(MENAFN- ProactiveInvestors) Robert Proctor said he could barely raise a smile from the Silicon Valley venture capitalists or indeed any UK based VCs when he took the () story out on the road looking for cash.
“Spoken word audio and audio on demand were just not that trendy a couple years ago. Now they are the hottest digital sectors out there” he told Proactive Investors.
’s share price up over 1000% last year reflects the medium’s new-found popularity.
Having utterly transformed the business in less than two years the aim now is to deliver the real value.
That means cracking the phone and tablet market while at the same time creating a profitable and cash generative business.
styles itself as the NetFlix for audio. It was initially set up as a user generated content social network akin to for audio.
However the service offering is now aimed squarely at the largest broadcasters publishers and sporting organisations which use ’s technology as their default audio player on their websites and social media channels.
This has been a huge success with companies such as the BBC Bauer Global and Fox using the technology worldwide.
Proctor reckons the firm is now the world’s biggest repository of on demand spoken word content.
More than 2000 content partners are signed up to which has 5600 channels and 3.3mln registered users (up from just 25000 in April 2013) and over 30 million monthly active unique users.
Phase-two will see it chase the consumer market aggressively for this is where the real value lies. That means it now has to become the default spoken word and podcast player on mobile devices.
It will officially launch on ’s iOS platform later this month although the alpha version of the app is already in the app store while the Android version will formally go live towards the end of February.
The target is to have 5mln registered users by the end of the year. Proctor reckons the tipping point where the service will have gone viral is around the 7-8 million user mark.
Once this landmark is achieved it can be safely assumed that is established and sticky and the process of monetisation through advertising can begin in earnest.
Until it gets to this point the CEO is keen to keep the mobile app ad-free.
The reality of being a publicly listed firm is that unlike virtually every other high growth internet company in the world must at some point make money for its investors.
However Proctor doesn’t want to degrade the user experience before that vital tipping point of virality has been hit.
So he and the team have come up with a plan that allows the business to break even during 2016 while continuing to develop the consumer offering.
The company will do this by syndicating out its highest quality audio content to third-party websites with this content carrying pre-post-roll and graphic display advertising.
By way of explanation let’s use the ’s tie up with websites devoted to Manchester United.
It has identified around 3000 sites and blogs that cover the footballing ups and downs of one of the world’s most popular club.
Only a handful of them have media capabilities. So has singled out 128 to receive Man U related audio with advertising attached.
This model is being replicated for all the Premier League teams across other sports such as cricket rugby and cycling. Aditionally the company is creating audio content and ad networks for all of its major content genres including: entertainment news business and music.
By the end of the quarter the company estimates its sports network alone could number 4000 sites attracting 30mln unique users.
Web advertising experts reckon conservatively this could generate a monthly income of around £300000 for the sports content alone. Proctor won’t comment on the figure.
The group came to AIM by reversing into cash shell Delta One.
It raised just under £3.5mln at 1.5p in March and topped this up in October with a further £8mln.
The current market capitalisation of £52mln may from the outside may look a little toppy for a business that is likely to remain loss-making for most of the next two years.
However this is very definitely the wrong way to look at .
Spotify is widely rumoured to be gearing up for an IPO that would value the music streaming service at US$10-15bn.
On that basis its 60mln users are worth just over US$200 each.
Applying that metric to delivers a number that is just under 10 times its current market capitalisation.
But given the user base is nowhere near the critical mass it requires you would have to discount that per subscriber valuation significantly.
A value of US$25 per subscriber gives us the business’s current market worth. There is an argument that for $50 to $100 per head is closer to the mark.
That argument can rage. This analysis simply reveals that the current share price which has gone from 1.5p last March to just under 10p today provides a conservative valuation yardstick.
The recent flow of announcements reveals the group is gaining significant traction with content providers.
Its partnership with Nobex Technologies opens the door to 20000 radio stations worldwide with 500mln users streamed via the American firm’s award winning app.
Meanwhile the tie-up with Amazon-owned audio books group Audible reveals how ’s attraction as platform for paid-for content.
Deals of this ilk were the thing of dreams back in April 2013 when the business in its current form started with just 25000 registered users.
“We started from a low base less than two years ago” said Proctor. "I think we have done alright so far but we have big plans for 2015 and we can see the hockey stick growth beginning across a number of our key KPIs.”
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