For reasons we can’t begin to grasp Quepasa held a conference call and presentation for analysts and investors today to “unveil” their rebranding strategy.
We admit that we are new to the story but from a distance the old story at least made some sense. Spanish speaking people are a big segment of the world and it’s not unreasonable to think about having a social network and content company focused on it. (Yandex $YNDX is a good example of a regional company that has done well and we like.)
But Quepasa decided to merge with MyYearbook and consolidate into something new they are calling MeetMe. The ticker of the company will be changed to $MEET. To be sure meeting sites like Badoo are popular and based on most accounts extremely profitable. But nobody is kidding themselves about what these sites are all about.
Unfortunately for Quepasa the “redesign” and integration creates a giant spam/hookup site that few investors will want anything to do with. The consolidation of the two looks more like FriendFinder $FNN then the companies they are comparing themselves to (LinkedIn $LNKD, Facebook and Twitter.)
Strangely the company fails to mention Meetup which is one of the few online sites that is in fact dedicated to helping people connect, albeit around common interests, regions or events. There are some gaps in the online services that would help promote more discovery but this will be emerging in multiple forms from established companies and third parties who will build that functionality alongside the large properties.
The real tragedy though is that the company burned a rare opportunity to actually connect with long-term investors and prove their mettle in terms of strategic thinking, operating expertise and hard and fast goals about product development, revenue growth, operating margins and returns on invested capital.
Their story went along the lines of “we have acquired this big property and put them together into something that makes some sense and are big in terms of registered users and page views.” Investors have seen versions of that story before and know it doesn’t work. Demand Media $DMD is another spammy content company that proved that volume does not equate to sustainable growth and earnings in an increasingly filtered net.
At this point we don’t have enough to suggest we should build an IV model on the company to see how the current market capitalization stacks up to what they might be worth. It’s possible that there is a brilliant strategy lurking around somewhere in the mix but it’s not at all evident from the information we have reviewed. As far as we can tell MyYearbook looks like a disaster and the dilution of what might have been an interesting niche story should be a disappointment to QPSA investors.
All in all another surprising example of a company that appears not to be getting any good advice on what investors expect or perhaps is not listening to it. Given the resources at their disposal they need to go back to the drawing board with good erasers and sharper pencils.
Further reading & references:
Demand Media: Cashing in on Crapification
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