Vertro Releases Metrics for Q4
Vertro management released key metrics related to Vertro’s Q4 performance after the market close on Monday afternoon. Overall the numbers were quite positive and indicated that the company continues to show steady growth in number of toolbar users, number of Home Page users and the number of total searches across the ALOT platform. Estimated revenue continued its upward trajectory as well, with an “upper single digit sequential increase” likely to push revenue into the $8 million + range. The most important aspect of the release was that Vertro CEO Peter Corrao reiterated that the company should acheive EBITDA profitability in Q4, which, given the timing of this release indicates that Vertro’s first profitable quarter is in the bag.
GrooveVC members should fully appreciate what is happening here because the year end toolbar user base numbers are impacted in two significant ways by a seasonal anomaly. Vertro’s live toolbar user count measure is based on the “unique user count” from the final two weeks of each quarter, meaning that it measures how many people use their toolbar at least once during that two week period. It is widely understood that consumer internet usage plummets starting sometime about a week before Christmas and usually does not pick up again until after New Year’s Day as consumers normal routines are impacted by holiday travel, shopping and vacations. So, not only is it likely that a significant percentage of Vertro’s toolbar user base will not be included in this count because they did not use their toolbar as they normally might during a normal two week period, but Vertro’s marketing machine is also running at a very low rate of its normal productivity (adding new toolbar users) because internet traffic generally is so much lower. As such, the measure used by Vertro to determine quarter end live users will be impacted substantially by this phenomenon each year. To give investor’s a fair and accurate reading of how the business is actually performing, Vertro management released a YTD toolbar count to give us a better “apples to apples” comparison with prior quarters.
The metrics released revealed a couple of positive developments – 1) the “region one” ALOT user base as of Feb. 7 is up more than 20% since Sept. 30. This is key because we know that the value of a “region one” user is approximately 10x the value of of a user from the “rest of the world”, both in terms of the average monetization rate and in the typical cost of acquisition. To go from 3,3 million region one users on Sept. 30 to 4 million region one users on Feb. 7 suggests very strong growth and/or improving attrition figures for the most important segment of the Alot user base. 2) Alot Home Page unique users in region one increased more than 15% sequentially, which is on top of the impressive sequential growth achieved between Q2 and Q3. The growth in region one usage, both toolbar and homepage, suggest that the company’s model is working quite well. If Vertro can grow in 2010 at even half the sequential gains we have enjoyed in 2009, we should see revenue growth that will bring recognition from investor’s that should drive Vertro’s share price much higher.
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