The increasing use of smartphones has fueled the growth of mobile advertising over the past few years. According to a report from Berg Insight, location-based advertising and marketing will represent around 7% of digital advertising or 2% of total worldwide advertising spending for all media by 2018.
The Berg Insight report further notes that the total value of the global real-time mobile location-based advertising and marketing (LBA) market will grow from $1.66 billion in 2013 to $14.18 billion by 2018. This represents a CAGR of 54%, which is impressive by any standard. If the market expands as expected, location-based advertising and marketing will come to represent around 38.6% of all mobile advertising and marketing.
Richard Andersson, Senior Analyst at Berg Insight, noted that the concept of Bluetooth marketing has been reinvigorated following Apple’s introduction of iBeacon in 2013.
The phenomenal growth anticipated in location-based advertising and marketing has certainly not gone unnoticed. Indeed, Wall Street is taken note of this trend and not surprisingly, one of the top performing stocks in the tech sector over the past year has been The Rubicon Project Inc. (NYSE: RUBI). Based in Los Angeles, California, RUBI is a technology company focusing on the automation of buying and selling advertising. In the past one year alone, RUBI shares have gained 42.70%, easily outperforming the S&P 500.
TubeMogul Inc. (NASDAQ: TUBE) is another company with a focus on digital advertising. In the past year, TUBE has seen its shares gain more than 53%.
An emerging player in the field of location-based mobile advertising and marketing is Sito Mobile Ltd. (NASDAQ: SITO). Based in Jersey City, New Jersey, SITO is a mobile media solutions provider serving retailers, advertisers and brands. The company provides a mobile engagement platform that allows brands to increase awareness, loyalty and ultimately sales.
Over the past one month, SITO has made some significant progress. In June, the company announced that it upgraded its mobile ad platform to the new OpenRTB 2.3 ad spec and has become the first Millennial Media Inc. partner to accept Deal ID, which is a unique targeting capability that allows buyers such as SITO to easily identify inventory specially curated for high performance, unique demographics, content categories and more.
Jerry Hug, Sito Mobile’s CEO, said in June that the upgrade is consistent with SITO’s vision to continually integrate leading edge technology in order to offset the latest advantages on the company’s platform.
In July, SITO made further progress with the acquisition of Hipcricket’s mobile advertising business. As per the terms of the agreement, SITO acquired Hipcricket’s mobile advertising business for $3.7 million in a cash and stock transaction. The acquisition will allow SITO to tap new revenue streams for its mobile advertising business through Hipcricket’s existing customer relationships with both advertisers and brands. The acquisition also expands and enhances SITO’s product offerings using proven technology from Hipcricket’s adServe platform through which Hipcricket generated $30 million in revenue over the past 30 months.
CEO Hug noted that the transaction represents a major growth catalyst for SITO in many ways. Hug said that the company will not only add a great team of experienced mobile advertising professionals that will enable a smooth transition and continued growth within the mobile advertising industry, but also Hipcricket’s expansive network, which will allow SITO to enter into many great new relationships with marquee advertising clients.
Despite all of these developments, SITO has not got the kind of exposure its larger peers have had. One of the reasons has been the fact the stock still trades on the OTC market. However, the company is already looking into this issue. Indeed, SITO has been considering a NASDAQ listing, a move that will significantly increase the company’s visibility among the investor community. On August 10th, the company will achieve its goal of NASDAQ listing. SITO has received approval from NASDAQ Stock Market LLC to list its shares on the NASDAQ Capital Market. Sito Mobile will trade under the ticker symbol SITO on the NASDAQ.
CEO Hug said that following another solid quarter, the company is pleased with the timing of its NASDAQ listing. Hug noted that a NASDAQ listing has been one of SITO’s defined goals for 2015 which help to increase exposure and allow the company to attract a broader range of institutional investors and analysts. Hug added that the company has accomplished a great deal over the past several quarters and remains focused on executing its plan.
The NASDAQ listing was preceded by a reverse stock split. SITO announced that it completed a 1-for-10 reverse stock split. The reverse stock split was affected to enable the company to qualify for the NASDAQ’s listing requirement. Hug noted that the reverse stock split will generate better liquidity and attract more investors to the company’s story.
Of course, once the company gets the attention of the wider investor community, the focus will be on the financial performance. SITO’s financial performance in fact has been very encouraging and captures the growth story.
For the quarter ended March 31, 2015, SITO had revenue of more than $2 million, up from revenue of $1.75 million reported for the same period in the previous year. For the first six months of the year, the company had revenue of $4.43 million, compared to $3.90 million reported for the same period in the previous year.
Earlier this week, SITO reported its financial results for the June quarter. Total revenue in the June quarter was $3.68 million, up 72% on a year-over-year basis. The significant increase in revenue was driven by continuing growth in the company’s Media Placement revenue, which rose to $2.154 million from just $131,500 reported in the second quarter of 2014.
Media placement revenue also showed a substantial increase on a sequential basis, rising 32%. In addition, there was revenue diversification, with media placement revenue accounting for 59% of total revenue and mobile messaging accounting for 38% of total revenue.
SITO not only saw a significant increase in its revenue but also saw gross margin expansion. Gross margin in the June quarter was 61%, a 400 basis points improvement from the same period last year. On a sequential basis, gross margin improved 300 basis points. The improvement in gross margin was driven by 68% gross margin in the media placement business. This was the highest ever gross margin reported in the media placement business unit.
CEO Hug noted after the June quarter results were released that the company has experienced strong growth on the customer side, and has won new business from both media buyers and brands directly due to its expanded sales force. With the acquisition of Hipcricket’s mobile advertising business, things will only improve further for Sito Mobile.
Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. For making specific investment decisions, readers should seek their own advice.