Seeking Alpha

John Gilliam's  Instablog

John Gilliam
Send Message
John Gilliam holds a BBA from Millsaps College and a JD from the Cumberland School of Law. He is the manager of Point Clear Strategic Holdings in Point Clear, Alabama. Point Clear Strategic invests in value oriented small cap technology companies. Visit: Point Clear Strategic Capital... More
View John Gilliam's Instablogs on:
  • Below Radar Stocks That May Benefit From Facebook's IPO

    The news that the long awaited Facebook IPO filing might come as early as this week led to a surge of interest in many social media related stocks Friday afternoon. Publicly traded social network stocks like Ren Ren (Nasdaq: RENN), Que Pasa (Amex: QPSA), and LinkedIn (Nasdaq: LNKD) all surged on a wave of investor enthusiasm that was likely stoked by the $100B valuation estimated for Facebook. Even more interesting was the surge in social media related stocks - not just the social networks and the not so surprising valuation comparisons that kicked in, but the stocks of companies that are not social networks per se but have essentially built their business on the Facebook platform (like Zynga - Nasdaq: ZNGA) or have benefited tremendously from the rise of social networks generally (like Pandora - P: NYSE, and Groupon - Nasdaq: GRPN). These social media related stocks all surged much like the social network stocks on Friday afternoon.

    There were several articles this morning and over the weekend that discussed this phenomenon, did the valuation comparisons to be expected between the social network stocks and the discussed Facebook valuation range; and explored the substantive impact that a Facebook offering may or may not have on those with a more tenuous connection. The enormous enthusiasm for this theme led me to do some digging to see if I could find other lesser known publicly traded companies whose products, services and/or growth is tied to the Facebook platform. In so doing, I have discovered two that have their fortunes tied to the Facebook Platform as much as a Zynga and arguably even more than a Pandora or Groupon.

    Snap Interactive (otcbb: STVI) is one of the best examples (along with Zynga) of a company that is literally built on the back of the Facebook platform. Their "AreYouInterested" and "WhoIsNear" Facebook/smart phone applications have been installed by over 54 million users and they continue to add users at a torrid pace. What might be the best example of how the company benefits from the growth and development of the Facebook platform occurred in Q4 2011 when Facebook launched the Facebook platform on Mobile - essentially bringing all the social channels that had helped apps reach hundreds of millions of users on the Web to mobile apps and websites. This launch caused a 70% increse in iPhone logins for the service practically overnight and caused the AreYouInterested iPhone app to be the 5th highest grossing app in the iTunes App Store in the category of Free Social Networking in the U.S. Like many small company stocks, STVI has traded all over the board over the last year, oftentimes in a way that seems disconnected from the meteoric growth the company experienced over that same time frame. STVI's stock's price has fallen from the $4.50 range to below $1 at one point during the last year and has most recently traded in the $1.20 - $1.50 range despite reporting strong growth in users and consistently higher revenue each quarter. The company's success at building and marketing Facebook platform apps and services could cause it to gain increased recognition from investors searching for additional Facebook related investment options.

    Vringo (Amex: VRNG) is another good example of a small company that has focused its resources on developing apps for the Facebook platform. Its "Facetones" app is a relatively new application (just launched for the iPhone two weeks ago) that automatically matches your Facebook friends with your phone's contacts and displays their latest Facebook photos slideshow style when they call/text you or your call text them. The free ad supported app has been a viral hit for the company and is closing in on one million downloads. Vringo monetizes this app using Google's Admob mobile advertising service and it is currently generating 800,000- 900,000 ad impressions per day. While a great deal of the company's value may turn out to be tied up in its mobile advertising patent portfolio (20 patent applications pending dating back to 2006, with 3 already issued), the revenue growth will likely be tied to the growth of the Facetones app and the company's Video Ringtone service. An investment in Vringo is essentially an early stage venture type investment given the infancy of the mobile advertising market and the company's key Facetones offering, but investors looking to benefit from this growth and/or get a stake in a company that should benefit from the Facebook IPO spotlight will be investing beside highly regarded venture investors Beachmark and DAG Ventures, who combined purchased close to 20% of Vringo last month. I found this to be somewhat impressive even given that Benchmark and DAG typically eschew public company investments for early stage venture capital offerings that have included Twitter, Admob, Instagram, Zipcar and many others. Such an endorsement should help the smallish (sub $10m market cap with 4 million shares public float) company gain some recognition, in addition to any additional light it might receive from the glow of the Facebook IPO spotlight.

    In summary, there are quite a few companies that are getting revalued by investors in light of additional interest in social media stocks that appears to be driven by the filing/valuation expected by Facebook this week. Some of the smaller companies that have tied their fortunes to the Facebook platform may benefit disproportionately from this spotlight due to the publicity and additional exposure that may result in their gaining more users for their virally marketed Facebook platform offerings and due to valuation "upgrades" that occur as investors scour the landscape for other public companies that may benefit from the Facebook IPO.

    Disclosure: I am long VRNG, OTCQB:STVI, RENN, GOOG.

    Jan 30 3:06 PM | Link | 1 Comment
  • Has Glu Mobile Been Sold Or Is It Just An Apple iPhone Play?

    Notable chatter over the weekend about the possibility of a GLU Mobile (Nasdaq: GLUU) engagement to one of several well heeled suitors.  Of course, all the usual suspects are involved - Electronic Arts (Nasdaq: ERTS), Activision (Nasdaq: ATVI), Nokia (NYSE: NOK) and even Apple Computer (Nasdaq: APPL). This is not the first time we have heard such, but this time we are seeing the kind of volume that lends much more credence to the talk. With the overall market getting bruised badly today, GLUU shares were up 23% on nearly 10x their prior 10 day trading volume.  Such a spike in trading volume is fairly common in the days leading up to a merger announcement and the price action certainly suggests there are investors who want to get into this stock now and do not mind paying up to do so. Past management discussions of sector valuations suggest that Gluu might take a pass on any sub $100 million overtures, so we would expect any deal to price in excess of $3 per share on the low end and we should see the stock continue to trade higher if there is any substance to these rumors.

    While we do believe there may be substantial interest from some of these names and possibly a few others, we believe its just as likely that the Street is simply revaluing the Gluu story. With Apple's iPhone set to price at $99 beginning this Friday, there is substantial reason to believe that GLUU's outlook stands to improve markedly between now and year end. We fully expected to see the $99 iPhone price point prior to the Christmas selling season (see 01/12/2009 Seeking Alpha article re: Gluu) and feel it is very bullish for GLUU and other mobile gaming players that the move has been made early enough to allow the "iPhone as a gaming platform" market to develop prior to the big Christmas retail push. GLUU management appears to be executing on its plan of reallocating resources to push much more heavily into the development of games for the iPhone and this combined with their extensive experience with monetizing these assets bodes well for GLUU shareholders.

    Another factor that could be pushing GLUU shares higher is the anticipation of the possibilities with the iPhone’s new 3.0 software update, which will allow Gluu and other game developers to charge for items “within a game”. This opens the door to many new monetization possibilities including charges for premium weapons or tools, new levels or cooler gear.  Developers could conceivably just give the game away for free, but make even more money with up sells within the gaming experience.  This offers great potential for greater monetization per user vs. the traditional one time payment of anywhere from $0.99 cents to $9.99, where the average has generally been closer to the $2 level. 

    These iPhone developments could be a major watershed event for the mobile gaming industry and GLUU is arguably the purest mobile gaming play among publicly traded companies. With a market cap that (even after the aforementioned run on the shares) is only $44 million in a sector that is likely at the beginning of a secular trend that could make blockbuster profits for those best positioned to take advantage of it, Gluu stands out as one of  the best ways for investors to get mobile gaming exposure. However, the smallish number of shares (float less than 10 million shares) available could make it difficult to accumulate much of a position without moving the stock substantially. 

    Disclosure - long Gluu, Appl, Atvi

    Jun 16 3:06 AM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.