The Rise and Fall of Public Internet Advertising Companies
With the excitement, disappointment and frustration surrounding the news of Yahoo teaming up with Google, and telling Microsoft to pound salt. A couple months ago, Yahoo was sitting in the dumps around $18 a share, then jumping to nearly $30 per share with the news of a possible Microsoft merger. Off the news of the merger going away, Yahoo stock has taken yet another beating, and back down to $22 a share. On the topic of the future of advertising and the BIG 3, I thought it would only be fitting to do a quick spotlight on two other internet companies and their rapidly declining stock prices, which also base their businesses around internet advertising.
I’ve talked about Handheld Entertainment (ZVUE) several times in the past, mainly because I have worked in the humor and entertainment niche area for years… and this company came along and purchased a ton of high traffic entertainment sites, for what many saw as “inflated premium prices“. Handheld Entertainment went on to buy the extremely popular and controversial site, EbaumsWorld.com. At the time of the purchase, ZVUE stock was hovering around $1.78 per share. The terms of the deal were that Handheld Entertainment (ZVUE) will pay $17.5 million, including $15.0 million in cash and $5.0 million in common stock for the site. Today ZVUE is sitting at a low 27 per share.
The Business Model of Acquire, Acquire, Acquire… Isn’t Working for ZVUE
HandHeld Entertainment Stock – 52 Wk. Range: 0.20-3.73
ThinkPartnership, Inc (KowaBunga!)
The next stock I’d like to point out is, ThinkPartnership, Inc (THK). Like Handheld Entertainment, ThinkPartnership (now known as Kowabunga!), went on a bit of a buying spree of their own… picking up affiliate network PrimaryAds, creating ValidClick and now the core of their business KowaBunga! To make a long story short, before there were a million affiliate networks out there, the two main platforms were to go with DirectTrack or KowaBunga. In many cases, Kowabunga was the cheaper and better solution for smaller companies to run their own affiliate programs, and later through ther MyAP network… but ThinkPartnership would later increase Kowabunga prices through the roof… leaving many current users to shy away from using the network. So in short, that brings us to where we are today… the one year chart below shows the story, THK stock is now sitting at a low of .55 a share.
Where would KowaBunga be today if ThinkPartnership didn’t get in the way?
ThinkPartnership, Inc Stock – 52 Wk. Range: 0.45-3.43
So what is the end story and why are these companies failing? With both of the examples above, the core strategy of the parent company was to acquire other properties. Even when trying to look at a success story like InterActiveCorp (IAC) and their formerly popular Ask.com & AskJeeves.com… Barry Diller now plans to break apart the company intro five separate companies. Once again, we are seeing the same potential fall of Yahoo’s main business model (advertising) falling into the hands of Google.
How much further can these company’s stocks fall and what’s the future of advertising online?
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