Big Un Limited: Low-Cost Mobile Video Producer on ASX
BIG’s principal asset is intellectual property surrounding the Big Review TV broadcast network
Big Un Limited (ASX:BIG) is an Australian media and technology company focussed on mobile content and enterprise marketing.
BIG’s principal asset is intellectual property surrounding the Big Review TV broadcast network, which offers low cost video production and distribution tailored for small to medium enterprises (“SME”).
Since its formation in 2013, BIG has established operations in Australia, New Zealand, Singapore, Hong Kong, USA (New York & San Francisco) & UK (London). The Company listed on the Australian Securities Exchange (“ASX”) in December 2014 via a reverse merger with Republic Gold Ltd. As at October 2015, issued capital was $12.9million, or $0.165/share.
Asset Overview – Big Review TV
BIG owns and operates Big Review TV - a video driven, marketing and peer review platform. Big Review TV is tailored for SME’s and their customers, incorporating video listings, social media, innovative mobile phone video review applications, and TV review shows.
Through its video capabilities, Big Review TV provides an extra dimension of engagement relative to existing popular peer review platforms such as Trip Advisor Inc (TRIP.US) and Yelp Inc (YELP.US).
For SME vendors, Big Review TV provides affordable access to professional digital video production, editorial and marketing resources.
For users, the Big Review TV platform offers a valuable mobile device orientated information portal focused on multiple segments, including Food and Beverage, Lifestyle or Shopping.
With users encouraged to submit their own reviews on individual vendors, the Big Review TV platform is designed to host a combination of vendor sponsored and user generated video content.
Industry Background: Mobile Marketing Spend up 100 Fold in Past Decade
Marketing to mobile devices is the fastest growing form of advertising. Over the past decade the value of mobile marketing expenditure has increased 100-fold. According to Bloomberg Intelligence, the advertising medium was expected to attract US$50billion during 2015, representing 50 per cent year on year growth.
Spending destinations are currently concentrated, with Google Inc and Facebook Inc estimated to attract three quarters of all mobile marketing activity. However as mobile’s share of global advertising represents under ten per cent of the market, there remains considerable scope for further growth.
Magna Global estimates the USA to account for one third of mobile marketing spend with three per cent of expenditures occurring in Australia.
A growing proportion of domestic mobile marketing spend may originate from Australia’s two million SME’s. Representing 99.7 per cent of all businesses, domestic SME’s are characterised by underutilisation of their digital assets.
According to Sensis, 65 per cent of Australian SME’s have a website. However less than 20 per cent advertise their business on other websites or have formulated a digital strategy.
Development Strategy: Reach 25,000 SMEs by FY16
Core technology underlying the Big Review TV platform is operational and its associated mobile application has been developed and public launch is pending. BIG’s commercial strategy is presently focused on building the upstream side of the business, which involves attracting vendors to the platform.
The vendor procurement phase is scheduled to generate cash flow. BIG generates revenue by providing a contemporary video to the SME. Videos are then licenced under an annuity membership model for the SME to use on their own distribution channels. BIG has created a video centric ecosystem for the SME including a mobile app for filming SME and consumer reviews which can be shared within the BIG ecosystem and on social media.
Relative low production costs versus conventional media and advertising groups is the primary attraction for vendors to partner with BIG. Vendor procurement commenced in Australia in January 2015 and as of October, the Company reported over 1,200 enterprise subscribers as well as an additional ~1,000 merchants as part of the freemium model.
As of October 2015, the Company had a sales pipeline exceeding 12,000 SME’s for which it had showcased video production capabilities. To accelerate conversion of the pipeline into enterprise subscribers, BIG has partnered with CDM Direct Communication Services (“CDM”).
The CDM partnership is scheduled to expand BIG’s sales team from 15 to 100 telesales personnel and provide a service capability from Auckland, New Zealand.
The expanded service capability requires no additional capital outlay from BIG, and is calibrated to suit the Company’s recently established global operations in New Zealand, Singapore, Hong Kong, the UK and USA.
By the end of FY16, BIG aims to have increased its sales pipeline to 25,000 SME’s around the world. By building critical mass for its video production services, the Company expects to:
- Expand its enterprise service offering to other related field’s such as IT or social media management, and
- Leverage its SME database by launching the consumer Big Review TV app, currently under development
In Australia, expanded service capability would enable the Company to capture the $9,700 per annum SME’s spend on IT.
On a global scale, launch of the Big Review TV app would enable the Company to position itself alongside the likes of other peer review platforms such as Trip Advisor Inc (TRIP.US) and Yelp Inc (YELP.US).
Economics: Potential to Turn Memberships into Long-Term Recurring Revenue Streams
BIG has utilised the latest technologies and a lean overhead structure to develop an affordable video production service for SME’s. The Company estimates its services require an outlay in the order of 25 per cent of what a traditional media and advertising group would charge.
BIG delivers the video production service in return for a deferred application fee plus a weekly membership fee. The application fee covers BIG’s cost of production and customer acquisition whilst the membership fee is designed to cover hosting, promotion and periodic updating of the content on its broadcast platform.
The application fee is currently $399, whilst membership costs range from $7.50/week to $75/week dependent upon the membership level purchased and scale of distribution.
The deferred nature of the application fee is designed to procure vendor interest without the need for a financial commitment.
Whilst the strategy requires BIG to fund production expenses that may not translate into revenue, discussions with management suggest that uptake of its services once filming has been showcased stands in the order of 45 per cent .
Earnings from the current vendor procurement phase are therefore a product of the quantity of SME’s which adopt BIG’s service and their average membership tier.
Across Australia, Singapore, the UK and USA, Independent Research Group – Telsyte estimates the market opportunity for BIG’s video services stands in the order of $1.1billion
To date the Company has showcased its services to ~12,000 SME’s. Whilst personnel constraints have to date limited its capacity to convert this sales pipeline into memberships, the CDM partnership is positioned to accelerate uptake.
Discussions with management suggest the platinum tier membership (~$50/wk) has been the most popular package to date.
BIG has potential to build these memberships into long term recurrent income streams. Its capacity to attract a substantial consumer audience for its mobile app, which is currently under development, could positively impact retention rates.
BIG currently generates revenue from the provision of video production services and membership fees. However with a limited operating history, current revenue levels have not eliminated BIG’s dependence on external capital.
Financial Performance: FY15 Revenue Expanded 323%
During FY15, the Company generated revenue of $0.9million, and a net loss of $4.7million. Revenue grew 323 per cent versus the previous year. Excluding the one off goodwill impairment relating to the reverse listing transaction, BIG’s underlying net loss was $3.3m.
The loss is attributed to one off legal and advisory costs in relation to the reverse listing transaction, the higher corporate costs required by a public listed entity and the increased cost of operations in reflection of the higher volume of sale and production activity.
To date, the Company has funded these initiatives via equity. Its most recent financing activity was a $4million placement at $0.20/share. Completed in July 2015, the placement will be used to accelerate growth to meet increased demand from commercial partnership with CDM, facilitate marketing and promotional growth of the business and working capital.
Following the placement, we estimate BIG’s cash balance to be in the order of $3million whilst issued capital currently stands at $12.9million or $0.156/share.
Big Un Limited offers speculative exposure to demand for video based mobile content. Its established revenue profile….
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Author: Tim Morris
Mar 03, 2016
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.