With forty million monthly unique visitors, Intertainment Media’s (TSX:INT) Ortsbo, software that translates, in real time, more than fifty different languages across a dozen social media platforms, is an unqualified success.
Ortsbo’s recent deal with Variety (the company will provide users at this year’s Consumer Electronics Show in Las Vegas with the ability to watch Variety “summit sessions” through an on-line broadcast video stream that will feature multilingual closed captioning) is not the platform’s first taste of the limelight. Intertainment has hosted similar events with rock group KISS, Canadian NBA star Steve Nash, IndyCar and with the Disney & Dreamworks Corporations.
But has Ortsbo’s success outgrown that of its parent company? In one way, CEO David Lucatch says it has.
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In a press release issued late in November, Lucatch said management felt that Ortsbo’s growth would be accelerated as independent company, and that Intertainment shareholders would benefit from Intertainment maintaining a stake in this new entity.
And for those wondering whether an Ortsbo IPO was just idle chatter, management went on to provide detail on how they felt an Ortsbo IPO would look, valuation wise.
“Ortsbo has garnered significant interest by U.S. banks, venture and investment firms” the company said in a November 28th press release, adding that the plan “…has already received interest for a lead order of $20-million (U.S.) from a U.S. institution at an anticipated premoney valuation for Ortsbo Inc. of a minimum $210-million (U.S.), with further potential interest for additional financing. ”
A spinoff of Ortsbo would therefore be bigger than the value of its parent company. Shares of Intertainment Media closed today at $.52 cents, giving it a market cap of just under $150 million.
So in an environment rich with social media IPO’s, how does Ortsbo stack up?
Popular user review site Yelp, in filing its IPO paperwork with the SEC, revealed that “Approximately 61 million unique visitors used our website, and our mobile application was used on more than 5 million unique mobile devices, on a monthly average basis during the quarter ended September 30, 2011.” Yelp generated $58.4 million revenue in the first nine months of 2011, with a net loss of $7.6 million. The company has hired Goldman Sachs and Citigroup to lead its IPO, which is expected to value the company at $1.5 billion to $2 billion.
Social network game maker Zynga (NASDAQ:ZNGA) IPO’d in mid-December with a $7 billion valuation. Zynga has 148 million unique visitors on Facebook every month, for games such as its runaway hit Farmville. Zynga’s sales were much higher than Yelp’s In 2010, the company had a $90.6 million profit on sales of $597 million.
Online real estate company Zillow (NASDAQ:Z), which had an IPO valuation of $540 million when it debuted at $20 per share in July. Zillow currently has 24.2 million average monthly unique users. Zillow’s Q3 revenue, was $19.1 million.
Of course, the rub against Ortsbo is that it has yet to generate much in the way of revenue. Cantech Letter caught up with David Lucatch this afternoon, and while he acknowledged that investors will have to decide for themselves what sort of discount would be reasonable to apply to Ortsbo for its lack of revenue, the plan is by design for the platform, which he points out is just eighteen months old.
“Going after revenue instead of eyeballs would have been detrimental to Ortsbo” said Lucatch. “We have long term plans for this platform and we made the decision early on that we didn’t want this to be Netscape, where we try to monetize too early and destroy the user experience and that ultimately clears the path for someone else to monetize it. So we approached it by concentrating on delivering a great product for the end user, with monetizing in the back of our minds. Now, we’re starting to see the paths to revenue very clearly, in our deal with Variety for instance, and in other commercial applications, which are are presenting themselves on a regular basis.”
For shareholders of Intertainment Media the Ortsbo spinoff could be a winning situation at most any valuation. That’s because current accounting principals force Intertainment to recognize the value of Ortsbo at zero. An IPO would peg an actual value to the asset, instantly increasing the value of whatever stake the company maintains.