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Mobile Leaders Expecting Sequential Revenue Growth

|Includes: Hipcricket, Inc. (HIPPQ)

There have been a lot of articles written on the coming of age of mobile marketing. Never before has there been an advertising platform that was so intimately part of the end users life. Access to potential customers virtually any time and at any place makes mobile unlike any other marketing tool ever created. Despite mobile marketings now proven effectiveness, advertisers are still just scratching the very surface. The following recent study by Marketing Evolution stated the following:

US marketers should increase their spend on mobile marketing by a factor of seven, according to a study commissioned by the Mobile Marketing Association (MMA).

The research by Marketing Evolution, a marketing measurement and analytics firm, concluded that the optimized level of spend on mobile advertising for US marketers in 2012 should be 7%, on average, compared to the current budget allocation of less than 1%.

Three of the leaders in Mobile Advertising, Augme Technologies(AUGT.ob), Millennial Media(NYSE:MM) and Velti(VELT) have all recently reported quarterly numbers and given guidance for the next quarter. Most companies report growth of quarter over the previous year's quarter. Instead focusing on sequential growth from Q1 to Q2 etc.. is a much better indicator of how revenues are really growing. Here is a breakdown of recent reports and future expectations.

  1. Augme Technologies: Q2 revenues grew at an estimated 20-24% from Q1. Q3 revenues are estimated to grow 15-20% from Q2 revenues.
  2. Millennial Media: Q2 revenues grew at 19.75% from Q1 revenue. Q3 revenues are estimated to grow at between 10-14% over Q2.
  3. Velti: Q2 revenues grew at 13% from Q1 revenue.Q3 revenues are estimated to grow between 2-9% from Q2 revenue.

    All three companies are leaders in the mobile advertising space and all three have very unique attributes that cover either different geographical areas or unique mobile advertising capabilities. Here is a quick break down of the areas that each cover.

    Velti is a large successful global player that has built its business primarily on using PSMS, delivering sweepstakes, lottery type games and unique content worldwide. When they entered the US market they acquired several small mobile companies. One was a mobile web company, Media Canon, another a small ad network AdFuse and Mobclix. They also acquired companies with a presence in India call Air2Web and China called CASEE. Velti is the largest international player in mobile and only in the last year has been focusing on the Americas with their platforms. They currently retain 91% of their clients while continuing to grow with major brands such as Disney and Nestea.

    Millennial Media is the largest Ad network not owned by one of the large Internet players. They do a great job of providing a lot of eyeballs, primarily a tonnage player with a lot of inventory. Very good analytics with their service. They are a primary competitor to AdMob which was bought by Google for $750M. Their primary source of advertising is through banner displays and video types of ads. Millennial Media runs thousands of mobile ad campaigns through it platform and delivers tens of billions of global ad impressions each month. Advertisers achieve precisely-targeted campaigns and the revenue from these high-quality brand advertisers and help mobile app developers monetize their inventory.

    Augme/Hipcricket has been and is the leader in SMS mobile marketing. A powerful full featured platform with capabilities across the mobile environment. Including SMS, CRM, MMS, QR, Mobile Web, rich media , geo-location, mobile apps and strong analytics connecting all the Hipcricket features along with API strength for custom interconnections of resident client programs. The Ad network is a highly targeted premium network. Their customer base now encompasses almost 100 of the Fortune 500 companies and they now service over 600 brands. In the latest quarter new bookings from existing customers accounted for 71% of total new orders received during the most recent quarter, while 29% of new bookings resulted from orders received from new customers. Current customer retention rate is 95%.

As can be seen by the above company estimates the growth in mobile advertising is expected to continue to grow throughout the rest of the year. There are very few industries that not only are showing huge year over year growth but also growing from quarter to quarter. As mobile becomes a much larger part of advertiser's budgets this growth should not only continue to grow but should actually accelerate.

Despite recent impressive financials, all three companies are trading down significantly from highs. At their current prices, all three represent deep value relative to their projected growth rates.

Disclosure: I am long AUGT.OB, VELT, MM.