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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
  • Below Radar Stocks That May Benefit From Facebook's IPO 1 comment
    Jan 30, 2012 3:06 PM | about stocks: VRNG, STVI, RENN, ZNGA, LNKD, P, GOOG

    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.

    Themes: IPOs, Facebook, Social Media Stocks: VRNG, STVI, RENN, ZNGA, LNKD, P, GOOG
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  • vphibbs
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    Would u buy it after today's run?
    2 Apr 2012, 11:20 PM Reply Like
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