Shares of MeetMe Inc. MEET gained over 20% in yesterday’s after-hour trade in response to the raised second-quarter 2015 revenue guidance which was also much higher than the Zacks Consensus Estimate. The upbeat guidance reflects the successful transition of the company’s advertising inventory management from third party to in-house announced on Jun 3.
The social network operator now expects second-quarter revenues of between $10.5 million and $10.7 million, up from the previous $9–$9.5 million range. The revised guidance is also higher than the Zacks Consensus Estimate of $9 million. Similarly, adjusted EBITDA is now forecasted to be between $1.5 million and $2.0 million, much higher than the previous range of $0.25–$0.75 million.
Notably, MeetMe raised the second-quarter outlook twice this month . This is primarily because the company is getting higher ad rates than anticipated when the ad inventory management transition was announced.
Earlier, the majority of MeetMe’s web and mobile ad inventory was managed by Beanstock media Inc. The company terminated the agreement and decided to manage its ad inventory in-house. Since then, a tremendous jump in ad revenues has been witnessed.
The company’s revenues from mobile app ads for the first three weeks of June grew 23% versus the May average. For the 7 days ended Jun 21, it witnessed a 53% increase in daily mobile app ad revenues compared with the May average. Buoyed by this tremendous performance MeetMe now intends to test the full-screen mobile video ad units in July.
Formerly known as Quepasa Corporation, MeetMe is headquartered in New Hope, PA, which owns and operates a social network. It enables users to meet new people through social games and apps, monetized by both advertising and virtual currency. The company operates MeetMe.com, Quepasa.com and MeetMe apps on iPhone and Android.
Although MeetMe is a much smaller player in the social networking space, it has undertaken a number of initiatives to boost its customer base and enhance marketing capabilities. We believe that the recent transition of ad inventory management is also part of this strategy.
Over the past few months, MeetMe has been striving to enhance the mobile experience of customers as it generates a significant portion of revenues from mobile ads. With the launch of the full-screen mobile video ad unit next month, the company will be able to broaden its advertising scope.
According to the research firm ZenithOptimedia, online video is anticipated to grow around 29% per annum by 2017. The report also states that by 2017, Internet will outdo TV advertising in as many as 12 prime markets and is likely to represent 28% of the worldwide ad spending. The firm further projects global ad spending of $531 billion in 2015.
So we believe that there is an immense growth opportunity for MeetMe in the social networking space. However, the industry is highly competitive and majorly dominated by bellwethers like Facebook Inc. FB and Twitter Inc. TWTR which may negatively impact ad rates.
Currently, MeetMe carries a Zacks Rank #3 (Hold). A better-ranked stock in the Internet Service industry is Zix Corporation ZIXI, with a Zacks Rank #2 (Buy).
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