ON THE MARKET
Commentary and Insights
A $Trillion enterprise yet in its infancy and a Mini-Cap in the space that’s reporting an extraordinary Q over Q growth trajectory.
CommerceTel Corp (OTC:MFON) OTCBB $1.25
“Mobile” – the mobile device and its burgeoning array of uses – is a trillion-dollar industry; 5.3 billion users strong, and the fastest growing sector of the advertising world. Hold that thought...
(OTC:MFON) has a customer base of over 1,500 major clients * who license their proprietary software to connect, engage and market to consumers’ mobile phones regardless of phone type, method (SMS, IVR, MMS), or wireless network. See a great example below of how Sony utilizes (OTC:MFON)’s technology below. ** (OTC:MFON) also won the Sybase Innovator of the Year Award. ***
A preliminary word about the mobile market: the staggering global reach of this still emerging sector can hardly be compared to anything ever witnessed before.
The mobile device is revolutionizing the way information is disseminated and integrated, and as a marketing tool “it” has no peer. 5.3 billion consumers now pack the device and push out 8 trillion text messages; 2.1 billion are users of MMS multimedia. Hard to believe but the average person looks at the “device” 150 times per day, according to Nokia. Indeed it’s our phone, camera, and browser, our map, calendar, clock and alarm, our newspaper, social networking node and a whole lot more. Indeed, it’s an increasingly popular tool for the entire family to connect and engage with the rest of planet earth.
And all these people—these consumers—are buying lots of stuff and the advertisers and the corporate world know it, spending $ 8.8 billion (in 2010) for ads on SMS, MMS, and banners. In addition, search and video and other more advanced mobile ad formats and applications are ramping up strategies to grab the eyes of these consumers in an intimate way that’s not comparable to any advertising that has ever occurred in the history of mankind.
Mobile is twice as big as the fixed landline telecoms industry, twice as big as the global computer industry, four times as big as the global internet-related business, and three times as big as worldwide advertising. Huge numbers, I agree but ck: http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats and: http://consultantvalueadded.com/2011/03/07/mobile-as-a-trillion-dollar-industry-check-this/
Enter (OTC:MFON) armed with a technology that connects brands and interacts with consumers’ mobile phones, unifying disparate data input into a single “pipe” combining and coordinating Voice, SMS, MMS, and APPS under one umbrella on a single browser. The software platform is called C-4 and, prominently, it won the Sybase* Innovator of the Year Award.
The C4 cloud-based solution software allows delivery of HD-quality graphics and animation to screens—whether broadcast, stadium board, or digital signage screens, or connecting the advertised company or brand to the consumer via the mobile device screen. Read: a message pipeline directly to the consumer’s eyes.
Because of the widely known high regard of (OTC:MFON)’s breakthrough software in the trade, other companies have wanted to partner up or be acquired. Notably, three acquisitions have been closed this year and I expect that there will be more on the way that will add to the revenue acceleration. I also believe that (OTC:MFON) is on the cusp of being cash flow positive as they continue to employ synergistic cost cutting measures that have cut their monthly burn rate in half while leveraging their dynamic software product to their expanded client base in a 2 plus 2 equals 6 manner.
(OTC:MFON)’s quarterly revenue trajectory is startling: Q1-2011=$140k, Q2=$553k, Q3=$842k; a just published Q4=$1 million management estimate will grab one’s attention. This company is tiny but has what it takes to grow and grow IMHO...
To view the press release for the third fiscal quarter ended September 30th, 2011 that highlights their 231% quarterly increase in revenues and estimate of $1 million in revenues for Q4: http://www.marketwire.com/press-release/CommerceTel-Corporation-Reports-231-Increase-in-Third-Quarter-Revenues-OTCBB-MFON-1586691.htm
The (OTC:MFON) outlook for continuing growth appears exceptional. Management believes that the company is very well positioned to capitalize on a positively developing trend that, enhanced by a few significant additional kickers, places them in the sweet spot of the “play” for their target market space. Taken as a whole this is a mini tiger with multi-bag potential and one of my best mini-cap ideas for 2011 and 2012... I am looking for more of the same kind of growth going forward, and I am sure that we’re looking here at a likely acquisition target. In my opinion, it’s only a matter of time...
Keep this metric in mind: Local digital media spending, of which mobile media is a sub-set, is expected to grow from approximately $21 billion to over $42 billion by the end of 2015, according to industry sources.
So, if I’m correct in my analysis and (OTC:MFON) continues on this acquisition and organic growth tear while leveraging its award-winning software, revenue could continue to mushroom. Recent acquisitions in the sector have been completed at super-high multiples as the big players wish to harvest the eyes of the 5.3 billion mobile users who will soon be spending $1 trillion on goods purchased from their mobile devices, making the CommerceTel shares compelling. Furthermore, if the stars delineated above then align, a revenue run rate of $8-$10 million over the next 12-months could be conceivable. It would take another year of the kind of percentage gains that management has just accomplished, so it’s not that far out of bounds considering the vitality of the “sector” backdrop. If that occurs, a buy-out in the not-too distant future could loom large. This story has real home run potential, in my opinion.
Compute: an $8 or $10 million revenue run rate X a 10, 20, or 30 multiple (similar to the recent deals in the space) and you get fat numbers versus (OTC:MFON)'s current market cap of only $31 million.
Augme Tech (AUGT) $145 million market-cap and Velti Plc (VELT) with a $524 million market-cap are comparables in the space.
Also intriguing as regards patents: some time ago (OTC:MFON) acquired a patent that converts phone numbers to web site URL’s (and back again). This technology is used by a multitude of web-based companies. (OTC:MFON) also recently added a patent that provides a significant advancement in “authentication” (a holy grail of internet commerce) that leverages several capabilities of a mobile device (including facial recognition, SMS and geo-location) to authenticate the identity of end users. I understand that management is now undertaking measures to monetize these patents. Such patents alone could have substantial worth, possibly in the millions.
* (OTC:MFON)’s over 1500 customers include McDonald's, CBS, Pepsi, CNN, Disney, VISA, Sony Pictures, AT&T, Verizon, USA Network, numerous professional sports franchises, the Golf Channel, and NBC Universal. In addition add the distributed brand organizations such as Sonic, Jamba Juice, Dutch Brothers, Dairy Queen, Chick-fil, Subway and Pizza Hut. And just recently the NBA basketball franchise Orlando Magic was added to the list.The National Football League (NFL) has also recently been added; however, it will not allow an announcement without remuneration.
** Here is a great example of how Sony Pictures is using (OTC:MFON)’s unique mobile voice technology in a "living billboard" movie promotion at a prime location high above the Sunset Strip in West Hollywood, California. Billboards will also be placed in high-traffic areas in New York, San Francisco, Chicago, and Dallas. The film, Arthur Christmas is the new 3D CG-animated family comedy from Sony that opens in theaters November 23, 2011.
The technology allows Santa's son, Arthur to answer calls to Santa's toll-free hotline at 1-888-800-0010 via the (OTC:MFON) platform. You have the option of being connected to Arthur's cell phone (or voice mail) if he's on the other line. Anyone from across the US is invited to call the hotline throughout the "12 Days of Arthur Christmas." To view the Sony trailer: http://www.arthurchristmas.com/
*** Sybase is owned by SAP, the world's largest business software company. Sybase is a world leader in delivering enterprise and mobile software to manage, analyze and mobilize information for business intelligence.
Of Note: For an overview of the Mobile device growth thesis and some detailed (OTC:MFON) metrics with an overview of their financial model and patents etc., check: http://www.commercetel.com/deck/CTEL%20Investor%20Deck%20PUBLIC-Sept2011-DB.pdf
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