Let’s open a thread for a very interesting Adtech/Content & Comparison & SaaS company from Sweden.
Excellent description of the company quoted from user Helel:
The company operates in the lead generation business. The purpose is to provide services that would direct visitor traffic to their buyers’ websites in a meaningful way.
This happens through two segments: AdTech and C&C.
- C&C (Content & Comparison) means: maintaining various standalone comparison sites (Vinklubben, etc.) and e-commerce related customer traffic steering, “comparison collaboration” (Affiljet) with newspapers, etc., attracting visitors through discount coupons. In addition, Speqta is a consumer loan broker. You might notice, for example, Rahalaitos.fi, which is such a loan broker. Similarly, Ilta-Sanomat’s discount coupons are now through Speqta.
- AdTech. Products: Shopello and BidBrain
Shopello is a Google CSS (Comparison Shopping Service. An online merchant can choose Google’s own Google Shopping or another CSS that buys ad space from Google for products on behalf of the client).
(Through the product Shopello, there’s an opportunity to advertise on Google on a CPO (Cost per Order) basis, as opposed to Cost per Click (CPC). Most CSSs operate on a CPC basis. Shopello offers the possibility of “not paying for nothing,” i.e., only billing its user if a click leads to a purchase. This is considered an edge. Shopello used to be Shopello BidBrain, but now BidBrain has been separated as its own SaaS-based product.
BidBrain is AI. It’s a data analytics engine that aims to optimize ad placement and collects money from clients for successful sales. Shopello operates in conjunction with Google, but the BidBrain system is also intended to be utilized outside of Google.
BidBrain requests access to the client’s (online store’s) Google Analytics data and rights to operate their Google Ads account with its automation to create ad campaigns.
Red Eye has been following since 2016 and continues to do so. Latest update from November.
Let’s talk a bit about the ownership structure. Insiders own about 20% of the company, and they also have options to subscribe for a few more percentage points. Two insiders sold about a third of their holdings in December, but this was explained as paying off a personal loan.
They had lent money to the company a couple of years ago, and converted these bonds into shares in 2019, which were then pledged as collateral for a personal loan.
The key drivers currently are thought to be 1) market awakening, 2) growth in the C&C segment through organic growth of Affiljet and possible acquisitions, and 3) potential new initiatives from within the company.
Red Eye believes that BidBrain development will show as costs in the near future and will weigh down earnings. Therefore, they lowered the target from 10 SEK to 8 SEK at the end of the year. However, BidBrain is not mentioned as a driver, and it seems to be quite experimental at the moment.
Q3 report. This year, the impairment of additional purchase price of 21MSEK strengthens earnings, and adjusted for this, the EBITDA margin would be just over 10%, but this still doesn’t seem weak to me, and sufficient cash flow should come from the C&C segment.
**Risks! **
But fundamentally, it must be understood that this is a highly competitive industry. Google, in particular, is a potentially strong challenger to BidBrain at the CSS level. The good thing is that even a tiny fraction (on the order of a permille) of the market is enough for Speqta to be profitable. If the company still has even a shred of an advantage or success, I see a lot of potential relative to its current market capitalization. 
In C&C, there are also many players. Throughout its history, this company has run other food-related standalones under different names, and communities live and die in time. Speqta was previously named myTaste and listed on the stock exchange. This new strategy (which the company is now implementing, broad C&C/Affiljet + AdTech) was introduced a few years ago, I believe in 2017.
Growth has largely come from C&C. This year’s growth is largely explained by the Rahalaitos acquisition. However, there are also clear organic growth opportunities in this C&C, and expectantly, the current profitability is a kind of baseline, or rather, I see no reason to expect its profitability to significantly weaken. (me 2020)
BidBrain AI “smartly” utilizes the client’s own Google Analytics and Google Ads data and creates ad campaigns on behalf of the client. Google then bills BidBrain on a CPC basis, and BidBrain bills the client on a CPO basis. Everything here depends on how well the AI actually works, because no money comes without successful advertising.
In any case, third-party cookies are the way AdTech companies currently target their ads. When these are removed, it’s hard to say what will happen. On the one hand, a serious disruption will occur; on the other hand, it’s hard to say now whether Speqta’s BidBrain and its first-party data analytics will be a winner. On the other hand, since BidBrain seems to be based on the analysis of first-party data, it “shouldn’t,” in my layman’s assessment, suffer a major disruption itself. Secondly, the C&C cornerstone appears to be sound.
The SaaS aspect here is AdTech/BidBrain, which is launching this year. C&C/Affiljet is, in a way, an electronic service sold to various operators, but it doesn’t actually sell its own software for others to use. In this sense, this definition doesn’t matter if there is growth and money coming in.
Revenue 2020: 177,600,000 SEK
Market cap: 303,221,535 SEK
EV/Sales: 1.7x
P/E: 10.95
), revenue might grow close to that, but not sustainably, unless BidBrain truly takes off. Earnings, on the other hand, can grow much faster in the initial phase.
Well, that’s enough of that. Ignore these last two paragraphs.
I still think a lot here relies on the revenue that BidBrain will bring in 2022, and that seems to be the key to whether the company is cheap or expensive. If BidBrain takes off, the stock price could easily multiply.
