Full Press Release Details
Fellow Shareholders:
a transformative year for our young Company. With the acquisition of Traffix,
Inc. earlier in the year, we moved from a young, mobile content upstart into a
diversified online marketing and mobile media company. Our strategy of combining
the respective talents of these two companies proved beneficial.
three relatively strong quarters, the final quarter of 2008 was certainly a
challenging one. It is evident the Company's business model is hampered by near
term macroeconomic challenges to both consumer demand for our proprietary
products and advertising sales within our media. Through this time period, we
still remained dedicated to capital preservation, new product innovation and
deployment, strategic and accretive investments, and operating expense
reductions largely gained through post merger integration.
2008 with a strong balance sheet, positive operating cash flows, and strong
operating synergies while also making several strategic investments in our
future growth strategy. Our top line year-over-year pro forma revenue growth was
driven by an increase in our media business' premium billed subscription
revenue, and our interactive agency producing strong results in both search
engine marketing and search engine optimization services for branded
advertisers. Notwithstanding the company's strong year-over-year performance,
our media business' growth slowed during the second half of 2008, including the
fourth quarter, due to a combination of constantly changing market regulations,
non-recurring industry wide operational challenges, and general economic
uncertainty. Over the past several months our team has worked diligently to
address these specific challenges, and I will share with you the positive action
steps already taken on a go-forward plan to re-ignite subscriber growth,
lifetime values, and advertising revenue on our extensive media
ahead to 2009, as a whole, we do anticipate continued headwinds from the
macroeconomic environment. However, we believe our flexible business model,
combined with our refocused service offering, key new products, expanded billing
capabilities, international reach, and new advertising platform will enable the
company to grow while competitively positioning itself as a long term leader in
addressing two significant growth markets: online performance based advertising
and mobile premium build content services.
transformation will continue into the current fiscal year 2009. Historically,
the Company invested heavily in building a large-scale, domestic media and
distribution network that generates well over 20 million unique visitors per
month and acquiring 25,000 new user registrations each day. As a result, the
Company has over 40 million cell phone records in its database. The maturation
of Internet and mobile media through faster network speeds, rich media, Internet
enabled devices, and growing consumer demand for innovative, cross media
products creates an important opportunity for the Company to extend from its
strong roots in high volume distribution to a more product centric company.
Prospectively, the Company will focus on deploying high quality content and new
products, increasing the lifetime value of our subscribers, and associated gross
profits of the online impressions we serve each day.
we need to be our own biggest advertiser with compelling, subscription based
products consumers value. Today, we are not yet at this goal and aim to change
this during fiscal year 2009. When our direct to consumer business is growing,
our profit margins reflect a strong and scalable business model. Subsequently,
the Company is focused on deploying new proprietary products distributed through
a mix of media we control. Some specific examples follow:
2008 a beta version of the Kazaa music service was successfully launched with
our exclusive partner, Brilliant Digital, delivering a full track, fully
licensed music subscription service with associated mobile content delivered on
the handset. The service will be monetized, leveraging our alternative billing
infrastructure, paid on a consumer's mobile or fixed line phone, which will
allow us to acquire customers at a much lower cost than competitive music
subscription services. The ongoing test results - where we are already acquiring
approximately 500 customers per day - are positive and quite encouraging. The
next version of this service aims to include a social discovery and community
sharing application alongside a portable application a consumer can access on
the go. According to Forrester, US digital music sales account for only 18% of
the market today but will increase exponentially to 41% over the next few years,
providing a significant and growing opportunity for the Company.
during 2008, we commenced the co-development of a fast growing, social media
commerce application called Shopit, which is similar to eBay but for a social
network. Shopit facilitates commerce across well-known social media applications
like Facebook and MySpace, where sellers can quickly set up individual items for
sale or entire stores to merchandise to friends in their network. The first
version of this application has already attracted over 750,000 people to
download a Shopit widget while the Shopit publishing network is growing by
millions of impressions each week. The next version of this product - recently
launched in the current second quarter - will have a premium, value-added
subscription service where consumers are given store fronts to merchandise to
friends in their network and media to advertise their products and services
outside of their networks. Consistent with our business model much of the
billing will take place on the user's land line or mobile phone.
investment made during 2008 centered on our expanded alternative billing
capabilities to land line phones in addition to its mobile phone billing
infrastructure. Our 36% minority investment in The Billing Resource, known as
TBR, provides the ability to bill consumers for direct-to-consumer, digital
entertainment products like games, music, or membership clubs through their home
phone bills. Only a few companies in the US own and operate the underlying
contracts with the local exchange carriers since they typically take years and
cost millions to obtain. Consequently TBR, which is already operating
profitably, gives Atrinsic a significant barrier to entry against competitors
while providing us the fastest, least expensive, and lowest risk way to enter
this market. With these new billing assets we will be able to further monetize
our existing audience with limited additional investments, taking advantage of
the fixed line phone data we already capture from many of our
international expansion also became a reality in 2008, which aims to
sequentially grow our direct-to-consumer business over the following quarters.
During 2008 we developed the operational capability to acquire mobile content
customers in several international markets, such as Canada, the United Kingdom,
and Australia. We are doing so through leveraging our existing infrastructure
and adding limited overhead to our cost base. The company does anticipate
re-energizing growth in its direct-to-consumer media business through these
strategic initiatives, and we plan to update shareholders with specific progress
on the previously outlined new products, new premium billing capabilities, and
international distribution over the coming quarters.