Digital Marketing Companies - What is Happening?

Friday, 29 February 2008

Back in November 2007 the 'Big 3' digital marketing groups in Australia did not really expect what happened in the last couple of months: share prices are going down up to 150%, some issues with profitability, job cuts

BlueFreeway changes its strategy

BlueFreeway is the digital marketing company that generated much of the talk. From the Sydney Morning Herald to B&T, BlueFreeway's issues have been publicly exposed starting with the resignation of Richard Webb and two other directors, followed by a large number of job cut and the change in the company strategy.

BlueFreeway appeared in 2006 and proceeded to a series of acquisitions in Australia and overseas to reach 25 companies in 2007 including Clear Light Digital, Cogentis and others. BlueFreeway also heavily invested in the development, support and sales of the Blu. advertising portal.
Early 2008 some profitability issues started to rise and quickly led to the current situation: A share price at its lowest, job cuts and a lot of questions.
The interim direction has decided to go back to a more sustainable strategy focused on the portfolio of companies instead of the development of their portal.

According to Fanale, one of the new CEO, BlueFreeway grew too quickly and had a level of expenses to high compared to the level of sales. Now that overheads costs have been reduced, Fanale is confident on the future of the company.

Q Group struggles with profitability

The Q Group has aggregated 9 digital companies in the field of online marketing including media sales, search marketing and list marketing in the last 2 years.
Even if the group has a strong position in Australia, the Q Group is still not fully profitable. The latest acquisitions have not been fully integrated and the cost of expansion have dented the group profitability.

The results are similar to BlueFreeway, the share price has dropped significantly and the board has to proceed to some cost cutting activities

The future of the Q Group is not jeopardised as the group has recorded an orgnaic growth of 42.7% in the last 6 months of 2007 generating 12 Millions in revenues with an improving profitability.
However the future possible acquisitions mentioned in the board presentation might have to wait a little longer if Q Group want to restore confidence with its investors.