Windows Of Opportunity In Mobile Advertising Firms

Includes: FB, GRPN, MFON, YELP
by: Kyle Rankin

In the past, sporting events were a one way relationship as far as advertising and customer feedback were concerned. Typically a large digital scoreboard blasted ads to fans with the end result or effective factor not measurable. As the mobile world grew with the proliferation of smart phones, franchise organizations took the initial step of engaging fans with basic text response programs. But again, the data from most fans participation was short lived as technology had not caught up to how to manage and capitalize upon customer loyalty programs and the valuable data they produce. What is clear is that the number of mobile users and smart devices continues to grow. Traditional advertising has a new face, via social media outlets, and sports franchises and local businesses need to find a way to engage fans and consumers more. Furthermore, they need to be able to retain data from that engagement effort in order to make the communication more relevant, manageable, and have the ability to build on consumer loyalty.

The research firm Gartner, reportedly projects that revenue from mobile advertising is expected to grow to $11.4 billion worldwide in 2013, an increase from $9.6 billion in 2012. Worldwide mobile ad revenue is expected to reach $24.5 billion by 2016. But ad spending has not materialized with the ever growing base of mobile users, to date. By some estimates, the number of mobile internet users has exceeded the "fixed" ones; desktop PC's and laptops. But funds allocated towards mobile ad spending are a fraction of those spent on digital advertising in whole.

A window of opportunity therefore exists for firms, products and services that can offer and leverage web technology for the ever expanding mobile marketing world, by using extendable software platforms that can be used to deliver marketing campaign ads, adequately capture a response, and intelligently manage that data for future customer loyalty and marketing campaigns. Because of that window of opportunity, opportunities also exist for investors if they research and invest in firms that can successfully procure their services, capture customer bases, and profit accordingly.

The past 2-3 years have represented a big transformation in the business-to-consumer marketing world. Smart mobile has outpaced fixed systems on the hardware side, while software has grown by leaps and bounds, yet how business reaches its mobile customers is still seemingly in the experimental stage. Big players, such as the social media giant Facebook (NASDAQ:FB), have reportedly booked $305 million; approximately 20% of their total revenue from mobile advertising, a percent that is expected to grow each quarter as the company allocates more and more resources to reach mobile users. Groupon (NASDAQ:GRPN) has made their mark with bottom up marketing of engaging local merchants with local customers via massive web marketing and user participation effort. Yelp (NYSE:YELP) is another that has also shown growth and potential. Private firm Twitter has, in many analysts' minds, shown the most potential by continuing to alter the landscape.

Aside from the social media giants, some small firms are making small dents in the mobile marketing industry. Enter Mobivity (OTC:MFON), a small but potentially important firm in Arizona that holds some key patents in terms of how phone numbers-text messages are converted into usable, manageable data.

Mobivity has a Market Cap under $10 million but the company has managed to snag some big names using their technology to dazzle customers. Customers like CNN, major sports franchises such as the LA Clippers and Cleveland Cavaliers, Disney, and the NFL are examples.

The problem that Mobivity's C4 platform solves is that the thousands of consumers, who respond to marketing promotions and participate in response texts, do so from many different platforms such as Facebook and Twitter, and a management tool is needed to process those contacts for future monetization purposes while doing so in a respectable way to handle customer information. Cloud-based C4 is an enterprise-grade platform that enables companies to power and promote their brands in a way that engages mobile consumers across multiple channels. The software provides broad mobile communications and extensive customer relationship management (NYSE:CRM) features, accessibly to clients. The company also offers a graphical system through its patented Display Technology, which allows fans to interact with their mobile phones and high definition video boards and screens in real time.

Though quite small at this point, under $10 million in revenue, management is pursuing growth via smart partnerships and acquisitions such as acquiring the assets of Sequence LLC; and with it, a customer loyalty app that offers a convenient way for customers to keep a digital copy of the paper stamp cards provided by consumer firms, preventing the stamps from being lost.

While the AD spend is still relatively low compared to overall digital spend for mobile, small players may be the ones to watch for smart long term investments. An investment buy-in to Facebook at $27.00 seems high risk and volatile, Groupon at $5.60 perhaps less, but the company has a host of negatives. Yelp at $21.79 seems promising, and Mobivity at $.30 appears to have no where to go but up, but there is of course risk involved as in many of the very smallcaps where typically the cash on hand and the burn rate constantly compete. Note: in the past 7 days, the stock has risen from a stagnant $.20 to a current $.30, but has ranged to as high as $ .39 a few times during daily trading.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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