Vertro Reports Cyber Monday Results
Vertro management released ALOT’s Cyber Monday results yesterday with the total revenue coming in at an estimated $118,000. Congratulations to all GrooveVC members who have continued to use ALOT.com’s toolbar/appbar and home page for all of their searching and shopping, as we were able to help Vertro beat last year’s record revenue day by 11.4%. Perhaps even more impressive than the Cyber Monday revenue figure was the revenue of $114,000 that Vertro achieved on November 22, a day of no special consequence in terms of expected web traffic or retail sales increases. This represents a 7.5% improvement over the $106,000 record set on Cyber Monday last year, which suggests to us that the holiday rush started earlier this year or that their regular daily averages are running much higher this year, either of which should be a good sign for shareholders. Conspicuously absent from this press release was any indication of Cyber Monday being a record revenue day for Vertro. If we were to extrapolate that regular Monday figure of $114,000 across the 92 day quarter, it would equal revenue in Q4 of approximately $10.5 million. We are not quite ready to make this leap, given that Vertro has traditionally experienced a slow down starting a few days before Christmas and running until after the New Year, even though it appears that Vertro’s international expansion will mute that effect somewhat. However, the strength of that “average Monday” does help us to remain comfortable with our $10.3 million earnings estimate for Q4 and continue to be optimistic about Vertro’s Q4.
The recent volatility in Vertro’s share price leads us to believe that there are now a number of short term traders “playing” Vertro’s stock. This is not necessarily a bad thing, as it simply means that there are more potential shareholders/toolbar users involved in the story and it also means there are likely more short sellers involved. New shareholders/toolbar users represent new revenue for the company that did not have an acquisition cost, in addition to representing a toolbar user who is likely to produce more than the $1.50 – $1.60 in revenue average contributed by the toolbar user acquired through the company’s marketing machine. New short sellers represent future buyers of stock, as all will eventually have to buy to cover their short position. The increase in share volume traded each day makes the stock more appealing to instituational investors, whom we expect to play an increasing role in the Vertro story in 2011. Altogether, we believe that the introduction of short term traders to the Vertro story is a net positive for long term shareholders who can stand the day to day volatility.
A couple of thoughts regarding the Cyber Monday report. There have been numerous articles over the past few days about the major jump in online sales for retailers, with some reporting gains of as much as 20%. Let us not forget that Vertro is primarily in the search business, with over 90% of its trailing twelve month revenue coming from search. While the company has recently done a great job of increasing its non-search revenue (rose to nearly 15% of total revenue in Q3), very little of this is actually the kind of ecommerce revenue that you see measured and reported on Cyber Monday. The majority of the non search revenue is driven by display ads along with a few CPC deals, so the amount of retail/ecommerce type revenue for Vertro is essentially negligible. That is not to say that Cyber Monday should not be one of the better days of the year for Vertro, it should because there is an increased usage of the internet generally which should be applicable to Vertro’s 10 million strong toolbar base as well. However, we should not look to the gains of the online retailers for comparables to measure Vertro’s progress. It would be interesting and a much better comp to see if Google, Yahoo or Bing grew their search revenue more than 11.5% on Cyber Monday vs. the prior year.
Keep searching/shopping with your ALOT appbar/toolbars and keep spreading the word. The volatility in Vertro’s stock is making it possible for newcomers to buy their shares at prices that should allow for hefty gains over the next 6 – 12 months, so keep up the good work.
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