Here’s the entire text of the Q&A from MIVA’s (ticker: MIVA) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.
Thank you sir. The question and answer session will be conducted electronically. If you would like to ask a question please do so by pressing the “*” followed by the digit “1” on your touchtone telephone. If you are using a speaker phone please make sure your mute function is turned off, to allow your signal to reach our equipment. And we do ask that you limit yourself to one question to allow everyone an opportunity to participate. Once again please press “*”, “1” on your touchtone telephone, to ask a question. And we will go first to Eric Martinuzzi with Craig-Hallum.
Good morning gentlemen. My question has to do with your comment. I wanted to make sure I understood quarter-over-quarter growth. Is that to say, to suggest that this current, the Q4 guidance would represent, at least at the midpoint would represent a trough in the revenue and that thereafter on a sequential quarter basis we should expect growth? Or is that to say that year-over-year we should expect growth?
Yes specifically, Eric, what I was referencing is the investments that we’re making we are modeling for growth, quarter-over-quarter growth going into 2006. So that was specifically tied to the way we’re seeing 2006 payout. We are still going through that ‘06 budgeting process and have some work to do, but nevertheless we are budgeting and, quite frankly, modeled for quarter-over-quarter growth going forward.
And we will go next to Christa Quarles with Thomas Weisel Partners.
Hi, I am just, I was wondering if you could sort of characterize what your publisher base looks like now. Obviously you’ve cut out at least a quarter of your initial guidance from the beginning of 2005. As we look at some of the other competitors in the independent space, if you will, like a Kanoodle or an IndustryBrains, I know IndustryBrains for example is focusing on the top 200 to 250 publishers. Is that also where you’re focusing your energy? And I guess and you look at your publisher base, could you sort of characterize the revenue coming from those top publishers that may be more weary of working with a Google or Yahoo for example?
Sure. Obviously our network is, multiples larger than any of those referenced. Actually I would say in terms of comparison, probably the rest of the sector aggregated together still doesn’t come close to the size of our network so, I know you know that part of it. So, in terms of size clearly large. But in terms of the specific partners, we don’t go into detail, Christa. It’s kind of a long-standing let’s not map out what a good strategy looks like for others type of internal strategy. But nevertheless, we are focused on a lot of large names. On the fact where there are several proposals in-house right now for deals that are coming up with others because either they’re not being serviced appropriately or they’re looking for a strategic alternatives to possibly some larger names. So those are things we’ll look at, but in staying with our history, we’re not willing to do deals that aren’t beneficial or win-win both sides.
So point being is, while we’re focused for the larger companies, we won’t do a deal that’s not win-win and, like I said, clearly we intend on continuing to manage to a multiple or larger network, if you will, of quite frankly all the others segregated together.
And we will go next to Youssef Squali with Jefferies & Co.
Thank you very much good morning everybody. I guess my question has to do with pricing. If you were to normalize your revenues for the $1.5 million and one-time revenue that recognized, I’m kind of puzzled by pricing actually going down by some 7%. I would have thought it would have actually gone up as you eliminate low converting lower CPC traffic. Thanks.
Sure and that’s great point Youseff. Actually that is the net effect. When you do take out lower conversions obviously you see advertisers respond in kind. That’s not exactly the effect that you get immediately. Actually I think we’ve discussed this point on calls past. When you take out the first initiative, if you will, from an advertiser standpoint, when you’re removing traffic it’s to lower you ad budget, not necessarily stimulate the bidding process. But nevertheless, good point but the first reaction as mentioned is typically there’s not as much budget or, excuse me, there’s not as much inventory available, not as much budget gets allocated in the beginning. Obviously they start looking at conversions and the return on their investment. Then you see that process actually get stimulated, the bid amount for the pricing gets stimulated specifically. In fact, as Will stated in his prepared remarks, we’re actually seeing some of that on the US side as we go into Q4.
And we go next to Colin Gillis with Adams Harkness.
Yes, good morning everyone.
Good morning Colin.
Craig can you just talk a little bit about efforts to expand the US publisher base and give us a sense of a breakdown between the number of active publishers in North America versus in Europe?
Okay, actually I’ll tell you what, I’ll take the first part of that and may go into the second part in terms of a breakdown between US and Europe. But in terms of our efforts, we’re going after pretty much all across the board. In other words we’re going to continue to service the thousands of small publishers that we do service today. I believe the latest count it somewhere around 8,000 different publishers. Now not all of those 8,000 are meaningful publishers; there may be a click a month coming from some of the smaller guys. But nevertheless, that truly shows that we can work with the smallest of the publishers in a margin meaningful way, if you will. In other words, it actually makes sense for us to still continue to work with such small publishers as well as working or focusing some of the larger publishers out there. And when I say publishers, that’s an all encompassing word. That’s everything from search providers, localized or national, that has obviously contextual our content base companies that, let’s face it, the large content companies right now are being commoditized by the primary search engines. So they’re clearly looking for strategic alternatives to deploy their content in the marketplace. So we’re going after pretty much the entire range. In terms of a breakdown, we didn’t get into a revenue breakdown on both from the US and European side, but we don’t go into publisher breakdown, if you will.
And we will go next to Richard Fetyko with Merriman & Company.
Thanks good morning guys. Maybe if you could finish off on that thought of between, the comment between the revenue breakdown between the European and the US division. But also, I was wondering, Craig, if you could give us an idea how many of your distribution partners at this point or percentage of traffic belongs to or comes from publishers that have multiple products with you or have taken some additional new products that you’ve launched in terms of the, that include the search product that they’ve launched, the toolbar that you’ve launched and so forth, the private-label toolbar and so forth? Just an idea of percentage of publishers or traffic that comes from publishers that have multiple products I suppose.
All right in the US our revenue was 47% of total and in EU it’s obviously then 53% for the quarter, just to fill that in.
Okay. And so that’s obviously wrapping up on the revenue breakdown on the US and EU. In terms of percentage of distribution partners that have multiple products, I believe that was the question, Richard. It’s not a large number today. In fact, just deploying their customized toolbar in marketplace a couple months ago would clearly not lead to massive adoption across the board. In fact, we’re being pretty careful with the types of people we want to deploy that product with. We want to make sure they’re obviously very reputable, high integrity, good download and deployment practices that we’re helping them define. We have recently announced that Dennis Publishing which has the Maxim magazine and a series of other magazine titles under their belts. We’ve just pushed that out with those folks. But at any rate there aren’t a tremendous amount of companies that are using the toolbar, the search components and the banner component, MIVA Mail component, the contextual component altogether. This is quite frankly what we’ve been very focused on this year making sure that we have that product suite out there or, excuse me, at least available to be sold out into the marketplace and that’s the initiative that we’re undertaking now.
And we will go next to Stewart Barry with Think Equity.
Good morning. Craig, could you elaborate a little bit on your Pay-Per-Call effort and how that’s going, if that’s contributing to revenue meaningfully at this stage?
Sure. It is not contributing meaningfully to revenue at this stage. Let’s break this out; it’s actually a tale of two stories right now. On the US side there has not been widespread adoption. And quite frankly, I’ll make this statement which I hope this will make all of you sit down and model out something on Pay-Per-Call exclusively. If it grows as fast as Pay-Per-Click I will be very happy. Keep in mind, we’ve been doing Pay-Per-Click business since 1999; it wasn’t until in 2001/2002 that people said it was a legitimate business. But nevertheless, Pay-Per-Call has not had widespread adoption at this point on the US side. A tale of the different story, so to speak as we have announced the launch in the UK we’ve had very good adoption. Can’t tell you really that the call-through rate is this or the impression rate is that yet, but in terms of adoption totally different marketplace. It’s amazing that you’ve got a marketplace that’s clearly mobile oriented and call oriented that quite frankly most of the rest of the world and not so much on the US side, but nevertheless is definitely a tale of two different stories right now.
And we will take our next question from Marianne Wolk with Susquehanna.
Yes, I had a couple of questions. First of all, on the private-label side, any way you could give us a sense of how large that is now? Is it at least 10% of revenue and some of the growth drivers you’ve seen there, are there any contracts coming up for renewal we should be aware of? Thanks very much.
Nope, we really haven’t gotten into the detail in the past on the private-label revenue and that’s something that we’re still not going to do. Craig can speak to anything in the pipeline.
Sure, I’ll pick up on that. Actually it’s contractually based, we can’t speak to anything. So, I would actually urge you to look at what Verizon talks about. Verizon is pretty open in terms of their disclosure about this initiative. So I would have to push it that way, but contractually we don’t break anything out, we can’t break anything out. In terms of the pipeline, yes, there are a few. We made a comment, I believe it was Q1 of this year, that we felt Europe was going to have some opportunities. In fact we’ve announced that we have launched the private-label initiative with Eniro in Scandinavia and the Scandinavian countries. And I will tell you there are private-label opportunities in the pipeline currently within the European marketplace, not saying that there aren’t in the US, but Europe is really the area that we’re looking for right now. I will make one comment on that. Europe is not like the US, it’s not one market, it’s multiple small markets that make up one large market. So with that being said, when you have a primary player or a primary company in Germany or France or Spain or what have you, they typically are trying to protect a territory of German, France or Spain, not their Pan European footprint.
So unlike the US, those folks over there represent a little bit of a different opportunity. So we really are focusing our efforts on the European marketplace right now.
And again ladies and gentlemen that is “*”, “1” on your touchtone telephone, to ask a question at this time. And we will pause for just a moment, to allow everybody an opportunity to signal. And it appears we have no further questions at this time. So I’d like to turn the call back over to you, gentlemen.
Fantastic. Well again, I’d like to thank everyone for joining our Q3 conference call. I’d also like to thank all of the MIVA team members for your dedication and work and your 100% effort. Thank you very much, folks.
That does conclude our conference. Thank you for your participation.
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