RE: Peri vs Tremor14 Feb 2023 22:04
jonhas.....Perhaps it’s relevant to ask what is Bing’s contribution is to the total revenue of the Microsoft operations. This extract says it’s about $11 billion, which, in itself, is a sizable sum, but in reality it works out at just 5.8% of Microsoft’s total turnover.
Extract, In 2021, Microsoft made over $198 billion in revenues, of which over $67 billion came from Server products and cloud services, and $44.8 billion came from Office products and cloud services. Windows generated $24.7 billion, Gaming generated over $16 billion, LinkedIn over $13 billion, and search advertising (through Bing) over $11.5 billion.
Over time, one would expect Microsoft’s total operational revenues to grow and so when set against this, Bing’s contribution to Microsoft from ChatGPT would need to grow significantly in order to impact that 5.8% contribution. That may take a number of years.
The impact from that same growth on Perion however, as a % of Perion’s revenue could become quite significant and thus there is the potential here, as the years progress, that Perion would become more and more reliant on Microsoft continuing to renew the existing contracts and that may weigh heavy on investors if Perion doesn't take steps to mitigate for this.
You might argue that the managed side of Perion’s business will also grow and to some extent offset this, but looking at the practicalities here, there are issues for me, not least that the ‘managed’ business is labour intensive and more expensive than self-serve and not easy to grow it. Leaving aside the pros and con of both, managed programmatic platforms require dedicated teams for each and every one of their clients ie an Accounts Manager, a Project Manager, a Campaign Manager and digital analysts that constantly decipher and report on the data they’ve collect throughout each and every ad campaign. Whereas this is a good earner and a well-established niche earner for Perion, it looks to me that if Perion intend to scale up from here then, I can’t see scaling up happening from the managed side of the business. To do this, Perion needs a get itself a well matured self-service platform and also find a way to mitigate the worry for investors in regard to its growing reliance on Microsoft. To this end, but not exclusively, I could see great value in a merge with Tremor.
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