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MIMVI, INC. The Google of Mobile App Search

MIMVI, INC. The Google of Mobile App Search Rob Goldman November 7, 2011 MIMVI, INC. (OTC:BB MIMV - $0.29) Price Target: $1.50 Rating: Speculative Buy COMPANY SNAPSHOT Headquartered
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MIMVI, INC. The Google of Mobile App Search Rob Goldman November 7, 2011 MIMVI, INC. (OTC:BB MIMV - $0.29) Price Target: $1.50 Rating: Speculative Buy COMPANY SNAPSHOT Headquartered in Sunnyvale, California, Mimvi, Inc. is a pureplay Mobile Apps and Mobile Content search and recommendation technology company. Using its proprietary search and intelligent recommendation algorithms, Mimvi s powerful search engine provides an industry-leading 6 million searchable results for Mobile Apps and Web Apps and has indexed more than 1.2 million Mobile Apps. Mimvi s search engine is used across multiple mobile devices and platforms, including: Apple's iphone, RIM s BlackBerry, Google s Android, and Web Apps. Services for ipad, Windows Mobile platform and Samsung are in the Company s pipeline. KEY STATISTICS Price as of 11/7/11 $ Wk High Low $ $0.06 Est. FD Shares Out. 41.6M Market Capitalization $12.1M 3 Mo Avg Vol 3,000 Exchange COMPANY INFORMATION Mimvi, Inc. 440 N. Wolfe Street Sunnyvale CA Investor Relations: Wall Street Resources Sean Marconi OTC:QB INVESTMENT HIGHLIGHTS Mimvi, Inc. has quietly positioned itself as the Google of Mobile App search engines. The Company has successfully leveraged its patent-pending, proprietary technology to build an industry-leading 6 million Mobile Apps and Web Apps search results compilation, with more than 1.2 million indexed Mobile Apps. Mimvi is the ONLY pure-play, publicly-traded Mobile App search entity and the only firm that offers Google-like search results with Amazon-like recommendations. Plus, Mimvi is one of only a few search engines that can be used across multiple mobile devices and platforms. The Mobile App market is booming. Berg Insight projects that number of Mobile App downloads will approach 100 billion in 2015 and research suggests that Mobile App download revenue will exceed $100B by Mimvi s estimated 2-year technology lead over the competition should result in multiple revenue streams. We estimate that Mimvi will generate $1.5M - $3M in sales in 2012, and $9M - $12M in 2013, with net of $2M, on the lowend. Revenue streams include PPC, sponsored search, paid search, and in-app revenue sharing. Management has a history of success in search engine development and operation. The founder s previous search firm generated 250 million searches and 50 million monthly unique visitors. Mimvi has just signed an LOI with First Wall Street Capital Corp. to assist it in raising $5M in financing. Buying Mimvi stock in 2011 is akin to buying into a privately held Google in We liken this rare situation to buying Web search engine stocks in the mid-1990 s that were later acquired for huge premiums and deem that Mimvi will emerge as an M&A target in the next months, as the business model is executed. In the short term, the stock is set to soar as major traffic comes on line and new products and financing are introduced before year-end. Our $1.50 price target is based upon 30x FY13 our low-end net income estimate. We rate Mimvi Speculative Buy. Copyright Goldman Small Cap Research, 2011 Page 1 of 9 MIMVI, INC. (OTC:BB - MIMV) MIMVI OVERVIEW Mimvi, Inc. is a pure-play Mobile Apps and Mobile Content search and recommendation technology company. With a powerful search engine that provides searchers with an industry-leading 6 million Mobile Apps and Web Apps along with more than 1.2 million indexed Mobile Apps, Mimvi provides the most comprehensive Mobile App search results. Driven by the current and expected continued leap in Mobile App creation and utilization, an effective, easy-to-use search engine for the Mobile App space is an increasingly critical function. The genesis of the Company s proprietary search and intelligent recommendation algorithms stems from founder Kasian Franks previous search firm, Seeqpod, Inc., which generated 250 million searches and 50 million monthly unique visitors. Since the founding of Mimvi in 2010, the Company has leveraged this patent-pending technology to build the most userfriendly, familiar, and comprehensive Mobile App search engine available in the market. We believe that Mimvi actually has at least a two-year head start versus its pure-play competitors due to the Founder s success at his predecessor firm and the transformative offerings soon to be released. Plus, management is working with the noted firm First Wall Street Capital to assist in raising as much as $5M, to fund its growth. Familiarity + Focus + Breadth + Depth = Win Familiarity: Mimvi s management realized that there would be several keys to success. With respect to the front-end, where users enter information to search for Mobile Apps, management built an interface that combines the look and feel of Google-like search results with Amazon-like recommendations. Mimvi is the only firm that offers these critical and familiar, winning features. Focus: Given that users/searchers tend to search for apps in specific industry verticals, or buckets, the Company has designed its specialized search and recommendations engines to cater to these segments while maintaining its ubiquitous brand, such as Mimvi Health and Mimvi Games. In addition, Mimvi has launched sites designed specifically for key devices and platforms in the space, in order to maximize traffic and revenue opportunities. Breadth: Mimvi has engaged in an agnostic strategy relative to mobile devices and platforms. As a result, Mimvi s search engine is used across multiple mobile devices and platforms, including: Apple's iphone, Research in Motion s BlackBerry, Google s Android, and Web Apps. Services for ipad, the Windows Mobile platform and Samsung devices are in the Company s pipeline. We believe that within the next few months, Mimvi s engine will be available for use on more devices and platforms than any other search engine. Depth: As noted above, Mimvi provides the most comprehensive Mobile App search results available in the market. With its familiar front-end, breadth of device and platform availability, along with the most comprehensive search and index results in the space, Mimvi is emerging as the Google of Mobile App search. Image I. Mimvi, Inc. Homepage Copyright Goldman Small Cap Research, 2011 Page 2 of 9 New Mimvi Service Offerings With much of the indexing work behind it, management is poised to take the Company to the next level. The Company s R&D efforts are focused on the addition of device and platform availability, along with new, revenue-generating service offerings, in addition to the traditional sponsored and paid search, and in-app revenue sharing. The latest, pioneering new service, MimviLink, is a unique technology that acts as a bridge between Mobile Apps and Web content, by matching a publisher s Mobile Apps to their Web content. MimviLink enables any company or individual with a mobile app to gain greater exposure for their mobile app by having it matched and displayed next to relevant web content. By signing up for to use MimviLink, publishers can monetize their content as each time a user clicks on the relevant Mobile App advertisement. Thus, the content publisher generates revenue (along with Mimvi) and the Mobile App owner also gains greater exposure and consumer participation. Mobile App developers and owners can bid for relevant placement within the MimviLink network. The most relevant bidders can have their mobile app advertisements displayed next to the most relevant web or mobile content. It is expected that this service will exit beta testing and be available by year-end In our view, Mimvi will have at least a one-year advantage over its competitors with respect to this potentially lucrative search monetization offering. Another ground-breaking initiative, known internally as Project Jupiter is expected to be launched in the coming months. As early adopters utilize this innovative feature, Project Jupiter could transform not just the Mobile App search industry but consumer behavior and the way we initiate and execute commerce. Initially, this mobile app discovery service is for use across ios and Android platforms which will enable those users with a smartphone to discover relevant mobile apps, based on what they see and where they are located. By simply pointing a smartphone s camera to any physical object, Mimvi s proprietary algorithms will process what it sees, and in conjunction with the user s location, will display a series of meaningful mobile app recommendations. Mimvi CEO Kasian Franks described the service: The algorithms leverage environmental sensors inherent in smart devices. A smartphone user standing on a street corner anywhere in the world can point his or her phone at a particular location, for instance at a shopping mall, and up will pop mobile apps related to the stores in the shopping mall. With these new service offerings, Mimvi continues to build partnerships and its customer base for these new revenue streams as well as traditional search sources, including sponsored search, paid search, and in-app revenue sharing, etc.. Separately, management has recently launched a joint venture called Mimvi China, which will establish development and strategic alliances in China for its key offerings. This JV could be a bonus for Mimvi as the number of new Internet users in China for the past 3 years has exceeded the entire U.S. total installed base. For example, there are 900 million mobile users in China alone. The market is huge and there may be opportunities for co-opetition with large and small players including Baidu and Tencent. Image II. Sample Mimvi Search Results (Source: Mimvi, Inc.) Copyright Goldman Small Cap Research, 2011 Page 3 of 9 MIMVI, INC. (OTC:BB - MIMV) THE MOBILE APPS MARKET A Mobile App is an Internet application that runs on smartphones and other mobile devices. Mobile Apps connect users to Internet services normally accessed on the Web via desktop or laptop computers, or help users access the Internet on their mobiles. Users can download apps such as games or other functions that are pre-loaded on their devices or purchase these apps. According to Flurry Analytics, Mobile App usage is dominated by games and social networking, which is not much of a surprise. What is a surprise is that according to Flurry, those with smartphones now spend more time using Mobile Apps than on the web (both desktop and mobile.) The Mobile App market is driving the Mobile search market, and the Mobile App market is booming. For example, Berg Insight projects that number of Mobile App downloads will approach 100 billion in 2015 and industry research suggests that Mobile App download revenue will exceed $100B by The belief in the industry is that Mobile Apps will ultimately replace websites. Those firms that were major players in the website creation world are in the process of being marginalized by the Mobile App builders. Considering the rapid rise in their creation, it is not surprising. The Story The availability of the mobile Internet via smartphones, and the apps associated with it, in the U.S. and abroad has prompted huge growth in just a few short years. Flurry Analytics estimates that 1 million new smartphones are activated each day, which illustrate not the just the huge adoption rates but the speed of this adoption. Not only are more smartphones being purchased at a rate faster than the PC market, but in 2012 it is expected they will surpass the number of CDs procured. Apple has released figures that suggest that on a cumulative basis, Mobile App downloads for the Apple operating system ios in the Apple App Store reached the 10 billion mark six years before it reached 10 billion downloads for Apple itunes. It is estimated that there are currently 5.6 billion mobile users worldwide, and fewer than 900 million smartphone users. Thus, the penetration has quite a bit to go, which is a positive, considering the rate of Mobile App creation and download. Given the speed of smartphone and other mobile device adoption, such as tablets, the creation of a variety of Mobile Apps for multiple devices and platforms will continue to soar. The Players Apple helped launch this space with the introduction of the iphone, and later the ipad. Given its head-start, there are more applications available for download (an estimated 500,000+) on the ios (Apple) platform than any other. Google s Android operating system has not only caught up with Apple, but as of 2Q11, Android has passed ios as the most popular software platform for Mobile App downloads, accounting for 44% of all downloads, according to ABI Research. This surge has been boosted in part by sales of Samsung smartphone sales, which come equipped with the Android operating system. Research in Motion s Blackberry is playing catch-up, as are Nokia, LG, and Ericsson, and for the near term, it is expected they will remain also-rans, compared to Apple and Samsung. MOBILE APPS SEARCH Interestingly, Mimvi competes with major firms Apple, Google, and Bing, along with new, early-stage entrants Chomp, Quixey, Appspot, and uquery. Apple and Google each have their own App stores but have serious shortcomings in ease-of-use and functionality for users. If users know exactly what they are seeking, the process is somewhat seamless, but if users are uncertain, the process is more cumbersome. While Google and Bing are two of the dominant players in Web search and have a presence in Mobile search, these entities have not tailored their mobile search engines for Mobile search, which has left the user experience lacking. It is not expected that any search firms will spend resources on building the capability due to competing platforms and their foothold in the traditional Web market. Thus, they, or platform providers, could be buyers of Mobile App search firms to gain this functionality. Copyright Goldman Small Cap Research, 2011 Page 4 of 9 We liken the current environment to the mid-1990 s when there were many search firms, most of which were acquired for large premiums for their expertise, brand, and functionality. The current environment is actually a major advantage for Mimvi and other pure-play Mobile search firms. Due to the intense competition between the two, neither Apple nor Google will index apps that run on rival platforms, and don t even index all of the apps on their own platforms. Hence, the importance of having a search engine that can be used across multiple devices and platforms, which is a major feature of Mimvi, Quixey, and Chomp. As a result, those utilizing search prefer to use an independent (or agnostic), comprehensive search tool to find relevant information, especially if one has multiple devices and/or operating systems. We should note that while Chomp, Quixey and uquery are also pure-play Mobile search firms, they are much further behind on the development side and are essentially at the VC-stage of development and operations, versus Mimvi, which has a longer operating history (leading back to Franks predecessor firm), and a history as a publicly traded entity. Both competing firms have done a great job on the PR side and have made some inroads on the strategic alliance/integration front, which will help them in their quest to play catch-up in indexing and development, to Mimvi. THE REVENUE MODEL Mimvi is in an enviable position. The Company is a true leader in a burgeoning industry where, under other circumstances, new revenue models would need creation followed by choppy execution. In this case, Mimvi has the opportunity to naturally utilize the same tried-and-true models of Web search into the world of Mobile App search, yet do so at the earliest of stages of the Mobile App market, which is enjoying one of history s fastest technology and service adoption. In general, we believe that revenue generation will occur in stages and in waves. Stage one will begin in the first half of Interestingly, Mimvi, much like Google, will rely in large part on the pay-per-click (PPC) and click-thru (CTR) metrics for revenue generation, along with sponsored advertising. Since one of the key drivers is smartphone (handset) sales, we may see somewhat lumpy or staggered revenue as consumers continue to migrate to the newer phones, as prices decline and functionality and feature-set increase. Indirect and direct marketing of the Mimvi brand will also play a big role in the early part of However, as we reach mid-year, we believe that transformative events for Mimvi will occur, in the form of enterprise relationships driving traffic, meaningful revenue share on Project Jupiter along with PPC with MimviLink. Hardware and platform integration will also play key roles by mid-year, as will the fruits of its full-court press and visibility/outreach blitz. Therefore, if we look at a typical, current search engine revenue model, it is clear that there are hundreds of billions of searches monthly, with standard click-thru rates, and PPC. Thus, it is easy to extrapolate how on sheer volume, revenue will be substantial as Mimvi becomes the Google of Mobile App search. Moreover, the Company s new initiatives truly enhance Mimvi s corporate and business relationships as a partner, not just a director of traffic/business. This unique role raises the overall value of the Mimvi model, and generates what should be a large, steady diet in the form of revenue share of transactions or in-app advertising ( Appvertising. ) Since we are in the early innings of this incredibly fast-growing industry, the timing and impact of these new services is hard to predict. One good example of the high-growth sector would be social games and Mobile App developer Glu Mobile (NASDAQ GLUU.) GLU announced 3Q11 results on November 3, 2011, and sales results were staggering. Smartphone revenue and freemium revenue (similar to in-app advertising or micro transactions) grew by over 300%, yearover-year. This is the type of growth that should be expected for Mimvi. Copyright Goldman Small Cap Research, 2011 Page 5 of 9 MIMVI, INC. (OTC:BB - MIMV) In any event, by reaching users and app store owners and developers directly and indirectly through a branding and marketing campaign, along with strategic relationships with enterprises and developers, we believe that PPC and sponsored search will dominate revenue for the first 24 months. The revenue sharing stream should begin to generate meaningful results in 2Q/3Q12 and could be even greater than anticipated, with huge years for the Company, and our conservative forecasts could be blown away. COMPETITIVE ADVANTAGES Mimvi has a number of advantages over the present competition. In addition, management has built an effective, powerful technology platform that should serve as a barrier to growth for smaller firms and a barrier to entry for new companies. Most comprehensive search results and apps indexed Google-like features and Amazon-like recommendations Management has a proven track record in search (250M searches) Scalability to ultimately generate billions in searches Capabilities across multiple devices and platforms Platform for specific devices and operating systems Buckets for key verticals Services to-be-launched that could revolutionize traditional search and application/commerce execution Presence in China via joint venture LOI for $5M fund-raise A considerably undervalued company ripe for a takeover RISK FACTORS In our view, Mimvi s biggest risk is generating meaningful revenue quickly, as the size and speed of the Mobile App market is evolving at an incredible clip. Execution risks, including engaging in a campaign to make Mimvi a household name for Mobile App search may take time to execute as market education can be slow. Such delays could push meaningful revenue generation out to a later date, or in a smaller initial ramp, thus impacting sales goals. Lack of access to necessary capital, while a possible risk, is something we view as a negligible factor at this time, given the current LOI to raise up to $5 million. Slower sales pe
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