Blow for Blinkx shares as modest profits disappoint
Shares in Blinkx, the Aim-quoted video advertising company, fell 9 per cent on Tuesday after full-year results showed only a modest rise in profits before tax.
Blinkx makes money by using patented digital filters to place video and banner advertising alongside relevant content that increase the chances of a viewer watching and clicking on the add
Investors have been jittery about Blinkx since Ben Edelman, an associate professor at Harvard Business School, published a critical blog post in late January that caused the stock to collapse by a third.
Mr Edelman, who accepts paid briefs by private clients and is a seasoned internet privacy campaigner, claimed that Blinkx inflated its traffic figures by installing software on to users’ computers without their permission.
The company released a detailed rebuttal in March, claiming that Mr Edelman had made “numerous factual errors”, but the shares have not recovered their prior levels.
“The debate is still very live and the uncertainty is profound,” said David Reynolds, technology analyst at Jefferies. “Consumer behaviour is shifting so quickly, and there are massive issues in the industry about . . . return on investment [for advertisers].”
Blinkx’s 2013 revenue increased by 25 per cent to $247.2m, while profit before tax rose only 5 per cent year-on-year to $17.6m.
It also announced the acquisition of Lyfe Mobile, a California-based company that helps brands manage their digital advertising campaigns using GPS data and audience targeting, in an all-cash deal for an undisclosed sum.
Blinkx remained upbeat about the opportunities in mobile video advertising, with Brian Mukherjee, chief executive, saying that “we are fortunate to find ourselves at the crosshairs of a booming segment”.
The profit figure reflected a one-off charge of $8m due to Blinkx integrating Rhythm NewMedia into its business, a mobile advertising network that it bought for $65m late last year.
About three-quarters of Blinkx’s revenues come from video advertising and its top 20 advertisers make up 35 per cent of its revenue stream. Blinkx does not disclose who its top partners are, saying that because its relationships are not exclusive and its revenue-sharing arrangements are “dynamic and proprietary”, releasing such information would make it vulnerable to being undercut by competitors.
While companies such as Facebook have profited from a boom in companies spending more on mobile advertising, consumers are more ambivalent.
People in the US and UK showed “a profound aversion to mobile advertising”, according to commentary from PwC that accompanied a recent global survey of 3,800 respondents.
A majority of consumers in Brazil and China wanted to be targeted at least daily with ads on their mobile devices, but over half of consumers in the US and UK would prefer no mobile advertising at all. |
