Jefferies 3rd Annual Internet Conference

Jefferies 3rd Annual Internet Conference

NYC – February 28, 2007

I attended this conference and here are my notes from the presentations.

aQuantive.

  • $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

Shutterfly

  • $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
  • 1-800-get-site
  • 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.

InPhonic (INPC)

  • 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.

Bankrate

  • 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.

The Street.com

  • 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


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