MeetMe, Inc. (NASDAQ:MEET) has announced an important agreement to generate advertising revenues on its growing mobile platform. The announcement pertains to the expansion of its ad management relationship with a well-known ad firm, Beanstock Media. MeetMe will begin delivering its mobile advertising inventory to Beanstock at guaranteed costs per thousand impressions (CPMs). Under the agreement MeetMe will begin placing ad calls with Beanstock Media on March 1, 2015, and will do so for the remainder of 2015. This new agreement will take the place of the company's current ad management agreement with Pinsight Media, which expires on December 31, 2014 and has a 60-day transition period.
When I last opined on MeetMe I clearly cited user growth as a reason to go long this stock. The rapid growth of users will drive advertising revenue, and the company needs to ensure it can have a strong agreement in place to grow advertising. Mobile daily active users (DAU) in 2014 have increased 20 percent, from approximately 770,000 in the first quarter to approximately 920,000 in the fourth quarter to date. During the same period, chat grew more than 100%, and mobile visits per DAU increased more than 15%. MeetMe mobile has grown significantly in both users and in engagement per user in 2014. While I predicted revenue growth and the possibility to show a profit, which the company delivered in the third quarter, I did not anticipate the company would be switching its mobile advertising firm.
I think the news is good for the company. While we don't know the exact details of the agreement, chances are the company is getting a better deal than they had with Pinsight Media. If not, then why switch? Further, MeetMe already has a working relationship with Beanstock Media. They have been partners since October 2013 when MeetMe sought to optimize revenue from its web-based ad inventory. The present agreement should provide the company with stronger ability to predict ad revenue and could reduce quarterly seasonal in advertising rates. In 2015, the company projects annual revenue to grow to between $47 million and $53 million for the year. I maintain a buy rating on shares at present levels.
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