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It isn’t the case that the bigger you are the more pricing power you have... that’s complete nonsense.
If your product offering is strong, with evidence to support its effectiveness, the value you are adding to the client is high and the cost is an appropriate proportion to the value added then it is likely that a deal can be done.
Then the client needs to decide whether the proposition is actually the most competitive one on offer.
Nowhere into this process does the client go... hmm this company is small so I’m only going to pay them a pittance...
They may change their arm and try to get better value but that is where you require a strong sales force whom know how to conduct themselves in a negotiation.
Deep joy, agree with your cost of sales analysis.
With bidstack at the moment the power is with the advertisers/game developers.
In theory as bidstack grow in stature and the ad category gets more pronounced then bidstack will be able to negotiate contracts that are more in their favour.
Like you said economies of scale, the bigger you are the more pricing power you have.
intrepid - superb assessment hats off to you. You're right thou i was wasting my time but so nice to see somone on here who at least knows what they are talking about. All the best to you and silent others who dont crow for crowing sake and post abolute rot. regards DJ
Hi Deepjoy,
I feel you are wasting your time, but thank you for trying.
I pointed out the same back in Sept last yr - that the 'fixed costs' are clearly the amount BIDS has to pay over the the gaming co's as their share of the overall revenue takes. From memory, the amount left for BIDS was 24% exactly, from H1 2019 accounts. That struck me as meaning 20% + VAT, but I was not confident that VAT would appear in that section of the accounts. But either way, the figure was exactly 24%. That means that BIDS gets as actual 'money we can use for whatever purpose we like' either 20% or 24% (depending on the VAT issue).
They then need to pay all their costs out of that 20%-24%.
Lets assume they are getting 24% net, not 20%.
Currently, that means they would need to 'book' revenues (assuming JD uses the 'max up the reveunes' approach) of c £25m to show actual after 'cost of sales' revs of c. £6m, which would be enough to cover known costs of £500,000 pcm (again, a figure I accurately predicted back in autumn of 2019).
This is clearly possible in the future, once advertisers are A) confident that the new category actually 'exists' and is a bonefide way to spend their marketing/advertising budgets and B) they have income coming in to spend.
Neither of those currently can be said to be the case. There is still no announcement from any bonefide advertising category body that 'in game advertising' is now a newly recognised category. I am hoping someone on this BB can prove me wrong on this very important point, but, as it stands, I've not seen any announcement.
There is clearly a massive global squeeze on company incomes across the board. A very limited number of companies might still have deep enough pockets to advertise their way through the next 2-3 months. But they will have a very strong negotiating position and will get great deals from every channel/category. Their advertising budgets will be hotly pursued by everyone, including BIDS (or Anzu, ITV, The Sunday Times, virgin Radio etc). Most firms simply won't be able to book advertising or will massively scale back theirs, because they have much more pressing needs for the cash they currently have in their bank accounts.
so the short term is still all about cash-in-hand - and how long before BIDS needs to raise more.
a few more "you say it all, when you say nothing at all" Ronan Keating style RNSs will help the cause.
Come on 12p!!!!
Intrepid.
Yep...see you in the new financial year. Let's hope it's a good start for bidstack,coz every other aspect of it is going to be absolutely diabolical.
“Thats the last from me all, take care.”
Thank **** for that
I promise this is my final point to help people decide how the company may reports revenues.
Cost of sales means in the strictest sense -'the expense incurred for bought-in raw materials or components' (FT guide)
now if a company produces on a larger scale one can assume that economies of scale would mean that cost of sales would fall in proportion to increased sales.
So, if a companies costs of sales does not decrease as a proportion of revenue either their prodcution model is ineffecient or it is fixed. I asked myself what does bidstack actually produce that is not covered by fixed I.T assets and staff which is deducted from gross profit not revenues. Then i asked myself this, is the actual cost of sales acually a revenue sharing model and hence where the figure has been static in the last two sets of accounts? There is no abolsute clarity on the use of this vaugue term but we can assume it is a fixed cost for now and cant be reassessed until the accounts have to be published at year end (December at latest). Anyone think of any other reason it would cost 70% or revenue to place ads...
Thats my final point ...but the one hard lesson i leanrt so far in investing is that detail matters and if anyone wants to ask Mr Draper that question i'd be very interested to know the answer. Thats the last from me all, take care.