2011 is the year that tech became sexy again. In the US, Linkedin and Pandora are already public. Groupon, Twitter, and Facebook are surely not far behind.
In Canada, the effect has been more muted but, on most days, a small cadre of tech stocks is starting to crash the mining and metals party. Two of the heaviest traders on the TSX Venture Exchange this year have been Poynt (TSXV:PYN) and Intertainment Media (TSXV:INT).
At first blush, the two companies have little in common. But new data suggests their respective business models may both be set to benefit from trends in online spending.
Calgary’s Poynt, which until last October was known as Multiplied Media, is the creator of the wildly successful eponymous app. The company says the GPS enabled mobile app attracted 8.5 million unique users between June 2009 and June 2010, a 165% increase over the previous year. Poynt management says the app’s “popularity is being driven by its convenient and timesaving ability to connect consumers to their surrounding area.” Poynt has, at various times, been at or near the top of both Apple’s App Store and Blackberry’s App World, and was even prominently featured in a recent BlackBerry ad.
Intertainment Media’s Ortsbo, which was released just last year, is software that translates, in real time, more than fifty different languages across a dozen social media platforms. In late July, Intertainment released numbers on Ortsbo’s first year performance which showed that more than 71 million unique users from over 170 countries and territories had used the product.
The numbers on both Ortsbo and Poynt are staggering. But can the companies turn the millions of eyeballs into millions of dollars? A quick look at the books of both suggests the companies are so far, having little success. In fiscal 2010, Poynt lost $8.49 million on revenues of just $927, 000. The company’s recently reported Q2 showed a promising increase in top line, as revenue was up to $573,399, but Poynt still posted a $3.7 million loss. Intertainment’s numbers were slightly better, but the company still lost $5,25 million on revenue that was a shade under $4.4 million. This number was more than double 2009’s topline number of $1.97 million.
But is this trajectory just par for the course in the online game? After all, even Groupon, the fastest company ever to reach a billion in revenue lost more than $100 million in the first half of 2011. And Groupon’s biggest competitor, LivingSocial, is probably “losing money hand over fist right now” speculates the Wall Street Journal. Nonethleless, the paper goes on to estimate that a LivingSocial IPO could value the company at between $10 billion to $15 billion.
Clearly, both Poynt and Intertainment Media are winning the land grab game for eyeballs in their respective niches. But now that they have built it, will the dollars come? Andrew Osis, talking to Cantech Letter recently, said Poynt’s engagement with the user is unusually sticky, and that he believes the platform is especially great for “call to action” kind of advertisements. ” And talking to Cantech Letter in February, Intertainment Media CEO David Lucatch says that he actually sees two paths to monetization for Orstbo in both advertising and through licensing fees.
New numbers on the size and scope of the online ad spending business are showing a space that is beginning to hit its stride, so much so that a pencil with a good eraser has become a near necessity for industry analysts. New York based market research firm eMarketer says online ad spending will grow 20% this year, to $31.3 billion. The growth forecast is nearly double what it had estimated just last December.
If we’re to believe one expert, shareholders of both companies should hold on because the ride may just be getting interesting. Miles Nadal, CEO of the world’s eighth-largest ad agency, MDC Partners, says a major shift is about to happen in online advertising.
“Eyeballs will translate into ad dollars,” says Nadal “Consumers consume 25 percent of their media online. But, there’s only 12 percent of all ad dollars online. If ad dollars meet eyeballs you’ll have a $50 billion increase in ad spending.”