CrowdGather Aims at Monetizing its own Forum Advertising Inventory (CRWG)

CrowdGather Aims at Monetizing its own Forum Advertising Inventory

Ken Nagy, CFA

On July 9, 2012, the Woodland Hills, California based CrowdGather, Inc. (CRWG), with its networks of forum communities on the Internet, reported financial results for its fiscal 2012 fourth quarter and full year, ended April 30, 2012.

The strong fourth quarter performance resulted in a 42 percent year over year jump in revenues and nearly 6 percent increase sequentially, with revenues increasing to a record $580,716 during the three months ended April 30, 2012.

For the full year ended April 30, 2012, year over year revenues improved by 22.3 percent to a record $1.932 million from $1.580 million for fiscal 2011.

The year over year advance in revenue was primarily due to strategic acquisitions as well as the Company’s focus on monetizing its forum ad inventory.

Recent acquisitions included Pbnation.com and Yuku.com, the Company’s largest network platform.

Additionally, the focus on increasing the monetization from existing advertising inventory improved revenue per thousand impressions (RPM).

Still, net loss for the twelve months increased by $294,495 year over year, to a net loss of $3.106 million for the full year ended April 30, 2012. This compares to a net loss of $2.812 million for fiscal 2011.

The increase in net loss for fiscal 2012 was primarily due to an increase in total operating expenses which was offset by improved gross margin.

Total operating expense increased by 33.5 percent or $1.237 million year over year, to $4.925 million. The increase was primarily due to an 89 percent year over year increase in payroll and related expenses as well as an 11 percent year over year increase in general and administrative expenses.

Still, it should be noted that management expects total operating expenses to remain stable during 2013.

Gross margin jumped to 93.7 percent for the full year ended April 30, 2012 compared to 51 percent for fiscal 2011.

The improvement was primarily due to the Company’s focus on monetizing its own forum advertising inventory as well the termination of the previous Adisn’s revenue model, which required CrowdGather to purchase ad inventory in order to deliver advertising campaigns on behalf of direct advertisers and their agencies.

It should further be noted that the Adisn display and per-action advertising campaigns contributed to over 50% of gross revenues in fiscal 2011.

Based on a weighted average number of basic and fully diluted common shares of 58.329 million, basic and diluted net loss per share resulted in a $0.05 loss per share the fiscal year ended April 30, 2012. This compared to a basic and diluted net loss per share of $0.06 based on a weighted average number of basic and fully diluted shares of 44.904 million during the twelve months ended April 30, 2011.

The Company reported cash of $2.328 million, no long term debt and had working capital of $2.413 million as of April 30, 2012. This compares to $2.680 million of cash and working capital of $2.812 million as of January 31, 2012.

Still, management believes the Company has sufficient working capital to maintain operations, conduct further acquisitions, and improve the monetization of existing ad inventory with its ad server to reach breakeven without additional financing.

Along the same lines, if opportunities become available, management stated that it may allocate some cash and equity toward acquisitions, depending on the Company’s share price at the time a transaction is completed.

Management expects a solid Q3 and Q4 as they expect to carry the Company’s positive momentum into fiscal 2013 as they work toward completing a number of initiatives that should help add to high margin revenue growth.

The Company re-launched its corporate website in an attempt to better position itself for advertisers, forum owners, and prospective investors. The new look and feel features the Company’s ad supported business model and the benefits of its network for advertisers, forum owners, and general community users.

Additionally, the Company is focused on deploying the redeveloped ad server obtained during the June 2010 Adisn acquisition in late Q2 fiscal 2013.

Furthermore, management expects the ad server, coupled with the improved quality of the network, will further improve its RPM during fiscal 2013.

During April 2012, the Company reached over 220 million monthly page views across all properties, a 57 percent year over year increase, compared to 140 million monthly page views during April 2011.

Likewise, monthly unique visitors jumped 20 percent year over year to over 18 million compared to 15 million monthly unique visitors a year earlier.

Similarly, as of May 3, 2012, approximately 26.1 million users are registered on Company network sites with 70.1 million total discussions and nearly 1.2 billion individual replies. Additionally, approximately 24.9 million users are registered on CrowdGather Network sites to date with 72.0 million total discussions comprising nearly 1.2 billion individual replies.

Still, CrowdGather estimates that the ongoing removal of non-monetizable content that also conflicts with its terms of service may reduce its total monthly page views by 20 to 30 million, to approximately 180 to 190 million monthly page views network wide.

However, the Company does not expect any significant impact on revenues from the reduction and anticipates an immediate lift to RPM.

It should further be noted that the Company is in the process of migrating its third-party hosted sites, such as Yuku.com, to its own network operating center, in Los Angeles, California, as part of the Company’s risk mitigation and cost savings strategies.

The relocation is anticipated to improve uptime, speed, and stability for its sites, and to also result in savings of $12,000 to $25,000 per month due to the difference between the lower cost equipment lease payments and the higher cost third-party hosting charges.

Furthermore, the Company is working toward completing a number of internal initiatives that should impact topline growth, including the ad server launch, the development of an internal tool for monitoring and removing non-monetizable content, and general software development that will improve its communities network wide.

Likewise, CrowdGather has been working diligently to improve its brand sites as demonstrated by the re-launches of Digishoptalk.com and Pocketables.com in May of 2012.

The Company is also conducting ongoing development across all of its network properties, i.e. Yuku.com, to continue improving the administrator and user experience in the communities.

Finally, as 8 to 10 percent of all of CrowdGather’s aggregate page views are mobile, management stated it is beginning to look at its mobile ad inventory and ways to monetize it.

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