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Ian Cassel, MicroCapClub (144 clicks)
Long only, special situations, growth at reasonable price, research analyst
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Quepasa Corp (QPSA.OB) owns Quepasa.com, which is a best of Facebook + best of Myspace + best of Zynga social networking site for Latinos. QPSA is the only social networking pure play that is publicly traded. Quepasa.com has been gaining traffic/membership quickly, adding 17.3 million members over the last 11 months and the growth is building momentum. Quepasa.com currently has 25 million members, adding ~2 million members per month, and surpassed its YE 2010 goal of 25 million members one month early. The company is currently rolling out Quepasa DSM (Distributed Social Media), Social Games, Skill based Games, Social dating, and Virtual Currency/Gifts to monetize this growing membership.

As I expected, Quepasa Corp has been getting more and more attention over the last 30 days as investors are seeking ways to play in the social network space. Quepasa Corp has been getting attention also because its management team is executing its vision to near perfection. Quepasa.com is currently the 4th fastest growing social network in the world, and likely the 2nd fastest (behind facebook) in the Latino demographic. Goldman Sachs (GS) recently invested $450 million into Facebook at a $50 Billion valuation thus valuing Facebook on a per member basis around ($50 billion/~550 million members) $91 per member. Quepasa Corp at $13 per share ($13 x 27m fd shares out = $351 million market cap / ~27 million members) at $13 per member. I’m not saying Quepasa deserves to have a $90, $60, $50, or even a $40 per member valuation, but can QPSA shares get to a $20-30 per member valuation? I think QPSA shares will ultimately get to this type of valuation due to management's continued execution and increased buzz surrounding social network IPOs.

Quepasa.com will likely end the year with ~27 million members (up from 7.6 million YE 2009). If the company continues to add 2 million members per month, it will end 2011 with 51 million members. I’ve used this valuation matrix in previous articles, which illustrates the potential of QPSA shares:

(Click to enlarge)

As the CEO has stated several times, membership growth has been fairly easy, and now the company is moving toward monetization and retention of members. Sony (SNE) and Time Inc (TWX) recently signed agreements with Quepasa to resell the company’s distributed social media (DSM) advertising platform to their client bases. I believe DSM alone will likely cash flow positive the company in 2011, with social gaming revenues being the real growth driver.

Overall I believe a YE 2011 membership estimate of 51 million members is conservative. With the launch of at least a dozen social game titles created specifically for the Latino demographic during 2011, just one successful game could mean millions of additional new members on top of my YE 2011 estimate. As I said months back, I fully believe QPSA shares will see $20+ in 2011.

Click for (Part 1) from April 2010; Part 2 from October 2010

Source: Quepasa: The Only Publicly Traded Social Network (Part 3)