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lukehold
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Post by lukehold »

“ Most game publishers individually do not have the volume of impressions to unlock this big spend on their own.”

This is especially true when brands/advertisers want to target specific audiences based on country, gender, age, preferences etc



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lukehold
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Post by lukehold »

Very simply, It’s the same reason website developers don’t sell their own ads even though they could develop something similar. Some might do.. but Google have done alright out of it



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sectornitad
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Post by sectornitad »

And looking at Bids from a purely investment perspective, at current valuations (12p), a very strong case can be made that it is ripe for significant upside were a large game studio serious about doing IGA in house.

If (eg) EA were to spend £200m buying Bidstack (current market cap @12p is £46m), they could integrate the tech into all their sports games within a few weeks, and then they would have a ready-made division fully staffed to start pumping brand activations into their games. They would keep 100% of the revenue and would easily pay back the purchase price of buying Bidstack within a year, two at most.

If games studio executives are actively considering doing all this in house it would be improbable in the extreme that they would not first enquire as to whether a deal could be done.

Bidstack is substantially undervalued from an M&A acquisition perspective, never mind a "go it alone" business model.



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sectornitad
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Post by sectornitad »

Another angle is margin negotiation.

Take a big studio, with lots of premium titles where IGA would be a fit adding up to, say, 50 million daily active users.

It would take them at least 18 months from a standing start, and investment of £30m to build, to get to where Bids is right now (in terms of tech, team, IGA Gold Standard, insight, global reach/partner network). This would come also at considerable extra management load and therefore "distraction opportunity cost" and capital opportunity cost (instead, could they spend £30m on a new game etc?). We also know that Bids running costs will top-out at about £10m per year.

Assume 50m DAUs, with CPM of £10, 50% fill rate and 2 ad impressions per session. This would give revenue of £180m per year. If They did it all themselves, they would still need to pay £10m to run their team. Therefore, internal margin would still only be about 90%. In other words, if Bids do it for them and charged 10% margin it would about level out financially for the game company. However, Bids are also bringing instant availability (rather than wait 18 months). So, in year one with Bids they get £160m. Divide this over a ten year horizon there is a 'cost' of doing it themselves of £16m on top of the development costs.

So Bids has a lot of pulling power with margin to sway the decision their way. A deal at 15% margin, relieving all management "distraction opportunity cost" would mean both parties are very happy with the deal. Bids would (in this example) get £27m, enough to easily cover its running costs and making the company profitable. From just the single deal. Once those running costs are met there is future flexibility in the margin to reward loyal game companies.

Yes, the game companies could do their own IGA. They could also run build and own their own data centres. I bet they don't though!



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Post by mike »

Nickfletch70 wrote: Sat Jan 09, 2021 8:58 pm @mike excellent piece of work

Is it worth putting a reason why we missed the £5m 2019 revenue target then the 2020 target was only £1.5m?

That’s a question I would ask if I was thinking of investing?
@Nickfletch70 I've updated the section to explain more about what happened in 2019 and why the miss of targets occurred.



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mike
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Post by mike »

I'm thinking about converting the above to a Bidlievers .pdf research note. @sectornitad and @Mr_Chow - if you fancy putting together any charts (that are fact / evidence based with clear logic defined), that can either be included in the above or suitable for a pdf conversion that would be great. I think the original broker note is the basis of a lot of what I've seen you produce anyway. Also anything on revenue growth projections, cash burn rate, projected revs vs costs and ranges would be awesome to see.

Needs to be fairly concise and brief. As non-biased and non-speculative as possible.



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sectornitad
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Post by sectornitad »

@mike I'm in. I've got time on my hands until Boris lets me go out and play :)



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Post by Mr_Chow »

@mike brief understood

Will put something together. There’s definitely some value to be added on the numbers side as that’s what investors will care about most.



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Post by Mr_Chow »

Also great work 👍



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Post by sectornitad »

@Mr_Chow - would you like to do the company valuation piece, DCF etc, given inputs of revenue. And I can then do how we arrive at the revenue figures in the first place?



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