Received this e-mail today from a friend. It includes some good rebuttal to Mr. Adamou's article on BII:
Good evening,
I am following the thread's conversation and would like for
you or another person to make a couple points regarding margins
of profittability for bid.com especially in light of the Taurus report.
Note that the 2.5% margin was for the third quarter. The margin for the previous quarter was 0.9%. The quarter to quarter increase was 250%
The Tauras analyst even suggesting an annualized gross margin rate of 2.5% is downright imbecilic.
In a prior post I used this percentage increase to estimate margins for the next quarter based on several peformas. Please see link....
Message 6661953
Now why would there be continued expectations of growing margins?
This is very simple and happens in several ways.
1). More people become aware of the site because of its market activity (free advertising), televisions commercials, partners promotions, magazine adds, and people like waldo , myself, and others who spread the "word" (i.e. word of mouth).
The more people know about the site, the more they use it and the more competitive the bidding becomes which, in turn, drives up the prices and automatically increases gross revenues. This is already occurring. Look at the United State's auctions and look at how high bids on laptops are rising that started at $1.00.
Was word of mouth takes over, marketing and promotion costs can be more targeted and less a percentage of the operating budget., which means that marketing dollars can be used more effectively and selectively which cuts down on operating costs.
A funny thing may also occur in that bid.com is as good or better an url address than ubid.com. Many people may inadvertantly enter bid.com by mistake.
2). As more people become aware of the site a second thing occurs. More inventory is liquidated which, in turn, means more inventory doesn't have to be stored. Cutting down on storage costs cuts down on operations costs which also improve margins.
Also, the consequence of this added inventory "liquidity" is that bid.com can move more items get the same amount or increased margins on these additional items and, therefore, increase gross revenues irrespective of the percent margin increase.
3). The more people visit the site and the more products that can be sold gives bid.com leverage with suppliers to get better percentages for the products that Bid.com liquidates. This too increases the gross margins and revenues.
4). Becoming a heavy web address that attracts a lot of cyber traffic also increases the value of that cyber real estate. Any company wishing to place banners on the site will have to pay higher fees. This additional source of revenue also contributes positively to the bottm line.
Based on these factors for a business that is just at the beginning of its life cycle, where there are many ways to increase margins through greater receipts, and reduced costs, I can easily see forsee triple digit percent increases for bid.com margins for at least another couple quarters.
Why?
1). Irrespective of competition, the market is huge and people will learn to use e-commerce for convenience and savings in both time and cost. (I got my $600.00 digital camera, which I priced on line before bidding, for $340 including shipping. The camera arrived within three days). Every one should pick up the December 7th issue of "Fortune" magazine and read the cover story article entitled "Internet or Bust".
2). Regarding competition. Bid.com kicks butt for business to consumer transaction (this is very different than ebaY which is person to person) especially in terms of attraction of the site due to its graphics, innovated bidding, and frequency of bidding. Bid.com's site is just simply funner than its competitors and, therefore, IMO grab
its fair share of the market share. Bid.com may also be declared the "best of breed". I, of course, already think that it is the best of breed for business to consumer auctions.
Those who say their isn't a lot of product fail to note that the other sites auctioning process transpires over several days. Plus no other site has the"Dutch Auction" which utilizes bid.com patented count down software.
3). There is also a huge untapped potential market that others to my knowledge haven't seized upon and that is business to business auctions. From reading Bid.com prospectus, Bid.com intends to pioneer along this avenue.
So, basically I concur with all who say that Tauras was full of bull sh*t.
Down here in the States, Tauras's actions would be clear violations of SEC regulations. Being unfamiliar with Canadian markets, I'm just surprised that no similar regulating body wouldn't be able to persecute or , at least, sanction Taurus for trading equities on which it made such an irresponsible and detrimental commentary.
Also if this company with its management and business plan were on the Nasdaq right now I sure as hell wouldn't buy it.
Why?
Because it would cost to damn much!
There you have it folks. Some great points.
Regards, Wisam |
