Archive for August, 2009
In our initial research report, we discussed an experiment that we conducted using two control groups who had the alot toolbar placed on their computers. Most of the report focused on control group #2, who were told they had an equity interest in the toolbar company and that the toolbar company earned 80% of the revenue for clicks on ads. The projections for potential revenue gains for Vertro resulted from extrapolation of the averages gleaned from control group 2 results.
The “eye-popping” stats from control group 2 make it easy to overlook the importance of the stats from control group 1. Control group 1 knew only that they had a new toolbar that would allow them quick access to a Google search and that they could add quick link buttons to their email, social networking sites and favorite content – they had no expectation or knowledge of ownership. The average weekly click revenue for this group came in at 82 cents. This figure seems insignificant relative to the much higher averages from control group 2. However, we believe it is significant in that control group 1 would likely be found to be much more like the average consumer who downloads the alot toolbar.
The average consumer who downloads the alot toolbar has apparently seen something he (she) likes about it. Most of them will use it from time to time, but like our control group 1, a small percentage of them may forget about it very soon after they download it. Those who install the toolbar but do not generate any click revenue skew the averages quite a bit and we believe that is one of the main reasons why the average a lot toolbar user generates (by our calculations) less than $10 per YEAR in click revenue.
While our control group 1 average weekly revenue of 82 cents seems really low, when you annualize it and figure the portion that flows to Vertro (80%), you get a toolbar user who has generated over $34 in click revenue to Vertro per year, more than 300% higher than an average ALOT toolbar user for the period we measured (trailing twelve month figures from April 1, 2008 through March 31, 2009). We note that there was a tremendous increase in the customization options – content, buttons and tools – since March of this year. One of the best examples of this is the business/finance offerings. There was not even a business category when we started this process. Users joining this week will find a very robust offering of business and finance customizations and applications available, much more quality and value than the offerings from other toolbars including Google or Yahoo’s offerings.
Because our experiment ran during the May – July period, control group 1 was exposed to many new features that were not available to those who downloaded the toolbar between April of 2008 and March of 2009. It seems that the more options for content, buttons and customization that you can offer at the initial download, the more likely the user will see value in the toolbar, the more likely he will be to use it and the more likely he will be to keep it longer. This understanding is what leads us to believe that the two most important metrics for measuring the improvement of this business are 1) Revenue Per Thousand Live Users (“RPKLU“) – which tells us if the live toolbar users are searching and clicking more than they did previously and 2) Attrition Rate – which tells us if users are deleting the toolbar as often as they have in the past. We note that June 2009 (per last Q conference call) had the lowest attrition rate of any month since inception. It was also mentioned on that same call that the trend for Q3 to date indicated the highest RPKLU of the year.
The steps required during the process of downloading the Alot toolbar expose the consumer to the many tools, buttons, widgets and customizations available to them in a fashion that will oftentimes be the greatest exposure they will have to that consumer. Thus, even though Alot may add many new buttons, tools or features, the existing users may not have an occassion to see these new offerings and/or may not be aware they exist. The number of buttons, tools, widgets, categories, etc. has increased dramatically since the sale of the Miva division closed at the end of March. Many, many new categories and features have been added each month since April and this leads us believe that toolbar users added over last few months will prove to be much more valuable than those who downloaded the toolbar prior to the end of Q1. As the toolbar base begins to include a higher percentage of toolbars added after the big increase in content offerings, we expect to see greater gains in RPKLU and less attrition.
To summarize, we think the results from our Control Group 1 may be indicative of what may occur with Alot over the next few months as the new toolbar installations are exposed to the greatly increased content/tool offerings. We need not see the average usage rate grow to the 83 cents per week level of Control Group 1. A mere 10 – 15% improvement from existing levels would add $3 – $5 million to Vertro’s revenues, the vast majority of which would hit the bottom line.
As many of you are probably aware – our new website http://www.groovevc.com went live this week, naming Vertro (Nasdaq: VTRO) as our focus stock. We want to encourage visitors to our site to join the Groove VC Community mailing list to get periodic updates on community growth and company/industry updates. We also want to encourage everyone to give us feedback – we hope to learn and improve as we grow.