“Short horses” would have been Warren Buffett’s advice for those wanting to invest in the early stages of the motor industry, because it’s a good bit easier spotting those who are going to suffer in the face of changing technology than it is to pick the new winners. Very few early car makers were successful, and the same was true of the pioneers of aviation.
And in the past twenty years, the number of new-tech startups that have lost money for investors is pretty staggering.
Video advertising
Video technologist Blinkx (LSE: BLNX) was an early star with its technology for getting targeted advertising into video content, and the success of targeted ads on static web pages shows what potential there is. Blinkx’s early mover advantage was looking good at one stage, but the firm’s woeful failure to make the move to mobile computing in a timely manner could well have killed its chances completely.
That suggestion is supported by an interim profit warning this week, when Blinkx shocked us with the news that it expects a fall in revenue from $106m in the first half of last year to $85-95m this time round, leading to an adjusted EBITDA loss of $5-8m. That’s significantly behind analysts’ expectations, with forecasts sure to be downgraded now, and led to a 27% share price fall over the next two days, to 19.25p.
Although they’re back up to 21.5p as I write, Blinkx shares have lost 43% over the past 12 months — and they’re down a whopping 90% since their peak in November 2013. Is there a way back for Blinkx now? I wouldn’t put any of my own money on it.
Mobile cash
Monitise (LSE: MONI) is another that made a promising start, into the world of mobile electronic payments — an early mover, it even had Visa Inc on board as a partner and shareholder.
But it’s a business with relatively low barriers to entry, in which the big players have a significant size advantage — Apple Pay is making inroads, and Visa has moved on to develop its own system (and is not expected to renew its deal with Monitise). And rivals Paypoint and Optimal Payments seem to be going from strength to strength. Monitise has not made a profit yet and is not forecast to do so for at least another couple of years, and there are some amongst us who fear it never will.
The share price has followed Visa’s mooted departure, with a fall of 88% over the past 12 months and a shocking 94% drop from February 2014’s peak, to today’s 6.1p.
Monitise’s chance lay in making sufficient inroads in the very early days, and possibly being snapped up by a big operator for a nice premium. I reckon it’s too late for that now, just as it’s too late for Blinkx to capture the market share its founders once dreamed of.
