Remark Media Launches Roomlia App

Remark Media has released the Roomlia app developed by its recently acquired Hotelmobi division.  This is a departure from the company’s media/advertising core and it’s historical modus operandi of acquiring domains whose organic traffic allow a business model to be constructed around it.  Hotelmobi is obviously a different approach altogether, as it was essentially just an idea evolved to a development stage app that was being constructed under the direction of several seasoned executives from the buildout of Expedia’s wholesale hotel operations.  We will watch with great interest as Remark builds out this new model.  

Anyone familiar with the drivers of value in the online travel space knows that the juggernauts (Expedia, Priceline, Travelocity) in the space EXIST due to their successful development of wholesale lodging operations.  While the space is increasingly competitive, the margins can be huge for players who figure out a customer acquisition approach (like an app perceived as a better mousetrap offering attractive deals) that does not resort to pay per click arbitrage to gain one-off transactional customers.  With proper execution, we believe this business could evolve to be the x factor (besides Sharecare of course) for Remark Media holders.

While it is obviously still too early to determine if this business will evolve be substantial for Remark, I think this development bears watching.  A quick review of the Roomlia App impressed me with its intuitive flow, ease of use and most importantly, the inventory/deals they launched with.  I believe it will be well received and will be interested to see how it will be marketed.  Here are a couple of screenshots:

 

RoomliaScreenshots 003                            RoomliaScreenshots 004

I think this is a pretty slick offering.  If they can keep the flow of promotional deals they are showing currently and grow the footprint, this business has the potential to be a very significant contributor to the top and bottom lines for Remark Media.

August 27, 2014 at 3:09 pm Leave a comment

Inuvo’s Google Contract Upgraded

Inuvo’s contract with Google was just amended in a way that allows Inuvo access to Google’s higher quality display ad product, which appears to be a much higher quality offering using Google’s re-targeting technology. The impact of this on Inuvo’s top and bottom line could be substantial It appears that the upgraded display ad product has just gone live on the ALOT network of sites and below we discuss why that will prove to be a big deal.

In the most recent quarter, Inuvo’s websites reported that unique visitors to the sites had risen from an average of 3 million to 3.5 million per month. Given that revenue in Q2 was reported at an average of just over $3 million per month and we know that Inuvo’s July revenue (pre new Google display ad offering) was around $4 million, we believe it is a fair assumption that ALOT uniques are trending significantly higher than the 3.5million average for Q2. Beginning this month, when the 3.5 – 4 million unique visitors click-through to one of the ALOT websites (Living, Finance, Careers, Local, Health, etc.), they will likely be served a Google network quality display ad that is related to something that consumer has searched for recently. The likelihood of that consumer clicking a display ad like that has proven to be exponentially higher than the likelihood of their clicking on a random display ad unit of the kind Inuvo had previously offered in those places. The importance of this should not be lost on Inuvo shareholders. So much of Inuvo’s revenue is driven by spending $x to get y number of visitors to its sites because they will then click on an average of z ads which produces the revenue we earn. Now when Inuvo spends x to get y visitors, the z will likely be a substantially higher number allowing the company to produce a higher level of profitability and more likely, increase the x spend to get more y visitors who will click through ads at a higher pace so that our growth has the potential to scale higher at a faster rate of profitable growth.

Inuvo’s share price has only just now regained what was lost when the company appeared to be in danger of losing its listing due to the NYSE shareholder equity issue, when the stock fell from its $1.30 – $1.50 trading range on delisting fears. That issue was put to bed several months ago, but the stock is only just now reflecting that. In the meantime, the company’s operations, reported numbers and prospects have improved dramatically and Inuvo’s share price currently does not come close to reflecting this.  We believe none of the following are priced in at Inuvo’s current trading price in the $1.40 range -
1) the potentially higher margins and accelerated growth due to the new Google Contract upgrade as discussed above
2) the new content that was developed and paid for in full during Q1 that is likely to be just beginning to drive organic traffic
3) the company’s faster than expected growth in mobile ad revenue (which grew 40% of overall revenue in Q2).
4) a much improved credit facility that will allow the company’s expansion to accelerate without issuing new stock at the current ridiculous valuation.

Thus, Inuvo trading at prices under $2/share may prove to be a short lived phenomenon. Even if Inuvo trades up to $2 per share it would still be trading at just below 1x revenue, which is very cheap for a rapidly growing and profitable small cap company in the mobile ad space.  Over the past week there has been rumors, message board chatter, etc. of an Inuvo acquisition in the $2 per share range.  While we do not doubt that Inuvo is being approached by companies with similar business models but outsized stock valuations vs their revenue and growth outlook, we think the price would have to be higher than 1x the current revenue run rate for Inuvo shareholders to find it attractive.

August 26, 2014 at 8:53 am Leave a comment

Inuvo – the Profitable Small Cap Mobile Advertising Company

Shares of Inuvo have continued to show strength in the face of broader market swoons over the last few weeks. The company’s Q2 report came in stronger than we expected in most respects and we expect the trading price of Inuvo shares to begin to reflect this strong performance soon as the company’s earnings growth and the revenue trajectory of its nascent mobile advertising business begins to attract the attention of investors.

Inuvo’s management has successfully transitioned the company from an increasingly difficult to operate toolbar business to a rapidly growing mobile advertising network of third-party sites and rapidly scaling ad business driven by its owned and operated sites. This model holds significant advantages to the dying toolbar model and the company’s execution of its new content focused approach has already achieved the primary goal of replacing the toolbar revenue. The bullish take away from having done that in the second quarter is that it usually takes 6-12 months for most content to get indexed, linked from third-party directories, etc. and the newness of the content Inuvo has created means that what has been achieved thus far has likely occurred with very little organic traffic. As we begin to annualize the production of these content heavy websites, we should see more organic (read “free) traffic in the mix, which will make these operations even more profitable. Additionally, as the company’s partners grow and the company’s network of partners grows, we should see the mobile traffic and revenue grow to represent the majority of Inuvo’s revenue. We believe this will occur in the current calendar year and that this achievement will cause Inuvo to gain much more attention from investors.

The growth expectations for mobile advertising over the next few years are enormous, with mobile ads overtaking  newspaper ad spending for the first time in 2014 and other media over the next few years.   While many companies have been pitched to investors based on the promise of gaining a share of that huge growth, many have yet to solve the puzzle of how to grow a mobile advertising business to be profitable. In the small cap space, Inuvo will soon be not only one of the fastest growing in terms of revenue, but one of the only profitable small cap plays in the mobile space. As the juggernauts continue to dominate the space and show the profit potential for mobile advertising, there will likely be more investors looking for an investment vehicle of a size where significant mobile advertising growth can move the needle. Inuvo is well positioned to be that company. Hold onto your shares and do not be tempted to let some go on the days we move 5-10% higher. As the stock establishes a trading range north of $1, more investors will start to find their way to the Inuvo story and begin to understand what we already know – Inuvo’s valuation represents a complete disconnect from its prospects and the stock is dirt cheap below $1.50.

August 21, 2014 at 3:57 pm Leave a comment

Inuvo Still Cheap But Moving Higher While Key Insiders Are Buying

Shares of Inuvo have been steadily moving higher over the last week on higher volume. Insiders have been buying more shares on the open market, including CEO Rich Howe (10,000) and BOD chairman Charles Morgan (25,000). Inuvo trading anywhere below $1 is quite cheap relative to its growth trajectory, as the company’s growing mobile business and its increasingly profitable ALOT business offer the potential for the company to grow revenue and earnings at over 100% year over year. Owning a share of this growth and the earnings stream it is producing costs less than 10x what is likely to be this calendar year’s earnings. It is rare to find a small cap growing at the rate of Inuvo that actually has earnings, is growing at a triple digit rate and has a single digit multiple. It is difficult to imagine a scenario where Inuvo continues to trade in that range for very long. 

Even if the stock advances back to the $1.10-$1.20 trading range it found before concerns of NYSE delisting dragged it below $1, we believe that Inuvo will increasingly be perceived as a prime takeover candidate due to its very low valuation for a profitable company with a 12 month revenue run rate over $50 million. An acquisition of Inuvo at $3 per share would still be less than 1.5x revenue, literally a steal for many other small cap companies in this space that have no earnings and trade at large multiples of their revenue. Such a deal would give investors at today’s prices a gain of over 200%.

By any measure, Inuvo remains dirt cheap.  Groove investors would do well to load up while you can still do it below $1. 

June 13, 2014 at 12:10 pm Leave a comment

Remark Media (MARK) Hits Multi-Year High

Remark Media shares have been on a tear as of late, hitting new 52 week highs in each of the last two sessions and topping out today at $7 before closing at $6.95. The moves have also been on stronger volume, with today’s trading running at about 2x the normal daily average of shares traded. What could be behind the move?

We can think of several things -

1) Anticipation of breakout earnings – Remark’s operating business has long been viewed as secondary to its stake in Sharecare, but that could be about to change. The company has been on an acquisition spree over the last 12 months, acquiring Bikini.com to enter the lifestyle space and most recently adding additional heft to its growing financial media holdings. The last purchase extended the company’s holdings in the tax extension filing segment and will likely lead to a significant increase in transaction revenue. Additionally, its possible that investors are considering that the improvement in revenue shown in Q1 may lead to a similar (if not greater) show of strength in the Q2 report, especially considering that much of the company’s transactional and ad revenue are generated in the days leading up to the April 15 personal income tax filing deadline. Investors may simply be pricing in a very strong Q2 showing.

2) Anticipation of a Sharecare IPO filing – Remark’s shares have long been heavily impacted if not driven by news related to Sharecare due to Remark’s role in developing Sharecare and more importantly, its large holding of equity in Sharecare. All signs point to a Sharecare IPO filing in the near future and we would be shocked if it does not happen over the next few months. When it does, the very high profile nature of the stakeholders and the likely valuation range will surely bring a great deal of attention to Remark’s holdings and its status as the only way for the average investor to get a stake in such a high profile Initial Public Offering.  This is in our estimation the most likely reason for the recent uptick in buying interest. 

3) Additional acquisitions – Remark’s management has made some interesting moves over the last few quarters by acquiring and or licensing unique media assets. We have noticed that the company is increasing its use of stock in these acqusitions and have noticed a pattern over the last few years of the stock price increasing (perhaps on deal talk) in the days and weeks leading up to new deals. Is it possible that the company has another deal in the works?

The trading action over the last few sessions suggests us to us that some buyers are wanting to buy shares now. Patient buyers over the last few quarters could usually pick up shares of Remark at fairly significant discounts to the 52 week highs if they were willing to wait and buy on the bid. While the buyers of the past few days have picked up most of their shares on the bid, the bids have been very aggressive including today’s that started at the open with a bid higher than the previous day’s new 52 week high. It will be interesting to see if these recent buys are indicative of one of the three possibilities mentioned above or something else.

June 9, 2014 at 11:42 pm Leave a comment

Inuvo Announces Official Compliance with NYSE Market Listing Standards

Inuvo reported prior to the market opening this morning that the company has received notification from the NYSE Market that it has regained compliance with all listing standards. This is a very big deal, as the stock had been beaten down to the 60 – 70 cent range from the $1.20-$1.30 range on concerns that the stock would be delisted. Despite good operational news, record earnings and and strong outlook, the stock has never been able to regain its footing due to that dark cloud. This morning’s announcement of official compliance apparently brought many investors back who had stayed on the sidelines to see if the company would regain compliance, as the stock rallied as high as $1.03 on volume of over 1 million shares. The stock closed up 4.71% at 89 cents after pulling back from the highs and we believe that this represents a tremendous buying opportunity. The negative catalysts that pulled the stock below $1 are no longer an issue for Inuvo and the company’s strong recent performance should result in more investors finding their way to the Inuvo story. The stock remains a tremendous bargain at any price below $1.00 and we think Groove investors would do well to buy as many shares as possible and tell your friends to do the same while INUV shares can still be had sub $1.00.

June 3, 2014 at 1:55 am Leave a comment

Inuvo Q1 Surprises – Stock Undervalued by at least 50%

Inuvo announced Q1 2014 earnings late last week and put up some eye-opening numbers. While the top line came in lighter than we expected at $10.1 million, the company was still able to produce net income of 3 cents per share, essentially the best bottom line reported by this company in years. Additionally, the report made it apparent that the company is making great strides towards accomplishing the strategic objectives stated several quarters ago of moving the company’s focus away from toolbars and towards its growing ad business for third party publishers and the development of its owned and operated mobile friendly websites and mobile apps.

The Partner segment delivered very strong margins and Inuvo management stated that the company was already experiencing an upward revenue trajectory for the quarter to date. Given that Q2 is already more than half done, such comments in addition to comments indicating technological enhancements that make Inuvo’s network more attractive to publishers of mobile apps should give investors confidence that this key segment is not only growing but hints that we might start to see an acceleration of this growth rate.

The company appears to have turned a corner on the transition of the ALOT business, with the company now predicting a complete replacement of the revenue previously earned by the ALOT toolbar with a more consistent revenue stream flowing from the ALOT websites. We see two reasons for shareholders to be extremely optimistic about this segment 1) the ALOT websites that target many of the most profitable verticals in online advertising have been live for a very short time to have already reached a level of revenue generation that it could replace that earned quarterly in 2013 by the toolbars and 2) the ALOT toolbar business still delivered $960,000 in revenue for the company, despite the company completely shutting down any expenditures to acquire new users .

We note that many of these O&O websites were only live for six months or less as of the beginning of the quarter just reported and thus it is logical to assume that there was very little of that ad revenue generated from organic (read “free”) traffic sources. In our experience, it often takes at least six and sometimes 12 months to start to see a measurable benefit from organic traffic (ie search engine indexing of content, links from other websites and organic sources) so the numbers we are seeing produced today are likely coming from 100% paid ad campaigns to drive traffic to those sites. While its great that the company is able to grow revenue profitably while undertaking such campaigns, this means that the higher margin payoff is still to come – when we start to see some contribution from organic sources which should be increasing in each quarter of 2014 as the content gets indexed by the search engines, picked up by directories and linked from other websites.  Thus, it is likely that the ALOT O&O websites business will see margins expand if the company continues to grow this segment in the measured approach they have used to date. 

While it is expected that the toolbar business will go away now that the company is no longer actively marketing the ALOT Appbar, we believe that Inuvo will profit from a longer “long tail” than investors or even management may dare to expect, as the ALOT appbar offers utility and convenience beyond most traditional toolbar products.  

In summary, we believe the Q1 report was much better than what most expected following the less than exciting Q4 results.  The Q4 numbers in addition to the dark cloud of a potential delisting (due to falling below minimum shareholder’s equity of $6m) caused Inuvo’s stock price to fall from its $1.20-$1.30 trading range to current levels.  Thursday night’s Q1 report showed a marked turnaround occurred in Q1 and management’s comments evidenced a growing momentum in both segments, as revenue is obviously accelerating in the Partner segment and it is apparent that the O&O segment is trending towards higher revenue and improved margins.  Additionally, the earnings achieved in Q1 pushed the company’s shareholder equity up to a level that exceeds the NYSE Mkt’s minimum requirements, which appears to remove the cloud of a potential delisting.  Thus, the concerns that led to Inuvo stock price declines of 30 – 40% have been all but removed from the Inuvo story, but todays trading range still reflects that big discount.  We believe this represents a major buying opportunity with the potential for a quick 50%+ gain over the next few months as investors realize what has occurred here and significantly greater upside for those taking the long term view.  If the current momentum continues, it will be hard to make the case for a sub $2 Inuvo share price, a level that would allow a nice 150% gain from existing levels.  As of this writing (10:30am edt April 28, 2014),  Inuvo is trading at 80 cents per share and we believe this represents a tremendous buying opportunity. 

 

 

April 28, 2014 at 10:50 am Leave a comment

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