Inuvo Gets $1.75m Grant and Renews Google Contract
Great news for Groove community participants and all Inuvo shareholders over the last 24 hours. Inuvo announced a renewal of their agreement with Google this morning, extending for two more years the partnership that allows Inuvo’s ALOT and Bargain Match services to offer best in class pay per click advertisements. This is a very big deal because only the highest quality producers of search traffic are allowed to offer the Google ad feed and because it typically monetizes any given sampling of search traffic at a significantly higher rate than the other major ad networks. It is also a big deal because Inuvo’s stock has declined over 30% the last six weeks in what appears to have been a sell off based on the theory that former CEO Peter Corrao’s departure was the result of a revenue shortfall in Q4 and what would prove to be the loss of the Google contract. Last weeks announcement of $16.2m in Q4 revenue took care of the revenue short fall issue and this morning’s announcement of the Google contract extension puts the other issue to rest.
Yesterday, Inuvo management announced that the company would be relocating its headquarters to Conway, Arkansas. The company is carving in the range of $2m (based on annualized run rate) out of its expense structure over the next 6 months by moving from New York City to Conway and the company has received a $1.75m grant from the Arkansas Economic Development Commission that will cover the cost of the move plus allow for additional capital investment in equipment to be used there. We believe this is a great example of the value new CEO Rich Howe’s entrepreneurial background will deliver for Inuvo shareholders.
Inuvo’s stock is still trading over 30% below the range it was trading before all the rumors about missing the Q and losing the Google contract started to abound. More recently, there has been much talk of the changes Google is requiring of its partners, particularly those who offer toolbars like Inuvo’s ALOT. This is actually a significant issue for many in the industry, as their aggressive practices that require consumers to “opt out” of having their home page, error search and browser search box defaults adjusted during the toolbar download process. Inuvo’s ALOT actually made the change to “opt in” that Google is requiring back in 2011, so this should not have an impact on Inuvo’s ALOT operations at all.
In summary, Inuvo has made major significant changes over the last 60 days that will have a very large positive impact on its cost structure and bottom line going forward. The company has renewed its Google contract and received a large grant to pay for the expenses associated with the company’s additional cost structure improvements over the last couple of days. The company’s overall long term prospects have improved significantly since early December when the stock was trading in the $1.20 – $1.30 range, but the stock is still trading below $1. We do not believe that will be the case for long and believe that Groove participants would do well to buy more shares while it is still this low.
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