Escalating online Google advertising cost hits BuyMyplace selling platform profit results
The high cost of online Google advertising has been highlighted by auditors Grant Thornton amid the latest financial report on the ASX-listed, BuyMyplace (BMP).
The DIY selling platform has reported a $2.8 million loss in its recent half-year results, noting currently only three percent of listings are DIY in the Australian market, "an exceptionally low number compared to international markets."
It is still aiming for breakeven which is expected to be achieved at 350 listings per month, with an average order value currently sitting within $800 to $900.
BMP spent $870,000 on advertising and marketing, some 68 per cent up on the prior period, and more than half of its $1.5 million revenue.
In its independent auditors' review, Grant Thornton noted the company's latest net loss, up from $1.7 million in the prior period, indicated that "a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern".
The newly appointed BMP CEO Colin Keating told The Australian Financial Review it was "not unusual" for micro cap companies at BMP's stage of growth to have concerns pointed out by its auditors.
But he said BMP remained highly viable, and that since taking over as CEO in November last year, a significant review had seen BMP address the increased cost of Google advertising.
Keating took over from Paul Heath who led the company during its IPO in early 2016 which envisaged the possibility of 8000 annual property listings, $10 million annual revenue and $3 million EBITDA by 2019.
The recent shareholder update advised BMP’s focus on promoting the brand through marketing had "led to a leading position in the market, ultimately resulting in an increase of web traffic and number of listings."
BMP enjoys $1 million working capital facility provided by KM Custodians which owns around 10 percent of the company's shares.
Currently the facility is drawn to $500,000.
It indicated net cash burn for the quarter of $880,000 was slightly higher than the previous quarter.
"The increased burn was directly associated with technology initiatives that have already delivered efficiencies in the operations platform.
"These efficiencies were reflected in a reduction of inbound tickets from existing DIY vendors thus providing a more effective customer experience in conjunction with establishing operating margin levers and scalability."
BMP recently undertook an extensive search of potential digital marketing agencies to replace the incumbent provider.
"This search highlighted several areas of opportunity in terms of optimizing the marketing spend and driving enhanced growth from a new digital marketing strategy," shareholders were advised.
The new digital marketing agency partner commenced with BMP earlier this month facing the challenge of the slow down in residential property listings across the Australian real estate sector, along with increased competition from other disruptors.
The former CEO Peter Butterss recently tendered his resignation as a director of the company with lawyer, Stephen Moulton joining the BMP board.
Property Observer understands BMP is currently in a number of discussions with potential merger partners and acquisition targets.
Discussions have taken place with five targets which could see to $16 million potential additional revenue in year one.
The shares are currently trading at 14 cents having hit a 2016 peak of 50 cents.
