EN1 grows programmatic ad business, plans acquisitions

By Megan Graham. Published at Apr 26, 2018, in Technology

engage:BDR (ASX:EN1) has today provided an update on the progress of its programmatic advertising business in Q1 2018. CY2018 has so far brought rapid growth for EN1’s programmatic advertising platform, which it expects to be profitable and cash flow positive by the close of the FY2018.

The company has processed 86 client integrations to date, with a further 15 clients expected to be integrated by end of Q2 2018.

Of those integrations, 18 were completed this calendar year — two of these new clients are described below:

In regards to ‘client integrations’, the process involves connecting the client’s systems to engage:BDR’s systems to ensure that both systems are communicating with each other effectively.

This is a complex and time consuming process, taking between three weeks to six months to complete and 80+ man-hours involving several team members from both companies.

Given this investment of time, EN1’s customer retention rates should be bolstered, as once a client is on the engage:BDR platform they are unlikely to leave and go through the entire process again with another company.

Yet EN1 does remain a speculative investment and investors should take a cautious approach to any investment decision made with regard to this stock.

In January 2018 the programmatic advertising division of EN1’s business was “280% higher than the corresponding month in 2017 and the February 2018 programmatic advertising was 310% higher than the corresponding month in 2017”.

EN1 advises that it expects this high growth rate to continue for the remainder of the 2018 calendar year. Incidentally, the second half of the calendar year is considered the busiest in the advertising industry due to advertisers increasing their spending around key dates such as Halloween, Thanksgiving and Christmas.

engage:BDR recently reported that it expects its annual revenues to grow to between A$24 million to A$24.5 million in 2018.

Programmatic advertising in a nutshell

Programmatic advertising utilises software or platforms to buy and sell digital advertising space. During this process, platforms automate the buying, placement, and optimisation of advertising inventory through an online bidding system.

Internet users will have experienced programmatic advertising presented to them via ‘Cookies’. Advertisers use ‘Cookies’ to collect information about a website’s visitors, using it to put together user profiles so they can display advertisements most relevant to the individual.

The below graphs clearly demonstrate the current largescale growth of the programmatic advertising industry:

New product development

EN1 recently developed a new 100% viewable proprietary display slider ad unit for its programmatic advertising platform. This allows the advertisement to be viewable even when the user is scrolling down the webpage, enabling visibility at all times while the client is engaging with EN1’s platform.

Typically, digital advertising is static on the webpage, and as such is not viewable when a user is looking or scrolling to another part of the page.

EN1’s latest feature is currently being beta tested, and is expected to deliver significant benefits for advertisers willing to pay a premium.

Update on EN1’s acquisition growth strategy

As previously announced, EN1 is considering several potential strategic acquisitions in the near term.

If EN1 makes an acquisition of another similar business in the digital advertising space and migrates that company’s clients onto its own platform, it believes that the majority of the revenue will be converted to its bottom line.

Further, the company has indicated that once a publisher is set up on the engage:BDR platform there is a multiplier effect, which could reach up to four times the current revenue of the acquired company.

Overall this is an early stage play and as such any investment decision should be made with caution and professional financial advice should be sought.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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