Jefferies 3rd Annual Internet ConferencePosted: February 28, 2007
Jefferies 3rd Annual Internet Conference
I attended this conference and here are my notes from the presentations.
- $442mm/$123mm EBITDA/28% margin
- 40-90% rev growth over last several years
- $2.5B market cap, Enterprise Value is 20X EBITDA
- Divisions are
- AvenueA/Razorfish (Agency), $267mm/17% margin
- DrivePM (Ad Network) and $52mm/18% margin
- AtlasDMT (Technology Licensing) and $122mm/41% margin
- $540 million in media spend in 2006
- They service 27% of Fortune 100 in 2006
- DrivePM has 250 online “premium” publishers
- Revenue by category: Travel & Entertainment – 16%, Fin Svcs 17%, Pharma 11%, Retail 14%, Telcom 8%
- Competitive dynamics: full value chain, internal operating leverage, internal customer/supplier relationships
- $123mm/$20mm EBITDA/17% margins
- 50% revenue growth for last several years
- $400 million market cap, Enterprise Value is 10x EBITDA
- Photo print, scrap booking, greeting cards and calendars
- Premium brand and vertically integrated
- 5 million orders sent in 2006
- 77% of new customers come direct and are “free”
- Avg cost of paid new customers is $12
- They have 70 customer segments that get messaged differently
- 25-44 yrs old (63%) 84% female, 50% with children, $75k+ income
- 1.7 million transacting customers in 2006, (955k in Q4) 2 average orders per customer per quarter(?)
- Money Magazine did a ranking of photo services and ranked them the best.
- Very impressive presentation – I really liked the CEO. I am going to test them out and probably switch from Ofoto if what he says holds true.
WebSite Pros (WSPI)
- $52mm/$6mm EBITDA/13% margin
- 45% CAGR growth rate, Enterprise Value is 20x EBITDA
- 74,000 paying SMBs for web sites
- 23 million SMBs
- Slightly over 50% have web sites
- $50 to $100 per month
- They build the site, get a domain, submit to search engines. They include maintenance (30 minutes a month).
- For an extra fee will buy SEM
- They also track e-mail responses, phone calls and faxes.
- They own Leads.com
- They own RenovationExperts.com
- They work with Discover (original partner, was 90% of lead flow now 46%), IBM, Yahoo, Register.com, Eathlink, Quickbooks, FirstData, Verio and VistaPrint (these companies turn over their customer list and WebSite Pros does the outbound sales and they get a small revenue share).
- They have 200+ FTE in telesales. (2+ year avg tenure for reps) Six call centers. Hire unskilled and then train. Build as many as eight web sites a day per employee.
- Emerging competitors Network Solutions, Web.com and Yahoo.
- Avg customer is 18 months. Break even for customers is 3 months.
- Impressive, non nonsense, just the facts mam’ CEO
- Expect 20 to 25% operating margins in two years.
- Largest sellers/activator of wireless phones on the Internet
- $406mm/$24.5mm Adjusted EBITDA
- Projecting $500mm this year, guiding to $35million for EBITDA.
- Added 660,000 net subscribers last year
- Shifting from one time acquisition payments to residual fees
- CEO owns about 30%? Goldman Sachs is second largest holder, TCV has exited their stake.
- 6,000 private branded stores (for AOL, MSN, Yahoo,) and for manufacturers.
- 80% of consumers research wireless service online while only 7% buy it online.
- They represented 40% of online phone sales. Amazon is second largest and they now have a partnership.
- 52% of their sales are from their own WireFly.com (expedia of Wireless). This is their lowest cost of acquisition.
- Marketing cost is 28% of revenue
- They spent $100 million in marketing last year. (most if not all is online)
- They are expanding product offerings suh as accessories, device protection plans, mobile content, family plans, pre paid, travel related benefits.
- They have 7.5 to 8.0 million customers (prospects?) in their database. They are looking at direct marketing (third party offers) as a new source of revenue.
- They save time and money for customers who would ordinarily shop in the store.
- They generated $2,000 for mobile carrier over four years for $340 marketing costs. ($60 per month from avg subscriber)
- They work with 9 carrier system, there are 400 handset skus and 1,000 carrier rate plans, 6,000 marketing partners, and 44,000 zip codes resulting in billions of combinations.
- They had a customer service melt down in Q4 2005. Rebates not granted and other major problems. Now at 80% customer satisfaction.
- 3 to 5% of their traffic is from SEO. They had to re-build Wirefly to be more SEO friendly. Big focus in this area.
- They bid on 5,000 key words.
- Did not go to there presentation, but a few interesting tid bits from the slides that I saw.
- $100mm proj for 2007/$40mm profits
- 73% of their traffic is “organic” from SEO and partnerships, 10% is paid search, 17% from 75 co-brand partners such as Yahoo, AOL, Forbes. (shows the long term small potential of co-brands with portals)
- 487 million page views last year generated $64 million in revenue. I think that works out to a .12 cents per page view of a $123CPM which is very, very good. Shows the value of highly targeted inventory in a lucrative category.
- I had to leave early, but a few nuggets.
- $50mm/$12mm EBITDA
- 61% of revenue is subscription, 33% ads and 6% syndication revenue
- Pushing toward 45% ads in a few years
- Average subscriber spends $300 per year!
- Their subscription writers are “in the money flow” meaning they are practitioners