CrowdGather Inc. may be the fastest growing local company that no one had heard of – until last week.
That’s when word apparently got out about the Woodland Hills outfit, which hosts 65,000 online forums on topics ranging from technology to hobbies to parenting.
GrowdGather, which trades over the counter, was the LABJ Stock Index’s top gainer last week, with a share price increase of 31 percent. The stock closed at $1.88 on Jan. 27 when 827,000 shares traded hands, more than three times the average.
Chief Executive Sanjay Sabnani attributed the trading to an interview he did on SocialMedia.net, a popular Internet site that tracks online media. He also believes investors have a renewed fascination with new Internet companies.
“It feels a little like 1998, with euphoria among private companies and high valuations in public markets,” said Sabnani, who founded the company in 2002 when he bought humor forum Genmay.com. The company went public through a reverse merger in 2008 and claims dramatic growth.
“Last year we went from 12 million page views a month to 90 million page views. Our goal for the end of this year is 300 million to 400 million page views per month,” he said.
However, like many other small Internet companies that rely on advertising, CrowdGather has a hard time making money.
In its most recent earnings report, which was for the third quarter, it stated net losses of $771,000, wider than the $471,000 loss of a year earlier. Revenue was up a whopping 700 percent, though it only amounted to $462,925.
The company attributed its losses to higher administrative costs associated with its purchase last year of Adisn, a Long Beach digital ad agency, which cost $5.5 million in stock. It also bought another forum network, FreeForums.org, for $1 million in stock, and forum network LaFora for an undisclosed sum.
CrowdGather only has 10 employees because its hosting is electronic while the forums are supervised by interested volunteers. Its most popular forums include Genmay, with 900,000 page views a month, and ZuneBoards.com for users of the Microsoft media player that gets 400,000 page views a month. Others have topics ranging from fish tanks to democracy to health care, and some only get a few thousand page views a month.
But so far, CrowdGather hasn’t sold a single ad directly to an advertiser. Instead, it works through networks that place the ads but also take the lion’s share of revenue.
Aaron Schoenberger, founder of digital ad agency Brainchild Group in Beverly Hills, said a major challenge for CrowdGather will be to get advertisers to buy space on small forums.
“You have a long way to go until you get that first advertiser,” he said.
Sabnani believes forums are overlooked by advertisers because they are often text heavy and visually boring. But when people want detailed information, especially on how to fix something, they usually go to Google and find the answer on a forum.
“Forums are the help desk of the Internet,” Sabnani said. “I keep asking, ‘Why don’t advertisers talk about forums?’”
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