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blinkx Shares Soar on Video Ad Potential

Shares in blinkx, the AIM-listed company that powers video search on AOL.com, shot up more than a quarter on Monday as investors grasped the company’s potential to cash in on increased spending on online video advertising.

Shares in blinkx rose 25 per cent to 85p after the company issued an upbeat trading update for the third quarter and predicted full-year revenue would be 9-12 per cent ahead of its previous estimate. At one point the shares reached 87p.

The company, spun out of Autonomy Corporation in 2005 and listed in 2007, raised its full-year revenue guidance to between $180m and $185m from $164m. The high end of that range would mean revenue growth of 62 per cent on the previous year’s turnover of $114m.

Suranga Chandratillake, president and chief strategy officer of blinkx, attributed the company’s performance to increased scale from its acquisitions in 2011 as well as one-off benefits from the effect of the London Olympics and US election campaign on online video advertising.

“When you have big events like this, it raises the water level; people have to pay higher rates because so much of the inventory is being soaked up,” Mr Chandratillake said.

Mr Chandratillake said the company did not yet know how much of the increased revenue was due to the one-off events, but said it hoped to give more detail in its full-year results. However, he said the acquisitions of two companies – Burst and Prime Visibility – were paying off as the advertising market caught up with the consumer trend of watching more online video.

“The primary rationale behind those acquisitions was to embed blinkx engine into those two companies that had a lot of scale but were selling at a much lower price. We have seen that customers who needed more scale have very, very quickly bought into it and are very happy with the results.”

Jonathan Imlah, analyst at Canaccord Genuity, said blinkx had been undervalued since Hewlett-Packard announced the writedown of its Autonomy acquisition in November, noting it was still trading at a discount compared with its peers.

“I’m quite surprised by the magnitude of the [share price] move – we’ve been pointing out that this is a big year for online video and mobile video advertising, and the trading update concurs with that.”

“The previous full-year guidance had increased from $155m, so they have added $30m revenue without the cost base going up. You’d expect that to show through in reasonable profit upgrades.”

blinkx, which has headquarters in San Francisco and London, has indexed 35m hours of video for search engines across its 800 media partners and its own site, blinkx.com.

In January it announced a big update of the latter to optimise for mobile users and touchscreens. blinkx said beta testing showed the new design boosted usage by 400 per cent in the mobile segment, an increasingly vital channel for advertisers.