Perion Network's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Perion Network Ltd. ( PERI)

Q4 2011 Earnings Conference Call

March 06, 2012, 10:00 a.m. ET

Executi ve s

Rob Fink - IR, KCSA Strategic Communications

Josef Mandelbaum - CEO

Yacov Kaufman - CFO

Analysts

Jared Schramm - Roth Capital Partners

Jay Kumar - Midsouth Investment Fund

Presentation

[Will be posted shortly]

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question is from Jared Schramm of Roth Capital Partners. Please go ahead.

Jared Schramm - Roth Capital Partners

Hi, you talked about the tablet in the mobile space. It seems like you got some pretty traction there with 400,000 users already. Could you just talk a little more in depth of the role of that tablet and mobile space at Perion as the percentage of the business and the focus going forward?

Josef Mandelbaum

I think the best way is separating the two things. One is focus in terms of resources and one is focus in terms of percentage of I guess revenue that it brings. I will start with the latter one, the latter one zero percentage of revenues at this point in time. These as I think everyone here knows with the exception of something like angry birds. I don’t think there is many people making a lot of money at it today, but having been in the industry for 20 years I know enough to know that the iPhone, Android maybe Windows 8 platform is for the tablets and the phones are going to be a major presence in the future and a major economic driver for lot of companies.

For us in particular what we are seeing is there is on the tablet side and the research we are doing, our consumers in particular are adopting tablets at a much higher rate in terms of usage and they were smartphones. So, we are putting a lot more emphasis there and in terms of R&D and focus in terms of product managers and marketing, we are probably spending I don’t know exact percentage is, but I’d say 20% of the people in the company are now focused on trying to build great applications, looking to understand the industry better and how we can really relate to our consumers better for products on this platform.

Jared Schramm - Roth Capital Partners

Okay. And with the launch of PhotoJoy and Fixie recently could you describe what customer reaction has been like to that versus your expectations originally?

Josef Mandelbaum

Sure. The reaction to PhotoJoy overall has been actually positive, the challenge with PhotoJoy we have been having is monetizing it as effectively as we would like. Right now it's only an advertising search driven model, and the industry and the advertising the search driven model as people are following it is competitive. And PhotoJoy is a bigger download and we are working on trying to solve that. So, that the take rate is little bit lower than we would like in terms of the completion rate when you started which effects the lifetime value and the cost per acquisition. So, economically, on PhotoJoy we are struggling a little bit to make it really work, so we haven’t we deemphasized a little bit in terms of our marketing on that until we get it right. But the consumer reaction to PhotoJoy is actually been very positive. And that’s why we launched an iPad 2, it just started on iPad but really on the desktop, I think whoever has it, they really like the application. So, we know we have a nice product. We are trying to figure out how to really accelerate it through a monetization. Until we really understand that, we are going to be conservative with that.

On Fixie, again just started in Q4 of last year. I think what we are seeing is this is one of the good examples of doing cross marketing against our base, and we have nice pickup on our existing base where we’re marketing Fixie to them. So, that’s doing well and the overall consumer reaction to Fixie, I’d say overall it's positive. These are the use, people like it, it's helping them. It's just the first of our forays into this category. We hope to do a lot more in the security space, in the next comings months to years. I think Fixie was just our toe in the water.

With regards to external acquisition efforts, like we did earlier in last year, we are taking our time; we are doing a lot of testing. I think some things are showing some good positive signs and some things are showing its competitive out there. So, the good news is, we are leveraging our base and that’s helping establish a base of users and revenue for Fixie. We are not yet at the point where we’re really putting pedal to the metal so to speak to kind of really increase that on the customer acquisition basis as much as we would like in the future, but right now it's going according to plan. We are not planning in Q1 to really spend a lot of money on Fixie, we are doing a lot of testing there and hopefully in the next one or two quarters we can give updates on how that’s going.

Jared Schramm - Roth Capital Partners

And now that you’ve had the Smilebox property under your belt for a couple of months here. Could you discuss some of the success with the cross marketing efforts you had between Smilebox and the IncrediMail product?

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