At Israel Opportunity Investor, we’re spending a lot of time with CEOs recently asking about their views on the future. What’s interesting is that some tech companies are beginning to see a connection between the subprime fiasco and their own businesses.
So, we decided to do a rundown on firms that we think may have some exposure, hidden or not, to the subprime mess.
Companies dependent on ad revenue from housing/mortgage lenders and further downstream secondary effects
Bankrate (Nasdaq: RATE) should be the bad-boy of the subprime mess, but this thing holds up like a champ. There is a large short
interest against the stock but the firm recently received some big upgrades after trading softly, as the market was expecting some shortness. RATE operates in two segments: one online and the other offline. Bankrate acts as a data aggregator of all kinds of rates (mortgages, interest, etc.). Acting as a middle man, Bankrate gives syndicates its data out to its network of traditional web publishers (frequently for free) who publish these rates. Users who click through on rates are then taken through a 6-step process intended to generate a mortgage or savings account lead. Bankrate gets paid by its advertisers and shares out these revs in a split with its publisher partners. The short argument is pretty straightforward — as more and more talk of an interest rate reset freeze, this could trigger a decrease in traffic linked to refi’s. Bankrate’s customer base has traditionally not been subprime, so you have to do your homework in terms of its exposure to this market.
If Bankrate truly does tank because there is less refi traffic, than any publisher that receives significant revenue from Bankrate would suffer as well as they’d get less of a payout. Move.com (Nasdaq: MOVE) is a recent addition to the network and Bankrate also has Yahoo! (Nasdaq: YHOO), America Online (NYSE: TWX), The Wall Street Journal (NYSE: NWS) and The New York Times (NYSE: NYT) in its network.
Google (Nasdaq: GOOG) has traditionally seen a lot of mortgage related keyword bidding with some refi/subprime keyword being very lucrative for the firm. Google says its not affected by what’s happening but you have to think that demand for certain keywords has softened. That said, when advertiser scale back, they’re frequently reallocating offline funds to online — and search generally has the best ROI.
IAC (Nasdaq: IACI): Owns Lendingtree, which is one of the largest players in the lead generation game, along with Lowermybills.com, now owned by Experian.
