Advertising revenue is poised to re-accelerate in Q4. Boingo purchased an advertising specialist in the June period. That group currently is being integrated and expanded. By the December quarter the unit is likely to start handling the advertising functions that previously were outsourced. That promises to boost revenue directly. Margins should benefit, as well. The closer integration also could yield better overall performance. The consumer operation is being made more profitable, too. That effort has been underway for a while. Pricing adjustments have caused casual users to leave. But they are being replaced by higher margin subscription customers.
The venue business remains strong. Boingo continues to win 75% of the projects it bids on. Besides Wendy's, the company recently landed a 2,000 store retailer. Boingo will include sophisticated software in that operation, allowing the retailer to monitor where customers are heading on the Internet when they are in the stores. If they're checking out product reviews or pricing at on-line retailers, the system will be programmed to intervene with special offers to try to keep the sale in house. That could help thwart the problem of "show-rooming." If the technique works substantial growth could be realized by penetrating other retail accounts.
We are reducing our 2012 earnings estimate a nickel to $.30 a share to reflect the Q2 slowdown, and Q3 transition effort. A solid Q4 rebound appears achievable, laying the foundation for resumed expansion next year.
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