Item 1. Business
ITEM
1. BUSINESS.
Overview
General
As
used herein, “we,” “us,” “our,” the “Company,” “Thumzup™,” means Thumzup™
Media Corporation unless otherwise indicated. Thumzup™ operates in a single business segment which is social media marketing. Thumzup™
has a mobile iPhone and Android applications called “Thumzup™” that connects brands and people who use and love these
brands. For the advertiser, Thumzup™ incentivizes real people to become content creators and post authentic valuable posts on social
media about the advertiser and its products.
The
Company was incorporated on October 27, 2020, under the laws of the State of Nevada. Its headquarters are located in Los Angeles, CA.
The Company has never been the subject of any bankruptcy or receivership. The Company has never engaged in any material reclassification,
merger, or consolidation of the Company. The Company has not acquired or disposed of any material amount of assets except in the normal
course of business.
In
February 2022, the Company was admitted to the Over-The-Counter Venture Market quotation system (OTCQB) under the symbol TZUP.
Thumzup®
Products and Services
The
Company operates in a single business segment which is social media marketing. The Thumzup® App works on both iPhone and Android
mobile operating systems and connects brands and people who use and love these brands. For the Advertiser, Thumzup® incentivizes
real people to become content Creators and post authentic valuable posts on social media about the Advertiser and its products.
The
Company seeks to capitalize on industry-wide gig economy and business democratization trends. Immense value and opportunity have been
created through the democratization of ride sharing, hospitality, finance and other industries. The Thumzup® tools are designed to
facilitate this democratization trend for the consumer and the Advertiser within the online advertising space.
The
Company has built the technology to support an influencer and “gig” economy community around its Thumzup® App. This technology
and community are designed to generate scalable authentic product posts and recommendations for Advertisers on social media. It is designed
to connect Advertisers with individuals who are willing to tell their friends about the Advertisers’ products online and offline.
Social
Media Marketing Software Technology
The
Thumzup® mobile App enables Creators, to select from brands advertising on the App and get paid to post about the Advertiser on social
media. Once the Thumzup® Creator selects the brand and takes a photo using the Thumzup® App, the Thumzup® App posts the photo
and a caption to the Creator’s social media accounts. The Advertiser then reviews and approves the post for payment and the Creator
can cash out whenever they choose through popular digital payment systems. For the Advertiser, the Thumzup® system enables brands
to get real people to promote their products to their friends, rather than displaying banner ads that people are tuning out.
A
recent Nielsen report found more than 80% of consumers believe friends and family are the most reliable sources of information about
products. According to a Pixlee article, 64% of millennials recommend a product at least once a month, and according to a
2019 Morning Consult survey, 86% of Gen Z and millennials would post content for monetary compensation.
The
average American adult is expected to spend 8 hours and 11 minutes per day using digital media in 2022 according to Insider Intelligence.
The amount of daily usage has increased significantly over the past several years, again according to Insider Intelligence ,
and the Company believes such usage will continue to accelerate. The Company empowers businesses that want to interact with these Creators
and provides tools and data so they can increase consumer awareness and expand their customer bases.
7
In
the past decade, social media platforms like Instagram, Facebook, Twitter, Pinterest, and TikTok have achieved mass worldwide consumer
acceptance and created hundreds of billions of dollars in shareholder value. This worldwide viral growth demonstrates that compelling
new social media platforms which present the right combination of experience and value, will attract Creators who will invest significant
amounts of time on the platforms.
The
Company is an early-stage entity building a new real-time platform to support the gig economy. The Company believes that acceptance of
its App and revenue growth can be driven by empowering everyday people to make money by posting about what they find to be enjoyable
or attractive on social media. The Company believes that the Thumzup® App is a conduit for Advertisers to connect directly with consumers.
The Company will need to secure enough Advertisers to make the App an attractive platform for adoption and scalability, and to ensure
that the platform is interesting enough for the Creators to return to on a regular basis. No assurance can be given that the Company
will be able to achieve these results.
The
Industry-Online Advertising
The
Company believes that it is developing a new form of social media marketing that does not currently exist, therefore existing descriptions
of market size and penetration are not directly applicable. As Thumzup® matures, the Company believes there will be other competitors
in this new market of paying non-professional advocates to tell their friends about products they love on social media at the point-of-sale.
The closest existing market that is similar to Thumzup’s market is the rapidly growing subset of online advertising called “influencer
marketing.” As social media influencers become more plentiful and proven, advertising spending has increased in this space. Brands
are estimated to spend up to $4.62 billion on influencer marketing in 2023 according to a 2021 Insider Intelligence forecast [7] .
We believe major brands recognize that having their happy customers post on social media is valuable.
Most
existing paid influencer marketing platforms were designed for professional and semi-professional online personalities. Some of these
platforms have expanded to accommodate “micro-influencers” - people with 5,000 to 30,000 social media followers. In
the Company’s opinion, none of these influencer platforms has entered the public consciousness and found mass adoption.
Recent
research conducted by TapInfluence has found that influencer marketing content delivers 11 times higher return on investment than traditional
forms of digital marketing , and approximately 66% of marketing firms now deploy influencer marketing according to a 2018 Association
of National Advertisers survey. A recent Nielsen report found more than 80% of consumers believe friends and family are the most reliable
sources of information about products. According to Simplilearn, nano-influencers have an average engagement rate of 8%, more than 4
times that of accounts with more than 1,000,000 followers and further, as an account’s audience grows, its engagement rate tends
to decrease. There thus appears to be, in the Company’s view, a clear downward correlation between follower sizes and post likes.
Around 66% of marketers now use influencers and nearly half of U.S. marketers plan to increase their influencer budgets according to
a according to a 2018 Association of National Advertisers survey. According to a Pixlee article, 64% of millennials recommend a product
at least once a month , and according to a 2019 Morning Consult survey, 86% of Gen Z and millennials would post content for
monetary compensation.
The
Company has designed Thumzup® “from the ground up” to make it easy for brands and service providers to activate people
who are not professional influencers but who are passionate about the products, services, or establishments they enjoy or frequent and
then are willing to relate those experiences to their friends and other social media followers. The Company has designed the Thumzup
App and Advertiser dashboard with Apple-style simplicity and intuitive features to make participation by all individuals seamless with
their existing use of social media.
8
The
Company’s first product-Thumzup® App
The
Company operates in a single business segment, which is social media marketing. The Company’s mobile iPhone and Android applications
called “Thumzup®” connects brands, products, and services to the people who use and love these brands, products, and
services. For Advertisers, Thumzup® activates real people to post real product reviews and testimonials on social media with the
intention of enhancing brand awareness and reaching targeted consumers more directly and effectively while driving profitable traffic
to the Advertisers’ products and services.
The
Company is building an influencer and gig economy community around the Thumzup® mobile App that will generate scalable authentic
product posts and recommendations for Advertisers on social media and create a technology platform making person-to-person advertising
easy, cost-effective, and scalable. The App and Advertiser dashboard are designed to connect Advertisers with individuals who are willing
to promote their products and services online and offline.
Social
Media Marketing Software Technology
The
Company’s Services
The
Thumzup® mobile App enables Creators to select from brands advertising on the App and get paid to post about the Advertiser on social
media. Once the Thumzup® Creator selects the brand and takes a photo using the Thumzup® App, the Thumzup® App posts the photo
and a caption to the Creator’s social media accounts. The Advertiser then reviews and approves the post for payment and the Creator
can cash out whenever they choose through popular digital payment systems. For the Advertiser, the Thumzup® system enables brands
to get real people to promote their products and services to their friends, rather than displaying banner ads that social media users
are tuning out.
With
the Thumzup® App, the Company is targeting and seeking to sign up everyday people and gig economy workers who like specific brands
and present them with opportunities to be paid for posting about the brands on social media. The Company believes that its management
team has the sales relationships, legal, and technology expertise for its current level of development. The Company will need to add
additional staff to rapidly grow the business. All source code, development work, and intellectual property performed under independent
development or employment contracts paid for by the Company are assigned to and owned by Thumzup®.
Intellectual
Property
The
Company owns the copyrights to the source code for the Thumzup® App on the iPhone iOS and Android operating mobile operating systems
as used on the majority of mobile phone and tablet devices. The Company also owns the copyrighted source code for the “backend”
system that administrates the Thumzup® App, tracks payments and advertising campaigns.
The
Thumzup® thumb logo is a registered trademark owned by Thumzup® Media Corporation, Reg. No. 6,842,424, registered Sep. 13, 2022.
On April 13, 2021, the Company filed a trademark application ser. No. 90642789 with the U.S. Patent and Trademark Office (“USPTO”)
for the word mark THUMZUP, which was granted registration on June 21, 2022, resulting in reg. no. 6764158. Also on April 13, 2021, the
Company filed a trademark application ser. No. 90642848 for the Thumzup® logo, featuring a stylized hand with an upwardly extended
thumb. Meta Platforms, Inc. (which owns and operates Facebook and Instagram) initially filed opposition to the logo on June 30, 2022.
Thumzup® agreed to not use the logo as a reaction to a post and Meta Platforms, Inc. subsequently withdrew their opposition on August
5, 2022 and it was dismissed without prejudice.
9
Business
Model
Advertisers
purchase a campaign on the Thumzup® website. Once the Advertiser approves a post for payment, the platform facilitates the payment
to Creators a monetary amount per screened post which may range from $1.00 to $1,000.00. The Thumzup® platform enables the Advertiser
to screen posts so that the Advertiser only pays for posts that are commercially valuable and rewards Creators for posts that have images
and text that represent the Advertiser in a positive manner.
Per
Post Fee . Thumzup® Advertisers are charged a “Per Post Fee.” By way of illustration, an Advertiser that buys 100,000
posts from Thumzup®, to pay out $10 per post to Thumzup® Creators, would purchase the posts for $13.00 each or $1,300,000. The
Creators in this illustration would receive a total of $1,000,000 and Thumzup® would retain $300,000 for its services. The Thumzup®
platform would facilitate 100,000 posts for the Advertiser from Thumzup® Creators sharing with their friends about their endorsed
products on social media.
Value
Proposition
The
Thumzup® App is designed to generate scalable social media authentic social media content for Advertisers. It is designed to connect
Advertisers with individuals who are willing to authentically promote their products online. The Company envisions that many gig economy
workers will be ideal candidates to become Creators posting on Thumzup®. Imagine a gig economy driver waiting for their next fare
who takes a moment to post about the good experience they had at their lunch spot where they are waiting. Imagine a gig economy worker
on a laptop at a coffee shop doing a graphic design project from a gig economy site who takes a moment to post about the coffee shop
where they are working on Thumzup®. The Company believes that Thumzup® can readily provide extra income for this existing pool
of gig economy workers. The Company believes these gig economy workers will be able to provide quality Thumzup® posts on social media
for which Advertisers will be willing to pay.
Regulatory
Compliance
The
Federal Trade Commission regulates and requires certain disclosures by social media influencers, specifying when disclosure is required,
and how the disclosure should be presented. These rules are codified in the Code of Federal Regulations, 16 CFR Part 255. Specifically,
the FTC requires that influencers disclose any financial, employment, personal, or family relationship with a brand. Influencers must
disclose financial relationships and consideration paid including any money, discounted products or other benefits paid to the influencer.
Creators on the Thumzup platform are being paid to post about Thumzup advertisers. Thumzup puts #ad in each post made on its platform
to disclose that the creator has been paid to make the post.
The
Company does not believe its compliance with existing FTC regulations will have a material effect on capital expenditures, earnings and
competitive position of the Company and its subsidiaries, for the current fiscal year and any other material future period.
10
Thumzup™ App Workflow
For
direct-to-consumer (“DTC”) brands, a customer might get a postcard in the box upon receiving a purchase in the mail.
A postcard would inform the customer about the opportunity to get cashback by sharing a picture of the purchase with friends on social
media. If the Creator takes a picture of the postcard, a link to download the Thumzup® App will appear on the customer’s
phone. The illustration to the left and those below are intended as examples only and will not necessarily correlate to a final version
or an amount. Actual wording and amounts will depend on agreements with Advertisers, products or brands seeking recommendations and
other market factors as may be assessed by management.
For
physical stores and restaurants, the Company offers signage to make patrons aware that they can be paid to tell their friends about
their positive experience in the store or restaurant.
When
Creators open the Thumzup® App on their phones, they will reach a welcome screen which establishes the idea that they can get
paid to post about brands, services and places they like with the App.
11
The
main screen appears after a Creator enters the unique code the Company sent. The main screen enables each Creator to easily select
brands, nearby restaurants, and stores that will pay the Thumzup Creator to post to friends and other followers about products and
places recommended by the Creator on social media.
The
main screen has seven main areas where the Creator can take action. There is a “hamburger” menu in the upper left to
access administrative functions and there is a balance due to the Creator displayed on the upper right. Next, going down the screen
there is a search bar, a map tool, a left to the right slider to select brands that will pay for posts, and an up and down slider
to select locations nearby that will pay to post. The “hamburger” menu in the upper left gives the Creator access to
change bank or payment information, to link to social media, and to invite friends. The balance due to the Creator number in the
upper right has the total of monies pending and monies due but not yet transferred to the Creator.
12
When
Creators select a brand or location tile from the main menu, the App enables them to take pictures of their enjoying the product
or experience. The App then enables them to customize the caption that will be posted to social media. Once Creators submit the pictures
and captions, they get uploaded and displayed on the social media account of those Creators.
13
Thumzup®
inserts the tag required to disclose that the post is a paid promotion. If the Advertiser, in this case at left, a fictional brand
called “Wearclick” has chosen to offer a discount code to the Thumzup Creator’s friends on social media, that discount
code gets embedded in the post along with the offer.
When
the Creator makes a new post, the post is reviewed by Thumzup on behalf of the Advertiser to assure that it meets community standards,
does not include sexually explicit images or text, and that the post reflects the Advertiser in a commercially favorable light. For
instance, if images are poorly lit or irrelevant to the brand, Creators may be sent text messages to the Creators giving them this
feedback and explaining that the post is not due for payment.
When
Creators want to receive the money they have earned they tap on the PayMe! selection on the App menu. The App then pays the Creator
via online payment systems, such as Venmo or PayPal, the amount due from all screened posts made by that Creator.
The
App enables the Creator to search for brands they like that will pay them to post. This is useful so that Thumzup® Creators can
easily discover brands they like to post about. The App pays Creators to post about brands.
14
In
the Company’s opinion, paid posts from happy customers about how much they like an Advertiser’s goods or services offer
attractive, compelling values to both Advertisers and Creators compared to traditional online advertising because those posts should
yield higher response rates.
The
Thumzup® system provides Advertisers with quality control by enabling the Advertiser to review posts to make sure that the posts
meet community standards and are commercially useful to the Advertiser. This helps reduce the number of people who may try to game the
system to otherwise not use it properly. Thumzup® Creators can opt-in to receive text message from brands. This opt-in opportunity
is valuable to Advertiser brands because text messages have higher visibility to potential customers than emails.
The
Thumzup® system enables “campaign spend” to be limited by a total dollar amount as determined by the Advertiser. Once
the posts that the Advertiser has paid for have been posted and approved for payment, the campaign expires and the Advertiser incurs
no additional cost until it chooses to increase the amount. It also enables the Advertiser to limit the number of posts made by an individual
Creator by day, week, and month. The Company believes that this feature enables more efficient budgetary control while reducing unintended
cost overruns. This feature may eliminate abuse or saturation by Creators who post more than what may be commercially valuable to Advertisers.
15
Financing
Plan
In
November 2020, the Company raised an aggregate of $215,000 through issuance of senior secured convertible promissory notes to four holders,
which have since been converted and exchanged
into shares of Common and Preferred Stock, respectively, and are now retired. From January
1, 2021 through December 31, 2022, the Company has raised an additional $1,880,412 and $1,260,000 through the sale of its Common and
Preferred Stock, respectively, to Accredited Investors in private placements pursuant to section 4(a)(2) of the Securities Act of 1933.
These funds have been used to build and beta test the Thumzup® App and to cover operating costs, including other administrative costs
and expenses.
During
the year 2021 the Company was pre-revenue and transitioned into beta testing. The Company has generated minimal revenue in 2022 from
a limited soft launch in Santa Monica and Venice, CA. The Thumzup® App commercial launch began in late 2022 in a geographic region
around the West Side of Los Angeles with expansion into other geographic regions planned for 2023 and beyond.
The
Company is currently conducting an offering under Regulation A+, pursuant
to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company is offering
up to 2 million shares of common stock at a purchase price of $4.50 per share. The Company currently has subscriptions for 64,894 shares
for an aggregate subscription amount of $292,023 in escrow as fully described in the Company’s Form 1-A/A filed on December 23,
2022.
Competition
The
Company has competitors in influencer marketing software companies as GRIN, #paid, CreatorIQ, Mavrck, Popular Pays, Tribe Dynamics, AspireIQ,
Influenster, Traackr, and Hivency. All of the above-named competitor influencer marketing software is focused on influencers who see
themselves as professional influencers. To the best of the Company’s knowledge, these competitors are not building platforms designed
to turn social media creators into micro-influencers in the manner that the Company seeks to accomplish. Rep is also an app that connects
brands with influencers who are interesting in promoting brands. Rep’s app is different from Thumzup® because it is targeting
people who consider themselves influencers.
The
Company does not currently know of another business that is seeking to build a community of everyday people and empowering them to post
about brands that they love.
Nevertheless,
the influencer marketing industry segments are rapidly evolving and competitive and the Company expects competition to intensify in the
future with the emergence of new technologies and market entrants. The Company’s competitors may enjoy competitive advantages,
such as greater name recognition, longer operating histories, substantially greater market share, established marketing relationships
with, and access to, large existing advertisers and user bases, and substantially greater financial, technical and other resources. These
competitors may use these advantages to offer apps or other products similar to the Company’s at a lower price, develop different
products to compete with the Company’s current solutions and respond more quickly and effectively than the Company does to new
or changing opportunities, technologies, standards or client requirements particularly across different cities and geographical regions.
Certain competitors could also use strong or dominant positions in one or more markets to gain competitive advantage against the Company
in markets in which it operates in the future. The Company believes its ability to compete successfully for users, content, and advertising
and other customers depends upon many factors both within and beyond the Company’s control, including:
●
the
popularity, usefulness, ease of use, performance and reliability of the Thumzup® App and services compared to those of competitors;
●
the
ability, in and of itself as well as in comparison to the ability of competitors, to develop new apps, other products and services
and enhancements to then existing apps, products and services;
16
●
the
Company’s ad targeting and measurement capabilities, and those of its competitors;
●
the
size, composition and level of engagement of the Thumzup® App user communities relative to those of the Company’s competitors;
●
the
Company’s marketing and selling efforts, and those of its competitors;
●
the
pricing of the Thumzup® Apps and services relative to those of its competitors;
●
the
actual or perceived return the Company’s customers receive from the deployment of the Thumzup® Apps within the user communities
relative to returns from the Company’s competitors; and
●
the
Company’s reputation and brand strength relative to its competitors.
Problems
in the market that Thumzup® solves
According
to Inc. Magazine, in 2019, JetBlue Airways did a promotion where it offered free travel to people in exchange for posting about JetBlue
on social media. The promotion was deemed not to be a success because many of the people reportedly deleted the posts after claiming
the reward. JetBlue had no platform for tracking the influencers and holding them accountable. The Thumzup® Platform allows Advertisers
to limit and or cap their advertising spend, as well as allowing the Advertiser to approve individual posts prior to the Creator being
paid.
Employees
As
of December 31, 2022, The Company has four (4) full-time employees, as well as sixteen (16) marketing, sales, and finance
independent contractors. The Company also utilizes the services of approximately seven (7) part-time software developers. All of
these software developers are third-party contractors and are located outside the United States.
Legal
Proceedings
From
time to time, the Company may become involved in litigation or other legal proceedings. The Company is not currently a party to any litigation
or legal proceedings. Regardless of outcome, litigation can have an adverse impact on the Company because of defense and settlement costs,
diversion of management resources and other factors.
Available
Information:
Thumzup™
is located at 11845 W. Olympic Blvd, Ste 1100W #13, Los Angeles, CA 90064. Our telephone number is (800) 403-6150 and our Internet website
address is www.ThumzupMedia.com.
We
file or furnish electronically with the U.S. Securities and Exchange Commission (“SEC”) annual reports on Form 10-K, quarterly
reports on Form 10- Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act. We make copies of these reports available free of charge through our investor relations website as soon as reasonably
practicable after we file or furnish them with the SEC. These reports are also accessible through the SEC website at www.sec.gov. Information
contained on or accessible through our website www.thumzupmedia.com is not incorporated into, and does not form a part of, this Annual
Report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references
only.
17
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.