By: Dylan Sikes - AllPennyStocks.com News

Wednesday, April 10, 2013

Companies are learning how to operate in many different ways to maximize profit margins in a tough macroeconomic environment. Many companies are learning to leverage digital technologies as a valuable marketing asset to reach larger, targeted audiences as a matter of operating more efficiently to reach specific demographics in a cost-effective manner. It makes sense, as HubSpot reported last year that inbound leads cost 61 percent less than outbound leads. Once-public Internet Brands is a yardstick by which many companies in this, the “lead generation” business, are measured or aspire to be like. And wouldn’t they want to be? Started from a single brand, the company now has more than 100 vertical websites under its umbrella that generate more than 120 million unique visitors each month, according to Google Analytics. In 2010, private equity firm Hellman & Friedman bought the company and took it private for $640 million, a 47 percent premium to the price before the deal was announced.

Every shareholder has a dream of a move like that happening to a company that they have a stake in.

A company that could potentially parallel the growth of Internet Brands is WebXu, Inc. (OTCBB:WBXU) a digital media company, owner of a series of websites and lead generation expert headed-up by a team of serial entrepreneurs and financial pros that know a thing or two about building successful Internet companies. Without going into lengthy detail, Matt Hill, chief executive at WebXu, was a founding investor of Shopping.com. It was later sold to Compaq for $220 million. He also founded ShopIt.com, which was sold to Atrinsic. Hill was chairman of SuperNation when it was bought to Intermix Media. In 2010, he sold Adjuice to Beyond Commerce. The list of successful investments for Hill goes on and on and is, safe to say, quite impressive.

WebXu happens to be attractively priced at the moment as a price dip has followed an apparent misperception of a recent small debt conversion. The astute move involved note holders converting $550,000 of debt into restricted shares of common stock, wiping-out almost 18 percent of all the debt on WebXu’s balance sheet. The conversion was done at “nominal” discount to market, according to Hill and the restricted shares cannot have the legend removed to hit the market for a minimum of six months, so there is no immediate dilution to the share structure, a fact investors seemed to not pick-up on. As the company generates more revenue and a more liquid market, the shares should be easily absorbed.

WebXu is projecting revenue for 2013 in the range of $13 million to $15 million. If achieved, the revenue will far exceed WebXu’s current market capitalization of $5.15 million.

The bottom line is that the lead generation business is really only in its infancy and starting to grow, rising 15 percent from $1.32 billion in 2010 to $1.52 billion in 2011. As with most young industries, the lead gen space is still extremely fragmented and offers many opportunities for companies with funding (Breakwater Investment Management funded WebXu $3 million with half already paid back), strong management and an aggressive acquisition business model to capitalize in the future.

Hill has shown his prowess to quickly build a company in a very short period of time and he seems to be employing similar strategies again with WebXu. If they can follow in the steps of Internet Brands is something that remains to be seen, but history sure seems to be on WebXu’s side. Proper due diligence is, as always, encouraged.

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