Archive for November, 2012
Congratulations to all Groove participants who were spreading the word the last few weeks in preparation for Cyber Monday. While it may be a few days to a couple of weeks before we know the full impact, I think anecdotal evidence suggests that we got the word out in a big way. Numerous members reported that Bargain Match servers had slowed to a crawl mid morning on Monday, what we believe to be the impact of many many users accessing the service all at once. Additionally, it appears that consumers generally flocked to the internet to do their shopping and did so in record numbers:
The action in Inuvo’s stock Monday was nothing short of amazing. We believe that the stock should be trading more consistently at the levels it traded up to ($2+) and remain confident it eventually will as investors begin to better understand the Inuvo growth story. It is not the often that you see a stock move more than 50% higher in a day though and we believe that a number of short term momentum traders may have piled in when the stock began moving up so rapidly. The “fast money” crowd often exit as quickly as they enter and it appears that may have played some role in the stock giving back so much of the gain since then. Regardless, we believe that a number of new investor/consumers were introduced to the Inuvo story beyond the Groove’s word of mouth efforts as a result of the stock’s rapid ascent and this will only add to the “free” virally generated incremental revenue. Additionally, Inuvo is now on the radar screen of many new potential investors who may not be willing to buy into a stock that moved up 60% in an hour, but will jump at the chance to build a position in this emerging growth story in the range where it has settled.
One more thing, all Groove participants would do well to remember that this is a marathon not a sprint and the GrooveVC mantra has always been quite clear – “GrooveVC is about discipline, focused consumption and investing, not trading. The most significant impact of our involvement will likely be manifested over a period of months rather than days and we hope to have a positive impact on the stock price in a similar time frame.” Keep doing what you do – use the Appbar, use Bargain Match and tell your friends. November should be a big month for Inuvo, Bargain Match will undoubtedly break every single day, weekly and monthly record in November and the benefit of all of the “free” incremental revenue impacts margins and eventually is reflected in Inuvo’s trading price. Inuvo’s stock is cheap at current levels, again making it a good time to buy the stock, use the products/services and spread the word.
Inuvo management just put together a fantastic quarter, significantly stronger than even the most optimistic analysts and/or shareholders expected. From all indications, they are seeing this momentum carry over into the fourth quarter. This creates a very big opportunity for Inuvo shareholders, both existing and those smart enough to see what is about to happen here and choose to jump on this bandwagon. The company was solidly EBITDA profitable in Q3 ($1m in EBITDA) and the company expects to do that or better in Q4.
Reviewing the company’s actual Q3 performance vs. the analysts’ estimates, Inuvo delivered results about $200k below estimates on the expense line, while beating the revenue estimate by close to $700k, making for a GAAP bottom line over $800k better than the analysts were expecting. Looking at analyst’s estimates for the current quarter (Q4 2012), it appears they are expecting the company to show a GAAP bottom line loss of $1,013,000. We believe this presents a tremendous opportunity for Inuvo shareholders.
If Inuvo management can keep up the third quarter’s momentum and beat the analysts’ GAAP estimate by $820,000 in Q4 like they did in Q3, that would result in a GAAP loss of around $193,000 or essentially breakeven. But what if they get a little bump on the revenue line from a new product/service that produces significant income without adding much if anything to the expense line (read about the Bargain Match App here). We believe that Bargain Match is a big deal and it could provide the incremental revenue to get us over that hump to GAAP profitability. But what if hundreds, maybe even a thousand+ new investor/consumers evolved who were either Inuvo shareholders or friends of shareholders who took their vested interest to heart and used Bargain Match and the ALOT Appbar like they owned it? As a shareholder you do own it, and no one will benefit more than you if Inuvo finds a way to report a GAAP profit in Q4. We are not suggesting that is definitely going to happen, we are saying it absolutely could. If the people reading this click here to download the Appbar and also click here to download the Bargain Match App and use them daily over the remaining days of the fourth quarter, each such person could add hundreds of dollars to Inuvo’s bottom line. If 1,000 investor/consumers generated $2o0 each (click here to see how that could easily occur), that would equal $200k and that would put Inuvo over the hump to a GAAP profit in Q4 if the scenario described above plays out. If Inuvo management has already found that App (Bargain Match) that will itself push the company to GAAP profitability in Q4, the extra $200k or so from the daily use of investor/consumers will push the company to that much more of a profit. If INUV reports a GAAP profit in Q4 of this year, Inuvo’s share price will likely move up solidly over $2 and buyers at today’s prices would double their money just by buying the stock and using the services for five to six months (until Q4 is reported). Of course, by that time the stock could already be well north of $2 and have operating momentum that would make investors think twice before taking any of their capital off the table, but you get the point. It is very rare to see a company that is performing as well as Inuvo is performing right now trading at such a big discount to the other similar companies in the space (see Local.com article that highlights cheap INUV valuation here). It is also very rare to find a company whose fortunes could be so heavily impacted by a collaborative consumption effort that requires so little effort on the part of each participant – we are simply asking that you install the Bargain Match App before you shop at the online stores you usually go to (and get paid cash for your trouble) and use the ALOT Appbar search box for a convenient way to search the internet with Google. And show a few friends how to profit from this too.
The bottom line – it is time for the shareholders of Inuvo to unite and work together in a focused effort by each to use the ALOT Appbar, the Bargain Match App and show as many friends and associates as possible why they should buy the stock and use the Appbar and Bargain Match too! If everyone who reads this downloads the Bargain Match browser extension App and installs the ALOT Appbar and uses them for all searching and shopping for the next few months (with a laser like focus on doing it the next few weeks to beat last year’s record holiday results), we can have a material impact on the fortunes of Inuvo and your Inuvo stock. Use the tools at the bottom of this article to pass this along to two or three friends who might join us.
Thus, we are setting four goals to work towards starting November 15 –
1) We want our participants to use the Bargain Match Cashback App for as many purchases as possible
2) We want our participants to install and use the Appbar for its search box or use http://www.alothome.com for all searching
3) We want to do as many transactions as possible on Cyber Monday, November 26 to set new revenue records for Bargain Match while achieving a $100k revenue day for the ALOT Appbar / Home Page.
4) Do as many transactions as possible on Bargain Match for the two week period Nov. 15 – Nov. 30 to beat the records for total retail sales, transactions and revenue generated that we achieved last year in a beta test of Bargain Match during the early holiday shopping season.
What constitutes a transaction that will help propel Inuvo’s revenue generally and more specifically, help set new Cyber Monday records for retail sales, transactions and revenue generated by Bargain Match and achieve a $100k search revenue day for the Appbar? There are three kinds:
1) Alot Appbar Search Box – any search done using this search box generates search results pages from Google, the same things you would get with a Google search. The search results (websites) listed at the top (top 3) and bottom of those pages are paid placements and Inuvo keeps close to 80% of the revenue generated for each click of one of them. Much of Inuvo’s recent growth has come through this channel, as more US based users equals higher revenue per click because in the US, searches that include combinations that include keywords like lawyer, attorney, broker, loan, mortgage, insurance, car insurance, donate to charity, credit card, etc. (click here to see a list that purports to be the top 20 paying keyword terms) are in very high demand by advertisers who will pay very high rates to have their sites at the top of a Google search. All of this works the same way for a search from www.alothome.com, which many of you who may want to participate from work might need since some corporate computer networks block Appbars, browser add-ons, etc. For those participants, they can just type www.alothome.com into their browser and get the same Google search results experience while generating revenue for Inuvo.
2) Bargain Match App – shopping on 2,000 of the most visible and well-known retailer’s websites (includes Target, Wal-Mart, Sears, Lowes, Home Depot, Best Buy, most major retailers, click here to see full list) after you add the Bargain Match App adds money to your “cashback account” with each purchase and it typically pays the same amount to Inuvo. So if you download and use the BM browser app today, all your shopping going forward will earn cashback for you and more revenue for Inuvo. This is a big part of the push we are seeking.
3) Add the Amazon, Ebay and Groupon Apps to your Appbar – there are hundreds of options for apps to add to your appbar, but there is one each for Ebay, Amazon and Groupon that essentially lets you search those sites/services and it also pays Inuvo a commission if you buy anything through that search. When you click the app and do a search, it puts you on the Amazon or Ebay site pages for the item you searched and anything you purchase will result in a commission being paid to Inuvo. With the Groupon App, you click it to see the deal of the day for your area and when you buy it or click-through from the App to Groupon Goods or Getaways, Inuvo earns a % of this transaction (usually 4 – 8%) and Bargain Match users actually get 4% of their Groupon purchase deposited into their own cashback account.
In summary, Inuvo shareholders, Groove Community members and all who read this while the stock is still trading below its 52 week high ($1.44) have a tremendous opportunity to benefit not only from a very cheap, below the radar microcap stock that is just starting to gain operational momentum, but to participate in a unique “collaborative consumption” movement that is sure to push Inuvo to make the jump to GAAP profitability much sooner than it would have otherwise and possibly as soon as the current quarter. Whether that occurs or not, investors who buy shares at today’s prices (Inuvo closed at $1.02 today) should double their money by this time next year with the potential for 3 – 5x their money if enough investor/consumers join in.
Surprising even the most optimistic among our community of investors, Inuvo reported top line revenue of $15.5m and EBITDA of $1 million for the third quarter, easily besting our estimates for $14.8m in top line revenue and more than doubling our expectation for $400k in Ebitda. Net revenue from the Software Search segment was $7.9 million, or 50.9% of total revenues. Revenue from the Publisher Network has been dramatically improving since the merger with Vertro, and Q3 revenue improved by $2.2 million to $7.6 million for a 40% improvement over the second quarter of 2012. The revenue in each segment handily beat our most optimistic projections and management achieved these results on a lower expense base than we expected.
The Inuvo growth machine appears to be hitting on all cylinders. The Publisher side of the business has recovered much more quickly than anyone anticipated and it appears that the company’s new focus on attracting smaller publishers is paying off. Management mentioned that their local search offerings (Yellowise and Local.Alot.com) are growing rapidly and that Local.Alot.com will start to expand into international markets in Q4.
The biggest part of this story is the growth in the ALOT services. Inuvo management seems more bullish on their ability to acquire and monetize US-based users than any time since we started following the ALOT services several years ago and this bodes well for the long-term success of Inuvo. Management indicated that they have been able to acquire users at lower prices than they would expect based on historical averages and these users are generating more revenue than what would be expected based on historical norms. I would say that it does not get any better than that, but it actually does. Last month the company started offering the Bargain Match browser extension as a “tag along” with the ALOT Appbar campaigns amd management indicated that the high utility / value adding / margin expanding Bargain Match app is now adding thousands of users per day.
To get an idea of the potential value of a consumer who has the Bargain Match App installed, consider that ALOT has historically tried to acquire Appbar users at an average cost of around $1. The average lifetime value of that average user has typically ranged between $1.40 – $1.50, meaning that the search revenue and any commissions from that user clicking the Ebay or Amazon App to do some shopping has resulted in the company earning $1.40 – $1.50. Or course, that is an average across a base of millions of downloads and the revenue generated by many users will be much, much higher than that while others will have the Appbar and rarely if click on an ad or buy through the Apps. In any case, when Inuvo is able to acquire an Appbar user for a cost in the range of $1 and that user generates more than $1.50 over the time that they keep the Appbar installed, that is the icing on the cake that can materially change this company’s fortunes if it starts to occur with a significant percentage of the user base.
The consumer who has the Bargain Match browser extension installed will earn revenue for Inuvo (and cash for himself) practically any time they buy something online. Without having to go to any particular website or do anything other than what they would normally do while shopping online, the Bargain Match browser extension prompts the consumer that they can earn cashback and/or use coupons for the shopping site they are visiting – over 2,000 merchants participate including most major retailers (Target, Walmart, Best Buy, Home Depot, Lowes, Sears, Walgreens, Groupon, FTD, Expedia, Apple, Priceline, Hotels.com etc. and the list includes just about every retailer you have ever heard of, click here to see a complete list). Thus, if the user buys a $50 flower arrangement from FTD, the consumer gets $2 into their cashback account and Inuvo earns $2. If they book at $100 hotel room on hotels.com or Priceline, they get $4 – $5 back to their cashback account and Inuvo also earns $4- $5. If the consumer buys a $50 Groupon, the consumer gets $2 to their cashback account and Inuvo gets $2. The consumer has a prompt in the corner of his browser showing the buildup of that cashback balance, so he has an incentive to continue to keep the Bargain Match App installed. Inuvo gets to keep earning their half of the commissions and you can see how quickly those Appbar users we paid $1 to acquire in hopes that we could earn $1.50 can turn into longer term users who earn the company $5, $10 even $20. This could have a staggering impact on the companys top and bottom line, as this app has the potential to exponentially increase the revenue generated by each consumer that we acquire.
The Bargain Match App has enormous potential. The fact that Inuvo is now able to include it with the Appbar downloads for thousands of consumers that the $60k per day ad spend is targeted to reach is a really big deal. Inuvo CEO Peter Corrao said on the call that the majority of the consumers that have been offered the Bargain Match App are choosing to take it and he also indicated that attrition for those who choose the BM App is much lower than the attrition rates for those who take the Appbar alone. That makes Bargain Match a really, really big deal. Do not miss the importance of what is happening here. This only started in October, so Q4 will be the first time that investors will get to see the impact Bargain Match will have on Inuvo’s numbers. In the meantime, Inuvo is still trading in the $1.15 range and investors who understand what is happening here still have an opportunity to buy more shares at a price that will look very cheap in a few months. Larger investors and even insiders themselves will likely be vying for shares over the next couple of weeks and we will get a much broader audience when the stock moves to a new 52 week high as the momentum players look at what is developing here and start to move in. This will likely occur long before we start to see the any numbers released for Q4, so we encourage Groove participants to take this opportunity to get friends/associates into the stock while it is still cheap.