Inuvo is a company that has evolved over the last few years, growing from what was essentially an online marketing company that relied heavily on toolbars to drive traffic to the company’s Google and Yahoo powered search services, to a developer and acquiror of mobile Apps and rapidly growing player in the mobile advertising space. We get questions from time to time about the company’s apps and realized that there is some confusion among investors who think Inuvo’s results are still being driven by the old toolbar/appbar business that allowed consumers to install apps in their toolbar so we wanted to provide a little clarity.
Inuvo’s key partners (Google and Yahoo) were increasingly requiring adjustments to the marketing methods most toolbar companies were using to acquire new toolbar users and those changes in addition to the rapid migration by consumers to mobile browsing led Inuvo management to change its strategic direction completely. These changes started over a year ago, but accelerated dramatically in 2014 as the company ceased all marketing of toolbars and focused its efforts 100% on growing the mobile side of the business. The company now focuses on its owned and operated mobile websites, its growing mobile advertising network and its rapidly growing stable of mobile apps to drive the company’s growth.
Inuvo is now developing and at times, acquiring mobile apps (as distinct from the desktop browser apps on the old toolbar) to expand its mobile advertising reach. These mobile apps appear to be very well received by consumers, as some already have near to 1 million downloads. Here is a link to the Android store where consumers find these apps -
The Inuvo growth story is really just beginning to emerge and the stock has been volatile much like the broader market. However, the company’s increasing revenue and profits will eventually push the stock to new highs regardless of the broader market’s direction and investors who have taken advantage of this volatility and the opportunity once again to buy Inuvo shares below $1.50 should be well rewarded over the next few quarters.
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:
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.
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.
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.