MeetMe's (MEET) CEO Geoffrey Cook on Q1 2014 Results - Earnings Call Transcript

May.13.14 | About: MeetMe, Inc. (MEET)

MeetMe Inc. (NASDAQ:MEET)

Q1 2014 Earnings Conference Call

May 8, 2014 10:30 AM ET

Executives

Joe Hassett – Investor Relations

Geoffrey Cook – Chief Executive Officer

David Clark – Chief Financial Officer

Analysts

Ron Victor Josey – JMP Securities LLC

Darren Aftahi – Northland Securities, Inc.

John R Blackledge – Cowen & Co. LLC

Blake T. Harper – Wunderlich Securities, Inc.

Bill Sutherland – Emerging Growth Equities Ltd.

Jeff B. Osher – Harvest Capital Strategies LLC

Amit Dayal – Wainwright & Co., Inc.

Operator

Good morning, and welcome to the MeetMe Inc. First Quarter 2014 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Joe Hassett. Please go ahead.

Joe Hassett

Thank you, Camille, and good morning, everyone. Welcome to MeetMe's first quarter 2014 financial results conference call. On the call this morning are MeetMe's Chief Executive Officer, Geoff Cook and Chief Financial Officer, David Clark.

Before we begin, I would like to remind everyone that during this conference call, management will make certain forward-looking statements, which convey management's expectations, beliefs, plans and objectives regarding future financial and operational performance.

Forward-looking statements are generally preceded by words such as believe, plan, intend, expect, anticipate or similar expressions. Forward-looking statements are protected by the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a wide range of risks and uncertainties that could cause actual results to differ in material respects, including those relating to our plans regarding new products and mobile monetization.

Actual results could differ materially from those described in this conference call and presentation. Information on various factors that could affect MeetMe's results is detailed in the reports we filed with the Securities and Exchange Commission. MeetMe is making these statements as of May 8, 2014, and assumes no obligation to publicly update or revise any of the forward-looking information in this conference call.

In addition to GAAP results, we will discuss certain non-GAAP financial measures in this conference call, such as adjusted EBITDA. Our earnings press release for the first quarter of 2014 can be found on the news release link on the Investor Relations page of the Company's website, www.meetmecorp.com. The tables included with the earnings press release include a reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures.

A replay of this conference call will be available at the Investor Relations section of the MeetMe corporate site at, again, www.meetmecorp.com.

With that, I now like to turn the call over to our CEO, Geoff Cook. Geoff?

Geoffrey Cook

Thank you, Joe and good morning everyone. Q1 demonstrated the strong foundation of mobile monetization we built over the last five quarters. Mobile average revenue per user again exceeded web average revenue per user, as mobile revenue notched 144% year-over-year growth to $4.7 million in Q1. Mobile drove top line revenue growth of 22% to $9.5 million versus $7.8 million a year ago, and represents an acceleration versus the 12% year-over-year growth in Q4.

In Q1, we also made an excellent progress with a number of exciting products to make it easier and faster to meet and chat with new people. We view MeetMe as the mobile version of the bar or coffeehouse and as such chat is an integral piece of the product, enabling users to connect and socialize. If the end goal for the Company is to be the conduit for making new friends among the 50 plus million people aged 18 to 30 in the United States and the one plus billion people aged 18 to 30 worldwide. Our end goal for Chat our most popular feature is to build the communications platform enables people to break the ice and develop their mobile relationships over time.

With out ability to monetize the mobile audiences now demonstrated. Our attention is squarely on growing mobile daily active users or DAU. Growth in DAU ultimately drives growth in revenue, as users who log in more frequently, view more advertising impressions and are more likely to purchase virtual currency. Our mobile users viewed $8.6 billion mobile ad impressions in Q1, up 7% sequentially and 78% year-over-year.

To drive DAU in April, we launched the most significant upgrade to our app in its history transforming the mobile chat experience. Chat is by far the number one feature on the MeetMe app, and the effectiveness of Chat to induce another person to log in to MeetMe, ultimately drives our engagement model.

In April, we made Chat significantly easier and faster by adding real-time components including typing and status indicators to enable real-time communications similar to iMessage style conversations. We believe that as a result of these launches MeetMe is already showing signs of increased engagement.

In a recent three week period chats sent per day in our mobile apps increased 36% versus the Q1 average and screen views in mobile chat increased 26% versus the Q1 average. We also launched ephemeral photos within Chat to differentiate our Chat product around the MeetMe people use case. The ability to share photos within messages was one of the most requested improvements from users. Any early adoption of ephemeral photos suggest it will become one of the apps’ most important features.

Since we first launched ephemeral photos in Chat, we have seen overall photo posting volume increased by 23%, now approximately 100,000 ephemeral photos are being shared each day on mobile. Ultimately, we believe a stronger differentiated Chat offering will improve engagement and retain users longer.

The early data also suggest these releases are having a positive impact on DAU, since the launch of ephemeral photos our mobile DAU has averaged approximately 852,000 users an increase of 10% versus the Q1 average this suggest early signs of the success of our strategy to grow DAU through innovation and chat.

I’m excited, as well by the strength of the mobile product pipeline, while the most recent release made Chat faster and more visual, future releases aimed at driving more existing connections into Chat, and helping users efficiently find new chat partners. For example on a typical recent day only 8% of new friendships and just 2.5% of new matches led to a chat conversation.

Given there are more than 2.1 million new friendships a day and more that 1.5 million new matches a day, we believe there is an opportunity to add hundreds of thousands of daily chat partners by simplifying the product and removing any barriers to chat.

Beyond there is one example, we have a full pipeline of features aimed at improving the quality and likelihood of chats within MeetMe.

As our business is increasingly moving from web to mobile devices web revenue in the quarter declined 36% from a year ago to $3.3 million. While we’re managing the rate of decline by optimizing CPMs and launching new web functionality including real-time chat in the coming days. We expect this decline to continue.

Nevertheless, we believe mobile will continue to grow and surpass 50% of total revenue in Q2, in a long-run we believe the transformation to a mobile business will yield even stronger financial performance as indicated by Q1 mobile ARPU of $1.92 versus Q1 web ARPU of a $1.04. As we take actions to increase DAU, we believe that will proportionally grow ARPU as well further driving financial performance.

Now, I’d also like to provide a brief update on our standalone app strategy. As I’ve indicated previously we consider our standalone apps to be the tip of the spear in innovation, enabling inexpensive and fast product iteration, as well as unrestricted brainstorming and ideation. As a result, we are able to try many things and learn quickly what is working and what is not and apply that learning to the MeetMe core app, while also benefiting from the growth of the standalone app itself.

Our Choosy app has shown us the importance of conversation starters to driving high quality reply, a lesson we plan to apply to the core MeetMe app next month. In addition the ephemeral photo sharing feature we launched in April, began as a standalone app concept. Although we decided not to launch the feature as a standalone app we saw its promise and instead folded it inside the core MeetMe app which is proven to be a strong fit.

Finally, in the case of Charm, we learned we have not yet made the video creation process a little friction enough to consider scaling it to the MeetMe audience. Developed as a standalone app we learned this lesson inexpensively, which saved us the time and money it would have take to build the video infrastructure capable of supporting more than 1 million daily users.

In general, we continue to seek to launch one standalone app a quarter to feel fast if that standalone app does not find traction and to apply learnings to both the core app and the future standalone app pipeline.

Finally, I’d like to say a word about the market itself given the recent news of a potential risk IPO and profitable match been out from IAC. Mobile is changing the very way people meet and date. There are 85 million singles in the U.S. alone and 22% of singles, 25 to 34 now use online dating according to a recent Pew study, compared to 2005 twice as many relationships start online today, in fact according to our recent sector report online dating is $1.5 billion a year business and growing at 9% per year in the U.S. alone.

We believe a dramatic shift is underway in the multi billion dollar dating industry. And that the industry is anchoring towards free with lower pricing and dramatic investments in free services by existing players. Consequently, we believe the subscription dating model is ultimately comprised, because it is proven to lead to massive churn.

We believe that as the younger generation comes of age with free meet new people services like MeetMe buying a dating subscription later in life will feel quaint and old fashioned. MeetMe is unabashedly free, pursuing an advertising driven model that enables us to monetize the widest audience while providing the best user experience. Without paywalls that dramatically limit communication and engagement on the platform.

We’ve build what we believe to be an industry leading mobile monetization infrastructure around industry experience, with mobile ARPU reaching at $1.92 in Q1 ahead of even Facebook’s $1.33 in Q1.

We consider MeetMe to be the neighborhood bar, where users visit predominately the make new friends and socialize. By being inclusive, we can make better matches, because the users don’t hit a paywall and leave never to return again. Ultimately, MeetMe has nearly $5 million monthly users, who received the full value of the service not award a down version. We optimize around having the best experience for all of our users, and we believe this model will prove disruptive.

Ultimately, we see a dramatic opportunity to build the vast advertising supported meet new people service. In Q1, we demonstrated the strength of our mobile monetization platform and in recent weeks, we demonstrated the strength of our team by delivering short and ephemeral photos on schedule and driving traffic and DAU growth as a result.

I am honored to have the opportunity to work with such a talented team and helping to build the leading social service for meeting new people. And I look forward to continuing to execute against an ambitious product pipeline to deliver ever expanding mobile traffic and revenue and ultimately drive shareholder value.

With that, I will turn it over to David.

David Clark

Thanks, Geoff. The first quarter was a good start to the year as the business grew driven by strong mobile revenue growth offsets by decline in our legacy web business. For the rest of the year, we hope to continue that growth while focusing on developing new apps and features designed to drive user growth and engagement.

Total revenue for the first quarter was $9.5 million, up 22% from the $7.8 million a year ago. When thinking about revenue sequentially since over 70% of our revenue comes from advertising, we do exhibit the same seasonality of that industry. With the first quarter traditionally being our weakest and the fourth quarter is our strongest.

Growth is once again led by mobile, where revenues rose 144% to $4.7 million for the quarter with the bulk of the quarter’s mobile revenue attributable to advertising.

Mobile is now nearly half of total MeetMe revenue doubling of portion from less than 25% year ago and also representing a significant step up in just the last three months from 39% in last year’s fourth quarter.

Growth in impressions and CPMs drove an increasing quarterly average revenue per user or ARPU, which increased 134% to $1.92 in the first quarter from $0.82 a year ago. Once again, mobile ARPU exceeded first quarter web ARPU of $1.04.

Mobile average revenue per daily active user or mobile ARPDAU was $0.068 in the first quarter, up 143% from $0.028 a year ago and once again compared favorably to Facebook’s estimated $0.025 first quarter of mobile ARPDAU. Web ARPDAU was $0.109 in the quarter. We believe mobile ARPDAU has the opportunity to grow two and even exceed web ARPDAU given the heavy consumer engagement in mobile devices.

Web revenue is $3.3 million in the quarter, down from $5.2 million a year ago. The shortfall in banners and web advertising was partially offset by strong growth in cross platform revenues particularly Social Theater, where revenue in the quarter more than doubled compared to a year ago.

From an operational perspective, we continue to do a good job managing our cost while our revenues in the quarter up 22%, general and administrative cost grow up only 5%. As we mentioned in the last quarter, the improvement in mobile ARPU is increasing the life time value of our mobile users and we are using part of that premium to increase marketing spending.

For the year, we are targeting about 7% of revenues from marketing. And then in the first quarter, we spend a little over $837,000 or almost 9% of revenues on market. Cost of content including that driven by higher Social Theater revenues was up from just over $1 million last year to $1.5 million in the quarter. Because a bulk of our Social Theater revenues were cross platform that is hosted in other sites and the increase of cost of content reflects the added expense from revenue sharing nature of those cross platform arrangements.

Fourth quarter, we reported an adjusted EBITDA loss were approximately $500,000, which represents a significant improvement compared to $1.7 million loss a year ago. Adjusted EBITDA loss for the quarter was impacted by a bad debt write down which is not all typical for us and is not expected to recur. In addition results reflect a shift in revenue mix I previously mentioned with a growth in cross platform Social Theater revenue resulting in an increase cost of our content.

Also, since many of our cost were fixed the seasonal weakness of the first quarter reduced the leverage in our model. On our last call I mentioned we expect margins to step down from Q4 2013 levels due to both these seasonal factors and as well the increase in the resource is dedicated to grow users and improve engagement.

Adjusted EBITDA for the first quarter adds back $1.1 million of depreciation, amortization $940,000 of stock-based compensation, $775,000 of interest expense and $120,000 of restructuring cost specifically the tail-end of severance payments related to last year’s management transitions. A reconciliation of GAAP to non-GAAP measures such as EBITDA is included in our SEC filings and the appendix to the presentation now posted on our Web site.

Although it has not affected adjusted EBITDA I will mention that $355,000 of our total interest expense is the result of an adjustment to the value of warrants benefit to our term loan facility that was precipitated by the increases of our stock price during the quarter. Despite the loss we generated positive cash flow from operations of $394,000 in the quarter and use $950,000 of cash to retire and service debt and to fund capital expenditures. We ended the quarter with cash and cash equivalents of $5.8 million and based on our current expectations we believe we have sufficient cash on hand to meet our current growth plans.

Now turning to guidance we expect second quarter overall revenues to grow roughly 10% year-over-year with growth once again coming from mobile and we’re reiterating our full year revenue guidance of $42 million to $47 million, which is the high-end will represent 17% increase over 2013. Within this guidance range we continue to believe that we will be EBITDA and free cash flow positive for the full year.

Although the rate of revenue growth in the first quarter was above our total revenue growth expectations for the year we were coping against a relatively weak quarter from a year ago. For the balance of the year, with comparing next quarters that reflect early success of our mobile advertising initiatives, in particular a launch of feed ad in the second quarter of last year.

In addition, we feel it’s too early to confidently project the ultimate congregation of initial positive response through our major Chat rebound. While we’re optimistic traction will need to continue to and which will push any meaningful revenue contribution from the user and usage growth to the back-end of the year, we were comparing against we’re already some of the best quarters in our recent history, so that success is built into the high end of our revenue guidance.

Finally, on April 15, 2014 MeetMe began trading on the NASDAQ. NASDAQ and its impressive roster of growth-oriented technology companies is not only a logical partner, but we believe provide the strong platform to reach investors, enhance our market visibility and contribute to increased liquidity.

In 2014, our team is singularly focused on growing usage and capturing the vast addressable market in which we serve. We feel the increasing adaptation and usage of smart devices and increase advertising on those devices bodes well for our long-term future.

And with that Camille, you can open it for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question does come from Ron Josey from JMP. Please go ahead.

Ron Victor Josey – JMP Securities LLC

Great, thanks for taking the questions, so two if I may. One, just sort of higher level just, I wanted to understand maybe a little bit more about your thoughts on standalone versus core MeetMe apps. And I thought your commentary on Chat was really interesting in terms of how was originally thought of and then ultimately just included into the app itself. So just I mean information there would be very helpful.

And then maybe little bit more on the marketing cost, David, I think you said that marketing spend came in around 9% of revenues so call it close to $1 million. I’m wondering what channels worked well for you all, and if you believe this marketing spend helps to drive the pretty strong growth in mobile ad impressions both year-over-year and quarter-over-quarter. Or is that just sort of just organic ad impression growth overall. Thank you.

Geoffrey Cook

Sure. And this is Geoff. So the way we view standalone apps is really as a source of, really expensive testing. We can build the standalone app with a few people, spending a few months versus building a feature for MeetMe, which would typically require potentially dozen people for 9 to 12 months. And the reason is, we need to build the standalone app without having to build for 1 million daily active users of scale. And as a result you are able to test different concepts and ideas quite efficiently. And so what we’ve seen is that choose in particular had some pretty nice metrics around sessions producer. And what we believe drove those metrics was the likelihood of users to reply to an ice breaker.

And so we took that concept that we saw working and choosy and we are applying that to our core MeetMe app, it should be launching some time in the next months on at least iOs, and then weeks after than on Android. So that’s basically an example of our standalone app pipeline affecting the larger core MeetMe app, but there is other example as well. And of course when we are looking at these standalone apps, we are looking at them both – because we believe they could be independent, but also because we are interested in the concepts behind them and how they will do. And we view our ability to create these apps to be relatively we could do so relatively inexpensively with a relatively smaller team, and so it’s a good hotbed of innovation for us.

Ron Victor Josey – JMP Securities LLC

And if I could just follow up on that, do you need a lot of adoption to see if an idea would work or not. Or do you think like a relatively small sample size is enough to sort of say whether to start to continue to push marketing dollars behind it or do you include it in the core MeetMe app?

Geoffrey Cook

Relatively small sample size and we are advantaged in that we have built a number of channels into the core MeetMe app to drive users to the standalone. And so we could easily put 10 to 1,000 of users on any given app in order to start developing some conclusions.

David Clark

So on the marketing question Ron, where we spent to try to track users is usually app install ads on places like Facebook, and I think that though the increase in impressions in the quarter really do not have a lot to do with that spending, but more of the fact that in the first quarter, for the full quarter unlike last year we had the native feed ads on our mobile apps. And I think that help drive the impressions on the mobile apps, more so than really anything else. Obviously the higher CPMs also contributed to the increased revenue.

Ron Victor Josey – JMP Securities LLC

Sure, thank you guys.

Geoffrey Cook

Thank you.

Operator

Our next question will come from Darren Aftahi from Northland Securities. Please go ahead.

Darren Aftahi – Northland Securities, Inc.

Hey, guys, thanks for taking my questions, just a couple. Can you kind of help me figure out so impressions grew 7% quarter-to-quarter, where CPMs you’re seeing on banner and native, did those step down sequentially, I’m just trying to rectify the mask?

David Clark

Mobile or web, Darren.

Darren Aftahi – Northland Securities, Inc.

Mobile specifically.

David Clark

We can’t say exactly what’s in the Pinsight deal, but the Pinsight deal would have sort of tampered any step down sequentially from a CPM perspective. I guess we’d have to delve into how we are looking for numbers just to try to get behind, you’re seeing any sort of step down in CPM because we’ve got pretty good visibility, very good visibility to the CPMs on mobile as a result of the Pinsight deal.

Darren Aftahi – Northland Securities, Inc.

Good, got you. And then Geoff, maybe, can you talk about some actions you’re planning to take throughout the year to drive DAU beyond Chat or other (indiscernible) to chat going forward. And then what are your thoughts on monetization of Chat I think you, I think in talking with you anecdotally you said you do some stuff with banner, but is there an opportunity for native on chat, I know it’s early and if that was the case, what sort of timing?

Geoffrey Cook

Sure. so we’ve seen the – take the first question – the second question first, the monetization possibilities in chat. So chat does have advertising within it, and we – so we do directly monetize chat page views and screen views. And we look to – and then the other way we’ve monetized chat is that chat drives more DAU, so as users come into the app, they view page screens and beyond obviously, just the chat, they view profiles and they view the menu and so forth. And so we basically monetize chat both directly through increased screen views of chat related screen, which we’re seeing very nice gains in, as well as indirectly to just enhance DAU.

In terms of how we would continue to drive DAU, when we say, we’re looking to improve chat, we mean it in kind of the broader sense, both as a feature of course, with continued investment in improving the feature, making it faster, making it stronger, hopefully driving more chat. But also by improving the ability for other features, other apps within the core MeetMe app to drive discovery of users, it’s ultimately what our engagement models about is putting two users – connecting two users to each other, so they can chat. And so we have a number of plans to improve how discovery of new users works, that we believe will ultimately to more chat.

Darren Aftahi – Northland Securities, Inc.

Great. And then, maybe one last one, David, can you give us a little bit more color on the bad debt in the quarter?

David Clark

Yes. it was right down approximately $150,000 from – this is very rare in our case, we don’t generally have much lower of bad debt. this was just an outline case and they have not paid in about six months, so we just took the rate down, not something expected to occur.

Darren Aftahi – Northland Securities, Inc.

Great, thank you.

Geoffrey Cook

And Darren, sorry just to clarify total mobile impressions were up in Q1 sequentially. I thought your question might have suggested they were down sequentially.

Darren Aftahi – Northland Securities, Inc.

Yes, I can take that off-line, but I appreciate it. Thanks.

Operator

(Operator Instructions) Our next question will come from John Blackledge from Cowen & Company. Please go ahead.

John R Blackledge – Cowen & Co. LLC

Thank you. Just a couple of questions, maybe could you discuss the user engagement trends either from what you’re seeing on a time spent basis by users either year-over-year or Q-over-Q or both. and then I don’t know if you give out the mobile DAU-to-MAU ratio and trends there. And then just a follow-up question on the marketing line item, did you say that you started doing mobile app installs on Facebook in Q1 and just wondering how efficient that was versus other advertising channels and if it continue – that would continue to be part of the mix, do you add spend mix going forward? Thank you.

Geoffrey Cook

Go ahead, sorry.

David Clark

Hey, John, David Clark here. so just the last one first, we have been using Facebook app install ads for sometime now, all through last year. We find to be a pretty good channel, and we would expect to continue to use it for the balance of this year as well. And that’s what you’re looking for, but it’s not – it was not new in the first quarter for us at all.

John R Blackledge – Cowen & Co. LLC

Okay. And it was – okay, okay that’s helpful.

David Clark

We just are spending a little bit more than we – as a proportion of revenue than we were spending last year.

John R Blackledge – Cowen & Co. LLC

Okay, great.

David Clark

Yes. And to address your other question about engagement trend generally also DAU/MAU trends. What we’re seeing in terms of engagement trend generally, at least for Q1 is – on mobile screens and visits, and I believe Quantcast kind of bears this out, but visits and unique is being up single-digit percentage. we’re seeing internally I believe small single-digit percentage increase in screens on mobile.

and in terms of DAU/MAU trends more recently what we’re seeing is that the up tick to that was – that’s caused essentially by the chat releases in the femoral seem to actually be driving up the DAU/MAU number, while we only launched these improvements over the course of April, we’re seeing at least on Android, which got the update relatively earlier in April than later pickup from 33% in March DAU/MAU to around 36% in April. and obviously, we don’t know where that will end up, but we are starting to see some of – some movement in that DAU/MAU ratio toward the higher levels.

John R Blackledge – Cowen & Co. LLC

That’s great and maybe, just one follow-up and it’s kind of just to higher level. How should we think about the – or how do you guys think about the overall kind of adjustable market for users, what the tame is and where do you think you can go for either the core app or just the suite of apps going forward? Thanks.

Geoffrey Cook

So, it is Jeff again – so we view the role of services really is to make new friends and meet new people and we think that’s an activity that tends to skew relatively younger. so we have called our core demo, really 18 to 30 in the past. and there is 15 million such users 18 to 30 in the U.S., there is more than a billion worldwide only, right now, we’re right about at million users logging in every day and around 18% of that or more than inside the United States. and so we feel like we’re really just scratching the service on the total addressable market.

John R Blackledge – Cowen & Co. LLC

Thank you.

Geoffrey Cook

Thanks.

Operator

The next question will come from Blake Harper from Wunderlich Securities. Please go ahead.

Blake T. Harper – Wunderlich Securities, Inc.

Yes, thanks I had two questions gentlemen, I want to follow up on the question about the CPUs and – I’m sorry CPMs and as you reported higher average revenues per user on mobile and how much of that’s driven by the CPM trends and higher pricing and how much is more on the higher AdWords or a number of impressions per user?

Geoffrey Cook

Still we didn’t get to that breakdown, but it is really is both, as I said, we not only have the benefit of the Pinsight agreement, which takes some of the seasonality out of the CPMs for us. but we also have the fact that the native ads were not – native mobile ads were not in-place first quarter of the last year. so we can work up a portion that’s the increase quarter-over-quarter on that proportion, but we have impression increasing year-over-year up to 78% long CPMs, they increased about 100%.

Blake T. Harper – Wunderlich Securities, Inc.

Okay that’s helpful. Thanks a lot and then Jeff, you had mentioned too about the churn on online subscription dating models. And I just wanted to see how that compares to your type of churn and how you view the churn and the average tenure per user, MeetMe versus kind of some of those online dating sites that you had mentioned?

Geoffrey Cook

Sure, I mean one of the key things we see is that our DAU/MAU ratios tend to be quite high. So it’s a 30% or better, especially on mobile and that’s one of the key ways to look at retentions to measure of how many monthly users, while again everyday. And if I believe if you were to look at the DAU/MAU and from dating site, they would tend to be much smaller, I mean if you look at even obviously that the largest subscription dating site Match.com, it is 3.5 million albeit paid subscribers, there is only 3.5 million such people to really match at any given point. and what we really focus on is creating this feel, the neighborhood bar, this friendship making capability and we have a nearly 5 million monthly users and we feel like we’re relatively earlier days in our model.

We don’t have a marketing spend that needs to acquire tens of millions of users each year just to turn them now in the subsequent year. So I mean overall that’s the way we view it. We really create the entire experience around increasing the amount of engagement which allows us to show additional advertising, which allows us to make the free user, ad supported model really worked, and that’s why I think you don’t see that ad model work in subscription dating because there is not a high level of engagement to support it.

Blake T. Harper – Wunderlich Securities, Inc.

Okay. Thanks for taking my questions.

Operator

Your next question will come from Bill Sutherland from Emerging Growth Equities. Please go ahead.

Bill Sutherland – Emerging Growth Equities Ltd.

Thanks a lot. Dave, just had a couple actually one number question for you David, is in the web turned in down ARPDAU, I had to jump of actually one point, did you already provide that?

David Clark

Yes. On the call in terms of just what's contributing that and I mean just this seasonal step down in CPM’s on the Web that’s quite calm in from fourth quarter.

Bill Sutherland – Emerging Growth Equities Ltd.

I guess what was it, well, first of all I was curious about the actual numbers for one and then second is if it was simply within the band seasonality?

Geoffrey Cook

We have ARPDAU $0.109 in the quarter, in the fourth quarter 2013 web ARPDAU was $0.13. So I think it’s, Bill, that seem like within seasonal step down of CPM’s yeah. We are seeing impressions coming down too, but ARPDAU in particularly be affected by CPM in the first quarter.

David Clark

Yes. Visibility we have (indiscernible) staffing month of Q1.

Geoffrey Cook

And the being stock here provides for seasonal step down as well.

Bill Sutherland – Emerging Growth Equities Ltd.

Okay. And then with the DAU growing for nicely from mobile with the Pinsight deal. Should we think about ARPDAU kind of remaining in this $0.07 band for the rest of the year?

David Clark

I mean, yes.

Bill Sutherland – Emerging Growth Equities Ltd.

Okay. Yes, go ahead.

Geoffrey Cook

I think we got pretty good visibility on CPM as I said especially on mobile.

Bill Sutherland – Emerging Growth Equities Ltd.

But I mean as far as any additional increases from those.

Geoffrey Cook

This is Geoff. The extent we see ARPDAU growing it would be probably later in the year as we launch additional virtual currency related products to further drive ARPDAU.

Bill Sutherland – Emerging Growth Equities Ltd.

Okay. And then last Geoff, you’ve got some good information of Choosy and Charm, do you continue with those? Or do you move your resources to a couple of new ones? Just to do further testing at this point.

Geoffrey Cook

Yes. So I think good question. we have already put our resources on new apps in the hopper, so I think we learned what we could from Charm. Choosy has some level of resource albeit a much lower assign to it. But in general we are working on the next slate.

Bill Sutherland – Emerging Growth Equities Ltd.

Great. Thanks guys.

Geoffrey Cook

Thanks.

David Clark

Thanks, Bill.

Operator

(Operator Instructions) Our next question will come from Jeff Osher from Harvest Capital. Please go ahead.

Jeff B. Osher – Harvest Capital Strategies LLC

Yes. Hi guys, I apologize you probably covered this already I am been jumping between calls, but sequentially you said mobile impressions were up high single-digits or whose is the actual member, David?

David Clark

Hold on Jeff, because I close that one.

Jeff B. Osher – Harvest Capital Strategies LLC

Sorry.

David Clark

Sequentially 7%.

Jeff B. Osher – Harvest Capital Strategies LLC

7%. Just help us with what you can reconcile the sequential decline, then with Pinsight having a full quarter benefit of Pinsight with impressions up 7%. Just walk us through the either the CPM delta or whether some function of native ads declining. Just help us understand what the mobile revenue change given the up 7% sequential impression metric. How we pencil that in?

Geoffrey Cook

Yes. I mean, we obviously Q4 is a strongest quarter from a CPM standpoint, we did not have the Pinsight agreement placed in the fourth quarter, so CPMs in general when you go from Q4 to Q1 now are essentially flat CPMs. So that really wasn’t decline and then there was a set of increase in impressions, so are you focused on the ARPDAU.

David Clark

Yes, presumably ARPDAU on flattish users flows into the aggregate mobile revenue numbers, so I’m just trying to reconcile the 4.7 and 5.1.

Geoffrey Cook

You know what? What I didn’t mention remember in fourth quarter for virtual currency on mobile we had that.

Jeff B. Osher – Harvest Capital Strategies LLC

You had the breakage. You had the breakage.

Geoffrey Cook

Yes.

Jeff B. Osher – Harvest Capital Strategies LLC

That’s right. Okay that’s actually I think there were some other analysts on the call trying to reconcile that as well, so okay so you had the currency breakage that was a one-time benefit, So if we net that out even with the seasonal headwinds going from your strongest quarter in Q4 to your weakest quarter in Q1, net at the currency breakage, you still would have something like 5% mobile revenue growth.

Geoffrey Cook

Yes.

Jeff B. Osher – Harvest Capital Strategies LLC

Okay, great, thanks guys.

Operator

(Operator Instructions) We do have a question, it will come from Amit, please ask your question, sir.

Amit Dayal – Wainwright & Co., Inc.

Thank you, good morning, guys, most of my questions have been answered. Just one question regarding the Chat feature launch recently and its ability to improve engagement for the less frequent users. Could you provide some color on what the activity on that side has been?

Geoffrey Cook

Sure, Chat’s ability to reengage less frequent users come to down to the ability for the overall MeetMe app to have the more engaged users Chat, and it actually reach out with, reach out to the less engaged user. So I would say that the current Chat improvement was really aimed at the engaged user and having more engagement out of the engaged user by having the Chat being much faster by adding visual Chat.

I would say future including releases coming out as soon as this month are aimed at improving the discovery of users, which will lead we think to more Chat pair is essentially, so more the engaged users we’ll be reaching out to more users both engaged and less engaged, and so that will be way of reengaging the user, is ultimately the way Chat reengages and users, let’s say, you have a given user who is not as engaged has it logged in recently.

To the extent the receive a chat from another user, they will tend to receive a push notification on either iPhone or Android to come visit the app. Because they have a chat waiting for them, which tends to be a very strong message and very good at getting a user back. And then when they do follow that push notification and come back into the app, because the chat product itself is now much upgraded. They are likely to send more chat than they would of otherwise send. And so ultimately that’s how chat could benefit the less engaged users or the more engaged user.

Amit Dayal – Wainwright & Co., Inc.

So, just a segue and a little bit Geoff, in terms of how the team thinks towards introducing new features and new apps et cetera. Are we playing catch up a little bit toward features and offerings that are already out there in the market like Snapchat, ephemeral et cetera? Are we really thinking about putting our products that our geared towards how MeetMe is positioned with its end users.

Could you give us some color on what that process is, and I guess a little bit of it place into your standalone apps, but overall like how should we think about what you are doing relative to competitors in the market?

Geoffrey Cook

Sure, so I’d say, we are more focused on owning that MeetMe people use case, and if you look at somebody like a Snapchat for example, that’s not the fundamentally use case that they are pursuing. And so we certainly have our eyes open in terms of features and functionality that might exist in other contacts that we think could be applied to the core MeetMe app. And I think a ephemeral is one that we – that was correct, and I think we may well be the only MeetMe – at least I don’t know of another MeetMe people service that has a ephemeral photos. Although I can imagine that would really in true for long given what we are seeing in terms of their popularity.

So I think the way we think of our own product is how do we lead to – how do we get more chat, how do we make more connection, how do we facilitate more interactions among our users and how do we make sure that we have the best of free features available for them to use. And so that’s always going to be a combination of independent brain storming and innovation as well as keeping abreast of industry trends and the market itself.

Amit Dayal – Wainwright & Co., Inc.

Thank you.

Geoffrey Cook

Thanks.

Operator

This does conclude our question-and-answer session and the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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