Monday, February 22, 2016

Fund Manager Expects a Big 2016 for IDI

In his latest quarterly investor letter published today, Threshold Capital's Peter Delgado II discusses his latest thoughts on IDI (ticker: IDI):
IDI Inc. (ticker: IDI) continues to be clients’ largest position. 
To review, over the course of fiscal 2015, IDI has transformed itself into an emerging leader in the data fusion industry. 
Data fusion involves integrating and statistically matching metrics from disparate data sets based on common variables, the underlying principle being that the common characteristics can reliably predict patterns and identify relationships. 
IDI delivers otherwise unattainable insight into the ever expanding universe of consumer and business data through its proprietary linking technology, advanced systems architecture, and massive data repository. 
New executives and the Board of Directors have initially targeted the risk management and marketing and data analytics sectors, which it defines as having a combined market value estimated at over $13 billion.
IDI addresses the increasing need for actionable intelligence to support the risk management industry for due diligence, risk assessment, fraud detection and prevention, authentication, verification and more. 
Additionally, IDI’s cross functional core systems and processes are designed to deliver products and solutions to the marketing industry, and to enable the public and private sectors to layer IDI’s solutions over their own unique data sets. 
In December 2015, IDI announced its strategic acquisition of New York based Fluent.
Fluent is a leader in people-based digital marketing and customer acquisition, serving over 500 leading consumer brands and direct marketers. 
Fluent’s proprietary audience data and ad-serving technology enables marketers to acquire their best customers, with precision, at a massive scale. Leveraging content, first-party data, and real-time survey interaction with consumers, Fluent has helped marketers acquire millions of new customers since its inception. 
Fluent’s growth is supported by the increased demand in the marketplace for people-based marketing solutions, as well as the overall continued growth in digital advertising, and in particular, performance-based advertising models. 
People-based marketing is a method of deterministically targeting consumers across various marketing channels and devices, as opposed to probabilistic, cookie-based targeting that has proven less effective on mobile devices, where support for cookies is infrequent or non-existent. 
Fluent is able to facilitate people-based marketing because it specializes in the opt-in acquisition of personally identifiable information on behalf of its clients, such as email addresses, which can be used for traditional email marketing but also increasingly for the precise targeting of ads to individuals across mobile, social, search, video, and display advertising via emerging advertising solutions such as Facebook’s “Custom Audiences,” Google’s “Customer Match,” and similar solutions offered by data management providers (DMPs) such as LiveRamp, which enable email-match based targeting of advertisements. 
In addition, Fluent employs a “performance- based” pricing model for online customer acquisition, rather than a cost-per-thousand impressions (“CPM”) model. 
This means that Fluent’s clients only pay when consumers take meaningful action(s) in response to the marketing communications they are presented with, such as joining a loyalty club, signing up for an email marketing list, installing a mobile application, paying for a subscription, or any number of other ways of actively responding to an ad (as opposed to simply viewing an ad). 
Fluent’s technology platform and systems enable it to collect four types of user data:
  1. Meta-data: information gleaned by the system such as the user’s IP address, browser type, operating system, and, for mobile connected devices, the device model, device ID, browser, and mobile carrier; 
  2. Demographic data: self- reported user information such as name, address, gender, email address and telephone number;
  3. Ethnographic data: user responses to dynamically curated and served survey questions; and
  4. Behavioral data: purchase history, interests, likes and dislikes, preferences and frequencies.
Fluent also uses third-party services such as Experian Data Quality and Neustar in order to verify and supplement some of the data collected. 
This data is stored and analyzed, and can be further enhanced in real-time when consumers respond to dynamically populated survey questions, enabling precise targeting and profiling for ad serving and customer acquisition purposes. 
By using the system and the insights gained, Fluent can develop deep and relevant insights into each individual consumer. 
The platform and user volume has enabled Fluent to accumulate a massive data warehouse, which contains first party data on over 100 million consumers, 1.2 billion survey responses and growing by 5.5 million responses a day, and more than 450,000 unique user registrations per day. 
Fluent drove more than 100% year over year revenue growth from 2014 to 2015 and added 172 new advertisers to its client roster, bringing its total client list to over 500 top brands and direct marketers whose names include Pepsi,, Western Union, Shoe Carnival, and Smart Balance.  
The Fluent business now combined with IDI’s data fusion products and capabilities will catapult the Company to the attention of the investment community. 
IDI’s largest shareholder continues to be Miami based billionaire Dr. Philip Frost who has recently joined the company’s Board of Directors as Vice Chairman
Company insiders, including Chairman Michael Brauser, Vice Chairman Dr. Philip Frost, and Director Ryan Schulke (from Fluent) continue to purchase stock in the open market with their own capital; since the beginning of 2016 these purchases have totaled over 130,000 shares. 
Threshold Capital believes 2016 will be a tremendous year of growth for IDI Inc. and estimates the Company will generate revenues in a range of $170 to $180 million and earn $0.35 per share in profits.
NOTE: The rest of Threshold Capital's investor letter is HERE.

NOTE: More IDI analysis HERE.


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