"Background Comments November 14, 2001 By Rafi Khan
E Universe, Inc. (symbol EUNI)
Price $3.10 Market Cap. $76 million
FAST GROWING, HIGHLY PROFITABLE INTERNET GIANT
MANY ATTRIBUTES AT A MICRO CAP. VALUATION!!
WHICH fast growing, highly profitable Internet Giant:
HAD RECORD NET INCOME of $900,000 in the September quarter, which was an impressive 13.4% of revenues. (Microsoft and eBay type profit margins)
PROJECTS SEQUENTIAL QUARTERLY PROFIT GROWTH OF 44% in writing from the September 2001 Q to the December 2001 Q and another 38% profit growth from the December 2001 Q to the March 2002 Q
HAS A PLETHORA OF NEW PROJECTS that may significantly enhance those already very robust revenue and profit growth numbers.
RANKED #6 in the latest week survey by Nielsen?s NetRatings only below AOL Time Warner (AOL),Yahoo (YHOO), Microsoft (MSFT) and Lycos (LCOS)
HAD FLOWGO RANKED #1 Entertainment Site by Nielsen NetRatings. Flowgo is a flagship website of EUNI.
HAD OVER 36 MILLION UNIQUE VISITORS go to its various EUNI websites in October 2001 according to figures from Juniper Media Matrix
HAS OVER 40 MILLION HOUSEHOLDS that opt in, want or subscribe to EUNI?s various and numerous daily newsletters or special offers letters.
SENDS OUT AN AMAZING ONE BILLION PLUS emails, newsletters, special offers and other compelling content to households that have subscribed to receive that content monthly.
HAD FASTEST GROWING INTERNET PROPERTY which was Madblast.com, which grew an amazing 4072% in October 2001. The next fastest growing property grew only 292% (as reported by Juniper Media Matrix)
HAD ITS BUSINESS MODEL LAUDED BY THE GARTNER GROUP in a report titled ?Beating the Online Advertising Slump?. EUNI relies almost entirely on a performance based direct marketing and advertising model which has continued to thrive under the current very tough business environment
HAS RECEIVED A $5 MILLION CASH BOOST FROM SONY as part of a transaction by which EUNI bought the Sony InfoBeat Internet news and entertainment email service. The cash was very much needed as EUNI has never had the benefit of an IPO or a major capital raising from an Investment Banker.
FEATURED IN A MICROSOFT CASE STUDY that highlighted the robust nature and scalability of EUNI?s infrastructure using Microsoft?s NET Servers.
MANY ATTRIBUTES, HIGHLY PROFITABLE AND FAST GROWING
A LOW PROJECTED P.E RATIO --- THE STORY ON E UNIVERSE IS ABOUT TO DISCOVERED BY PERCEPTIVE INVESTORS
KEY COMPONENTS TO E UNIVERSE?S SUCCESS
THE GARTNER GROUP praised EUNI?s business model approach and rightly so! Hardly any company doing business on the Internet has such a unique mix of attributes as EUNI. Here are some of the key components that go into making EUNI such a success story: -
a) ?Close to Zero? Customer Acquisition Costs
Whenever it costs you money, and often a lot of money, to put a new customer on the books or to have a new visitor come to your websites ? that is a business fraught with danger. The more successful you are in getting customers or visitors, the more it costs you and the more you lose or can lose. Time has proven the Amazon, WebMD, PriceLine (and too many more to mention) business models have inherent problems. Even Yahoo and AOL spend hundreds of millions of dollars in advertising. EUNI?s advertising budget on getting new customers or visitors is zero. Typically EUNI will send you a funny Flash such as ?The Taliban Song? or an ?Osama Bin Laden? Flash and encourage you to send it to others.
For a popular joke, story, picture, poem, thought or Cartoon Flash this ?referral? or ?viral? marketing approach can lead to millions of people looking at EUNI?s content and the customer acquisition cost is virtually zero. So growth is capital intensive for most of the Top Internet Properties ? but capital free for EUNI.
b) Extremely low overheads
For EUNI there was no high profile IPO, or top notch Investment Banker touting their stock. The Chairman & CEO, Brad Greenspan, founded the company by backing it into a public shell. His initial annual salary was $50,000 a YEAR. There was no high priced top executives or advertising staff to sustain. The company?s focus was to grow visitors to its sites and develop its daily newsletter, emails and special offer services. Having reached a critical mass EUNI could then hire addition executives as needed that would, typically, contribute immediately to top and/ or bottom line growth. Even now with monthly visitors exceeding 36 million and emails sent out to over 40 million households, EUNI?s monthly burn rate is under $2 million a month. So revenues needed to be generated to turn the company profitable are also at a relatively low number.
c) Performance based advertising revenues
If a Visa Credit Card Company, a debt consolidator, a mortgage refinancier, a diet program operator etc. values a new customer as being worth $50 and offers to pay EUNI $30 to find that customer on which EUNI makes money ? this clearly is an advertising model that works for both parties and also is a program that may not be affected by the advertising slump faced by the more ?intangible benefit? advertising programs. So whilst many others suffered through the Internet recession and economic downturns, EUNI has not been afflicted with these problems. Indeed the challenge has been to maximize the opportunities afforded by the ever growing critical mass of the EUNI network of websites and newsletters. There is no shortage of Credit Card Companies, Insurance Companies, Magazines Sellers, CD & DVD sellers, Diet Programs, Vitamin Sellers, Dating Companies, Computer Accessory Sellers wanting to use EUNI?s services to generate additional sales and profits.
d) Compelling Content
EUNI?s rise has been constant and meteoric. You simply cannot have such performance unless you are providing the American public content that is compelling. The results speak for themselves:
? Fastest rising Top 20 U.S Internet property as measured by Nielsen
? Fastest rising Top 20 Global Internet property as measured by Media Matrix
? Fastest growing individual website as measured by Media Matrix (Madblast)
? #1 Entertainment website (Flowgo) as measured by Nielsen
Clearly the EUNI formula for ratings and visitors work and there is no reason why the core EUNI team that has been so hugely successful in the past should not continue its success in the future.
e) Internet Recession may have been good for EUNI
Access to new capital has largely been cut off in recent months for any number of Internet properties. That has meant less competition for EUNI as Internet companies have been forced to close and the wonderful opportunity to buy newsletters and websites at pennies to the dollar to what EUNI and others would have had to pay even just a few months ago. EUNI has been busy over the last 6 months developing and increasing its infrastructure and network at very little cost as others have been forced to abandon potentially exciting projects due to the inability to raise even small amounts of capital. So, in many ways, the economic downturn and Internet recession has been a big benefit to EUNI.
f) Macro Trend towards email has been re-invigorated
Even before the Anthrax scares in the U.S., there had been a trend to using more and more email. After all a piece of ?junk mail? may cost about 30 cents and a similar content email may cost only 1-2 Cents. After the Anthrax scares, these macro trends away from conventional mail to email may be irrefutable.
Arguably EUNI is the premier targeted email marketing company in the world today. And the beauty of EUNI?s emails are that they are sent to households that want, have asked, have subscribed and/or welcome receiving those emails. That may make the EUNI email a lot better for business clients than junk mail that customers are now loathe to open. Business conditions and the outlook for EUNI?s email based initiatives may never have been better. Another attribute of EUNI?s email is that they have a very strong demographic for Women aged 40 plus ? and often these women are the decision making buyers in the house.
THE E UNIVERSE EMAIL NEWSLETTERS
If you want the latest Hollywood gossip, a new recipe every day, a new joke everyday, special offers on the latest technology items, a new Flash Cartoon daily, or the latest entertainment stories ? EUNI will most probably have a daily newsletter suited for you. In total there are some 20 newsletters that typically are sent daily such as: -
GossipFlash ? The latest gossip from Hollywood and elsewhere sent to you in conjunction with National Enquirer to 10 million households.
Justsaywow -- The latest funny flash cartoons, stories and jokes that goes out to about 8 million households.
InfoBeat Entertainment ? One of the Sony group of newsletters goes to about 4 million households.
Intelligent X Technology ? A technology newsletter goes to about 3 million households
Gotlaughs ? Focuses on jokes and funny cartoons and goes to 4 million households.
THE LATEST NEILSEN NET RATINGS
For the week ended November 4, 2001 the Nielsen Net Ratings were as follows: -
Rank Property Unique Time
Audience Spent
(Millions) Mins/Sec
1 AOL/Time Warner 39.3 15.35
2 Yahoo 31.6 26.47
3 MSN 28.9 24.29
4 Microsoft 10.0 5.24
5 Lycos 9.4 7.08
6 eUniverse 7.8 7.13
7 eBay 7.5 38.58
8 Walt Disney 7.3 15.16
9 Excite@ Home 7.2 12.24
10 Google 6.9 8.37
Interesting to note that the time Americans spent on the eUniverse network exceeded the time spent on Microsoft and that is despite the recent launch of Microsoft Windows XP and the Microsoft XBox
Also most of these companies have multi billion dollar valuations and a number of them have had turbulent profit performances in 2001.
Other than Microsoft (MSFT) and eBay (EBAY) only EUNI has recently had net income which is more than 10% of revenues. In that regard EUNI is in exceptional company indeed --- the next stage for EUNI may very well be an earnings multiple rating that is more in line with EBAY, MSFT and other well regarded stocks.
NEW E UNIVERSE PROJECTS
Having achieved critical mass, EUNI is poised to launch a number of high margin new business initiatives which may further increase the company?s projected profit whilst EUNI takes minimal capital risk.
Mega Lotto Club ? Invites membership at $9.95 a month to participate in 8 Lotto drawings daily for a total of $14million and over 240 Lotto drawings monthly
FC Advantage ? Takes an attractive offline secondary medical insurance business and offers those products on the Internet affording EUNI the opportunity of enhanced commission for a prolonged time ? a win/ win situation for both companies. Many other such offline joint ventures are contemplated.
Home Security ?Anthrax? Test Kit ? Offering an inexpensive Test Kit to test for Anthrax and other Security Tests in the Home
Debt Consolidation & Mortgage ReFi Programs -- Offers the advantage of the recent lower interest rates to make substantial savings on debts and mortgages
These new programs are a follow on to the hugely successful All You Can Ink and CupidJunction dating programs that were largely responsible for the sharp rise in September Q revenues and profits.
If these new programs have any success similar to the Inkjet and Dating programs, there very well could be major upside earnings surprise from the already robust growth projected by EUNI.
OUTLOOK
The future outlook for EUNI both in terms of revenues and profits looks super strong. EUNI management, is conservative by nature and yet, has stated in writing that revenues will grow from the $6.7 million in the September Q to $7.8 million in the December Q to $9.0 million in the March 2002 Q. Correspondingly the profits are projected to grow from $900,000 reported in the September Q to $1.3 million in the December Q to $1.8 million in the March 2002 Q.
THE NIELSEN RATINGS for EUNI have risen by about a huge 30% in the last 2 months and also EUNI management has been very conservative in assessing the revenue and profit impact of the new programs that are coming on stream.
AS SUCH PROFITS OF $2 MILLION FOR THE DECEMBER Q AND $3 MILLION FOR THE MARCH 2002 Q ARE ENTIRELY POSSIBLE
AND THE SALE OF JUST A 100,000 HOME ANTHRAX TEST KITS WOULD MAKE EVEN THESE NUMBERS SUPER CONSERVATIVE
Now start to annualize $2- $3 million quarterly profits, add grow, couple that with the potential of a 40 million household Internet Giant and the possibilities of a major re-rating for EUNI seem compelling
So purchase of EUNI is strongly recommended at current levels
The information contained herein is based on sources, which we consider reliable, but its accuracy is not guaranteed. The information contained herein is not a representation, nor is any recommendation made herein based on privileged information. The information is not intended to be, nor should it be relied upon as a complete record or analysis. Neither is it a solicitation of an offer to sell or buy any securities mentioned herein. Any individual concerned with producing this document may have a position in any security discussed in this document or any related security. These securities may be bought and sold notwithstanding any recommendation made in this report" |
