manager at L.A. Fitness. Before that, he graduated from Draper University. Alongside him is Mario Contreras, the current Chief Product Development Officer of Blue. He has 8 prior years of experience related to user experience and interface design. He has worked with firms ranging from Nissan and Infiniti to Toshiba, Honda, and even Snapchat. The other top individual at Blue is Christen Montero. Montero is the firm’s Chief Marketing Officer, and she brings more than 10 years of experience marketing for firms like Coca-Cola, Google, and Microsoft’s Xbox.

Blue’s growth over the six months it has been monetized is quite impressive. The long-term ramifications of the business model, spurred on by network effects, could very well make for a great prospect. That is why, after careful consideration, we have decided to rate the company as a Deal to Watch. This is a high level rating, but it’s not the highest.

There are multiple reasons for awarding Blue the second-highest rating on our list. For starters, the valuation is awfully high. Nearly $15 million for the valuation cap is tough to swallow, especially considering they have no official revenue based on current filings. Add in the issue of no discount upon conversion, and early investors may end up walking away with no advantage over investors who come later than them. Overall, Blue is a really interesting deal for investors to consider, even with its drawbacks.