A Proper Look At … Weedmaps (MAPS) — And How It Can Become A $10B Company In 5 Years

Question: What’s the most valuable website in the world?

The answer, of course, is Google. It has established itself as the most efficient engine for converting consumer intent into profits. An incredible business model driven by organizing the world’s data, and serving up that data to fulfill consumer intent — profiting with every click.

In a nutshell, that’s the opportunity for Weedmaps.

Long term, there should only be two things that matter to Weedmaps: the number of consumers relying on Weedmaps for cannabis information, and the business processes put in place to extract value from these consumers. Organizing cannabis data and extracting profit from it.

MAPS has the first part of the equation covered.

Its latest financial report pegged the number of MAPS consumers at about 12M monthly average users (MAU’s) — far and away the leader in cannabis traffic. Number two is an also-ran.

These 12M consumers are not coming to Weedmaps to read the articles, scroll through pictures or kill time. They are there to buy legal branded cannabis.

However, the primary business of Weedmaps is not selling cannabis, but dominating the market for dispensary marketing services. This earns MAPS an incredible network of dispensary relationships — but foregoes the data structures and the business model to extract maximum value from consumer intent.

Weedmaps is caught in the Innovator’s Dilemma. It created the market, but needs to disrupt itself before others do..

It needs to either build, partner or purchase the second piece of the puzzle — and do so with alacrity. Given that we’ve built the second piece of the puzzle at Proper, I’m a big fan of partner or purchase — but MAPS has the wherewithal to build, the only question is speed.

Weedmaps has always answered the question “Where’s weed around me?” with unrivaled accuracy.

However, the market has shifted with widespread legalization, and the questions are now “What weed should I be buying?” or “ What’s the best price on those Kiva gummies?” or “ Where’s the best deal on an ⅛ of West Coast Cure Durban Poison near me?” The market has shifted, and will continue to shift, from access based information to marketplace based. From dispensary focused to brand focused. From the Yellow Pages to Google. Deeper information, better organized, with reduced friction in the purchase funnel.

With this shift, Weedmaps has some absolute advantages, and great opportunities.

Advantage #1: 12M+ people per month come to Weedmaps looking to buy cannabis. Let’s repeat that — 12M people per month. If each person spent $50 per month (likely a low number for the average cannabis user) that’s $600M per month in Gross Merchandise Value (GMV) — $7.2B in annual GMV. At a 10% take rate — that’s over $700M per year in a very high-margin business (90% plus).

Advantage #2 is MAPS existing relationships with over 5,000 brands and retailers.

Add in the existing advertising and marketing businesses, and this is a company that can generate almost $1B of revenue at very high (90%+) gross margins — and likely $500M — $600M of EBITDA and free cash flow.

Advantage #3 is that the company is already public and has a currency with which to attract and retain great talent. It can make acquisitions. It can finance operations. It is on the verge of profitability today. Its cost of capital is fundamentally lower than all of its competitors, and it is dropping.

That’s a $10B+ company. With roughly 180M fully diluted shares outstanding.

That’s a $60 stock.

And today that stock trades at $0.79

A 75X opportunity at scale — there’s nothing else like this in cannabis.

It’s a highly liquid venture capital opportunity.

And that’s without federal legalization, without more states going rec, without better delivery laws, without optimizing the take rate as Google has done, without credit cards or the ability to widely advertise and market. Without the ongoing optimization of its advertising and marketing business.

This is just the company as it exists in the market today!

With all of these growth drivers — the financial results could double.

Weedmaps’ opportunity lies in disrupting itself, moving its primary focus from dispensaries and starting to emphasize consumer marketplace metrics. Consumer marketing. Taxing every e-commerce transaction.

While MAPS’s revenue will likely always come from the dispensaries and brands, the value of MAPS is derived from the consumer. Right now, that value is extracted through an advertising model — but I would argue that the business model has to shift to an almost predominantly e-commerce model. Federal regulation will open the floodgates for advertising on Google, Facebook, Twitter, etc… and it is only a matter of time before competitive digital advertising will stifle the growth of the extant business model. But if you own the headspace for cannabis information, this shift can be navigated, Look at TripAdvisor.

Clearly, the company has a plan.

In November, co-founder Doug Francis and the board made the hard choice to part with the CEO, the COO, and the CTO — along with almost 200 other employees. This allows the company to reset, bringing profitability back to the business and giving a new management team with different ideas a chance to execute.

At Proper, we’ve taken a different approach. Not burdened (or blessed, as is the case of Weedmaps) with a successful existing business, we are able to look at where the market is going and build toward an inevitable future.

We’ve organized ourselves around the marketplace opportunity, investing the past few years in automated data ingest, cleaning and categorization, building tools for brand management and high ROI customer acquisition. We’re making it easier to shop for weed in a manner that modern consumers have grown accustomed to.

While we believe we have a tremendous lead on the cannabis data side, and a better consumer commerce offering, we would kill for Weedmaps’ 12M MAUs and relationships with almost every dispensary in the US.

The combination of superior data, and an existing audience on both sides of a marketplace, is what leads to unparalleled advantages in the near and long term.

Being able to credibly articulate and execute against that vision is what gets investors excited.

It is what makes $10B inevitable.

We, at Proper, understand that we are in a battle for survival and a race to beat federal deregulation (rescheduling — not SAFE or SAFE +). Survive and get into the market, and you are locking consumers into long-term habits and user flows while building consumer intent profiles. The companies that move swiftly now, invest now, partner now, or acquire now to get ahead, will be the ultimate winners in our opinion.

The most valuable digital businesses are those that elegantly monetize consumer intent. To do that you need the Proper data organization, the Proper business model, and the Proper management team.

Consumers want weed — they want to get high, they want to relieve pain or anxiety, they want help getting to or staying asleep, they want to relax. They will spend over $20B legally this year on branded cannabis products — and likely over $50B all in. Right now — no one does the job of servicing these consumers online better than MAPS — but the scale e-commerce opportunity is vast.

Weedmaps has the head start necessary to lock themselves into the position of being the leader in fulfilling consumer intent in cannabis. The only question is whether the board moves aggressively to lock in its future.

If they agree, then MAPS can be a $10B company in 5 years.

I’m willing to bet they do.

P.S. there’s even a longer vision I can see. With federal deregulation and the sunset of some insane tax distortions (280E) — Weedmaps, as an e-commerce and data giant, can further pivot to the Amazon position, taking in or creating house brands, and owning or partnering with the last mile distribution companies to extract the maximum value from the consumer journey. That’s another 10X.