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MICRO CAP HOT TOPICS

March 13, 2014

LiveDeal Advertising Model Will Drive Substantial Revenue

Revenue growth should parallel rapid restaurant and user growth

In the traditional advertising marketplace, salespeople used to quote prices for ad placement.  Consider the Yellow Pages model, where businesses would have to pay “x” amount for a text ad of a certain size, “y” amount for a bigger ad or one with an image and “z” amount for a full-page spread. LiveDealLogo Of course, where the ad was placed in the yellow phone book also commands premium prices. This legacy model initially made its way to the Internet and was used by most, until Google reshaped the way ads are placed with algorithms controlling countless instant auctions every second where advertisers bid for a premium placement based upon a target audience.  Google was a pioneer in the age of big data and showed the world how to grow enormous revenue by rethinking the best way for businesses to succinctly reach the right demographic to maximize return on investment.

In a similar manner, LiveDeal, Inc. (NASDAQ – LIVE - $7.77 – Spec Buy) is revolutionizing the daily deal space with a novel approach employing leading technologies to maximize ROI for its customers and help them get their brand in front of the right consumers.  LIVE developed and operates the world’s first real-time marketplace that allows restaurants to publish and manage deals instantly from a central hub, called DealCentral.  Using geo-location technologies, LiveDeal sees to it that the deals are presented to consumers in the immediate vicinity of the establishment, luring them in to enjoy food or a drink.

Consumers are embracing LiveDeal.com and the LiveDeal application due to the many benefits over other deals sites that inundate them with useless ads, vouchers with expiration dates and cumbersome payment methods just to get a voucher.  LIVE avoids those pitfalls by not requiring users to prepay for anything or to print a coupon; they simply show the voucher on their mobile device at the point of sale to get the discount or freebie.

So what does this mean for the bottom line at LIVE?  With such a targeted approach and delivery method, it means that their advertising model can command premium prices from establishments as they vie for visibility of their ads.  LiveDeal has made two extremely prescient moves in the launch of its platform:  1) Only catering to restaurants and 2) Initial roll-outs in the most populous portions of the U.S.

By only curating deals for restaurants, there is no confusion for consumers.  Further, LiveDeal has immediately created a pool of customers that are all competing in the same space in a massive market.  LIVE only launched its program in October and already curates deals for more than 1,000 restaurants in Los Angeles, New York, San Diego and San Francisco.  According to corporate disclosures, LiveDeal users are growing even faster than expected, with mobile usage exploding month-over-month.  Organic growth is being supported by high-profile exposure, including a media campaign on the wildly-popular Howard Stern show on Sirius XM.

Add it all up and LiveDeal (LIVE)  looks like a company that is executing with laser-like precision to get its business to the masses.  The initial step was to attract businesses with a first-in-class platform to instantly manage customer flow.  The second step was to present the product to consumers hungry for a deal in their area and keep them coming back looking for more.  Those two components in place, coupled with a leading advertising program, should lead to the third step: driving significant revenue and a strong bottom line at LiveDeal.

Senior Analyst: Robert Goldman
Rob Goldman has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund.

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I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report.

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