If there is one constant in the high tech world, it is the change at the top with companies such as Apple (NASDAQ:
AAPL), Yahoo (NASDAQ:
YHOO) and AOL (NYSE:
TWX) ever shifting in positions. For the savvy investors, game changers such as FrogAds (OTC:
FROG) offer many competitive advantages.
The first is that high tech companies, particularly those in social media like Craigs List, are very vulnerable for a fundamental economic principle: the lack of a barrier to entry. Utilities, car makers, etc... all have tremendous barriers to entry. There are none to prevent FrogAds from registering the impressive growth that it has in online advertising. This is a feature that Warren Buffet looks for in an investment: hence, his passion for railroads and utilities.
Start-ups also offer improvements. Social media sites like Craigs List become saturated with non-productive ads and very inefficient. This turns off users. FrogAds, by contrast, offers very specific and detailed online advertising. That is the most cost efficient and most effective and will attract the most customers.
This has been proven by recent social media successes such as Groupon (NASDAQ:
GRPN) and Zynga (NASDAQ:
ZNGA). As a result of this massive customer attraction, start-ups can develop impressive revenue streams very quickly. In a recent interview with Maria Bartiromo in
USA Today, "Technology soars again as economic driver," Ben Horowitz, a leading venture capitalist pointed out how quickly billions can be earned. According to Horowitz when asked about Zyngqa and Groupon, "Both those companies are less than 5 or 6 years old, and both do more than a billion a year in revenue. If you look at the entire history of business, you will be hard pressed to find two companies that went zero to a billion dollars in revenue in five years."
Revenues from this initial success plant the seeds of failure that companies such as FrogAds inevitably reap. Margins in the high tech world are very high. As a result, companies develop impressive cash hoards. Searching for ways to deploy this capital, mergers and ill-advised mergers and acquisitions take place that inevitably weaken companies. According to an article by Randall Schuler and Susan Jackson of Rutgers University, "HR Issues and Activities in
Mergers and Acquisitions," 90% of high tech mergers fail to deliver the promised results. That means they are failures and wastes of money. In the top ten list of worst mergers by Steve Tobak, note the preponderance of high tech combinations: AOL/Time Warner (TWX), HP/Compaq, Alcatel/Lucent (ALU), Daimler Benz/Chrysler, Excite/@Home,
JDS Uniphase/SDL, Mattel/The Learning Company, Borland/Ashton Tate,
Novell/WordPerfect, and National Semiconductor/Fairchild
Semiconductor.
FrogAds is growing at a healthy rate. In terms of brand name, Google (NASDAQ:
GOOG)
ranks FROG very high for a variety of
highly searched and competitive keywords. Included in this is FrogAds.com coming in at #3
for the 750 MILLION results for Google searches for "Place free ads." Those rankings were based upon consumer searches, too. No money exchanged hands for the high ranking. The recent signing of Pamela Anderson as the celebrity spokesperson will result in more activity for FrogAds.
This is just not idle speculation. n
a recent research report, Grass Roots Research and Distribution, Inc
focused on the growth ahead for FrogAds. The research firm projects
that revenue for FrogAds will increase from $0.5 million in fiscal
year ending March 31, 2012 to over $30.6 million by FY 2018. The
projections from Grass Roots Research and Distribution are compelling,
considering the growth in the internet advertising market; and
detailed in a previous article on www.smallcapnetwork.com.
The biggest mistake Yahoo (YHOO) ever made was not agreeing to be acquired by Microsoft (NASDAQ:
MSFT) for $41 billion. Now Yahoo is worth $18.62 billion. Obviously, this failed acquisition worked out well for Microsoft and its shareholders. High tech and social media is replete with these: remember Myspace? Prominent now, Apple (AAPL) has had its share of failed acquisitions. Investors would do well to remember the history of turnover in high tech and social media and not forget about the promise of FrogAds.
