Rumble Litigation Against Google Is An Interesting Litigation (NASDAQ:RUM)

I usually never invest based on litigation, but there is significant upside potential for Rumble’s (NASDAQ: RUM) multiple lawsuits against Google/Alphabet Inc. (GOOG)(GOOGL) and advertisers with no downside risks except for high legal fees. current major negative is “time”. Disputes often take many years to resolve. Rumble also released its Q2 results after the August 12 close. Revenue fell to $22.47 million from $24.97 million in Q2 last year. Loss per share improved to $(0.13) from $(0.15) solely due to the change in the fair value of warrant liabilities. The company is also burning more cash than last year.

Multiple processes in progress

2021 Litigation against Google over YouTube

We covered the January 2021 Rumble lawsuit against Google in detail: Rumble, Inc. v. Google LLC, 4:21-cv-00229, (ND Cal. Jan. 11, 2021) for antitrust and anticompetitive practices on video sharing platforms in July 2022 article.

This case is still in discovery and is now expected to go to trial in May 2025. Last May, Rumble tried to get the court to compel Google to turn over all documents associated with the recent DOJ case of United States, et al ., v. Google LLC, Case no. 1:20-cv-03010-APM (DDC). The judge denied this motion because the scope of the discovery request was too broad and indicated that a much narrower and more specific request was more appropriate. This request, however, illustrates the importance of the DOJ case’s impact on Rumble, in my opinion. (See below.)

As I mentioned in the July 2022 article, it could be years before this case is resolved, either through a settlement or a trial and subsequent appeal.

May 2024 Google ‘Ad Tech’ Lawsuit

Rumble filed another lawsuit against Google on May 13: Rumble Canada, Inc. v. Google LLC et al., 5:2024-cv-02880:

Rumble brings this action alleging violations by Google under Sections 1 and 2 of the Sherman Act (15 USC §§ 1 and 2) and Sections 4 and 15 of the Clayton Act (15 USC §§ 4 and 15), for monetary and injunctive relief of measures resulting from Google’s anti-competitive behavior with regard to online advertising (collectively referred to as “Ad Tech”)”.

Rumble is seeking triple damages, legal fees and a permanent injunction against Google from the alleged illegal anti-competitive conduct.

The four counts in the complaint are:

I) MONOPOLIZATION WITH VIOLATION A SECTION II OF THE SHERMAN ACT, 15 USC § 2

Google illegally acquired and maintained monopoly power in the publisher ad server market, illegally acquired or maintained monopoly power in the ad exchange market and ad network markets, illegally acquired or maintained monopoly power in the market for ad buying tools for small advertisers and unlawfully acquired or maintained monopoly power in the market for ad buying tools for large advertisers…”

II) ATTEMPT TO MONOPOLIZE WITH VIOLATION OF SECTION II OF THE SHERMAN ACT, 15 USC § 2

Google willfully, knowingly and with a specific intent to do so attempted to monopolize the relevant online display advertising markets, including the ad server market, ad exchange markets and ad networks and ad buying tools markets ads for big and small. advertisers…”

III) ILLEGAL CONNECTION WITH VIOLATION A SECTIONS I AND II OF THE SHERMAN ACT, 15 USC §§ 1 and 2

Google’s contractual arrangements and other behavior compel publishers and others to use Google Ad Server (DFP) if they use Google Exchange (ADX)…”

IV) ILLEGAL AGREEMENT IN VIOLATION OF A SECTION I OF THE SHERMAN ACT, 15 USC § 1

…entered into an illegal agreement with its co-conspirator Facebook, in restraint of trade and commerce, in violation of Section 1 of the Sherman Act, 15 USC § 1, in which they agreed to allocate auction winnings to display ads and fix price display ads”

Motion to Dismiss Google Files

Rumble’s 88-page complaint (the text of the complaint) makes a number of compelling claims, in my view. (I suggest RUM and GOOG investors read all 88 pages.) Google filed a 34-page motion to dismiss (text of motion). A hearing on this motion to dismiss was originally set for November 14, but was recently reset (Docket 19) to January 2, 2025. Google states in its motion to dismiss that:

…Rumble is neither a consumer nor a competitor in the markets it has so narrowly attempted to define. This means that Rumble has no antitrust standing to support these claims. Rumble is not part of the current fight against Google’s ad technology. It selectively copied allegations from other complaints that were filed many years ago and on behalf of very different entities…

Google tried to have the 2021 lawsuit dismissed and failed, which I covered in my July 2022 article. That case is still moving forward, and I expect this case to move forward as well. The amount, if any, of Google’s damages is problematic, but Rumble really wants a major change in Google’s operations/policies, either through a jury/judge/appeal verdict or a settlement.

Rumble and Elon Musk vs. Advertisers Litigation

Another recent Rumble lawsuit isn’t specifically against Google — it’s against the World Federation of Advertisers, Rumble Inc. et al. v. World Federation of Advertisers et al. 7:2024-cv-00115 (text of the complaint). Although there are two separate filings, this litigation is associated with Elon Musk’s Aug. 6 filing of X Corp v. World Federation of Advertisers et al. 7:2024-cv-00114 (text of the complaint). These two cases against the Global Alliance for Responsible Media (GARM) basically allege that certain named companies/advertisements (Companies directly named in Musk’s complaint are Unilever PLC; Unilever United States, Inc.; Mars, Incorporated; CVS Health Corporation; and Ørsted A/). S. There are many more advertisers/companies (not directly named that are WFA members) trying to suppress free speech (moderate and conservative content) by withholding ads.

The three counts in Rumble’s complaint are:

I) Horizontal Agreement to Restrain Production in Violation of Section 1 of the Sherman Act, 15 USC §1

The defendants and their co-conspirators agreed to impose uniform brand safety standards on social media platforms with the purpose and effect of reducing or eliminating the placement of digital advertising on certain disadvantaged platforms. The agreement restricted the total output of digital advertising on social media platforms, harming competition, advertisers, content creators, social media platforms and users, including by increasing the price of digital advertising.

II) Horizontal Agreement Establishing Certain Price Terms in Violation of Section 1 of the Sherman Act, 15 USC §1

Defendants and their co-conspirators agreed to apply uniform pricing terms to digital advertising for social media platforms … had the direct and foreseeable effect of raising the price of digital advertising, harming competition, advertisers, content creators, Rumble and Rumble Users

III) Concerted Refusal to Trade in Violation of Section 1 of the Sherman Act, 15 USC §1

Defendants and their co-conspirators agreed to withhold digital advertising purchases from Rumble

Rumble is seeking treble damages and “The Court declares that Defendants’ actions as set forth in this complaint violate the law.” It seems more like a PR stunt than a real potential legal gain, in my opinion. It is also an attempt to illustrate to the general public that website content is influenced by an advertiser’s political philosophy/agenda. The Global Alliance for Responsible Media shut down late last week, just days after the lawsuits were filed. The PR exposure from Musk and Rumble’s lawsuits seems to have worked. It will be interesting to see if there is an increase in ad revenue from these former boycotters.

The DOJ case against Google

Judge Amit Mehta’s 286-page decision (decision text) in the recent DOJ v. Google case could affect the Rumble v. Google cases. The judge ruled that “Google is a monopolist and has acted as one to maintain its monopoly.”

The judge ruled against Google on the search engine monopoly, but had a mixed ruling on various advertising issues. Hopefully, a remedy, assuming the DOJ wins Google’s appeal, will put an end to Google’s different search engine defaults when it buys various tech products and increase competition. (For example, when I bought a Samsung tablet, I had to enter a Gmail account during the setup step.) Having stronger search engine competition may result in increased traffic flow to the Rumble website instead of by YouTube.

Second quarter results

The latest results indicate that the Rumble continues to struggle. In theory, it should be a growth stock, but while revenue was up 27% from the first quarter of 2024, it was down from last year. Loss per share only improved to $(0.13) from $(0.15) due to a $10 million change in the fair value of warrant liabilities. Operating losses widened to $38.8 million from $34.5 million. The number that worries me the most is the high level of cash burn. In the first 6 months of 2024, operations had negative cash flow of $55.6 million, compared to $34.5 million in the same period in 2023. They still had $153.1 million in cash at the end of the quarter , but that’s down from $218.3 million. at the end of last year. If it continues to burn cash, eventually it needs to raise capital. Rumble could borrow money because they currently have no long-term debt.

Income statement for the 3rd quarter and 6 months 2024 and 2023

The company also announced a new partnership with the Miami Dolphins during their conference call. It’s not clear how much of a direct impact it will have. It seems to be more of a PR item to be used in marketing than a real direct increase in revenue.

Since 2024 is an election year, content posts and views should increase over the next two quarters. There could also be an increase in former boycotters and companies becoming more susceptible to becoming the target of future lawsuits as well.

Conclusion

Rumble stock has zero value based on current operations/results including recent Q2 results in my opinion. Value comes from potential future results, which are heavily influenced by Google’s business model. Even a modest change in Google’s operations could have a dramatic positive impact on Rumble. The upcoming competition between Google and Rumble is a function of two pending lawsuits. If there are positive wins or settlements for Rumble, the floodgates could open for many more lawsuits against Google by other companies.

There is a very legitimate concern that Rumble will burn through too much money to ever succeed, which could result in a total loss for RUM shareholders. However, I also look at the potential for significant gains based in part on the processes covered in this article. I rate RUM stock as a very risky “buy” in the long term. At the same time, I consider GOOG a “sell” due to current and potential future litigation from companies and various government agencies. Their monopoly may end soon.