Both of the company’s business segments continue to grow.
Team Internet Group (AIM: TIG), formerly known as CentralNic, published its 2023 annual report today. Here’s a look at some of what the company reported.
Team Internet’s Business
Team Internet runs two core businesses: Online Marketing and Online Presence.
Online Marketing derives its revenue primarily from monetizing web traffic. Much of this is traffic arbitrage, where it buys traffic from social media or other paid sources, sends it through a progressive intent filter, and monetizes it through ad partnerships (primarily Google Adsense). The company owns the popular domain parking platform ParkingCrew.
Online Presence derives its revenue from domain name registrations. The company’s business includes domain registry services and registrars such as Moniker and Key-Systems.
Key Numbers
The numbers keep going in the right direction at Team Internet, even if they’re at a slower pace than when the company was aggressively acquiring companies:
- Revenue growth 15% year over year
- Organic growth 13%
- Net profit growth 8%
- Operating profit growth 26%
- Adjusted EPS growth 32%
- Post-tax profit of $24.3M, compared to loss of $2.1 million in 2022
Gross revenue in the Online Marketing segment was $657.1 million, up 14% year over year. Gross revenue in the Online Presence segment was $179.8 million, up 17% year over year.
Google’s Role
Google continues to be Team Internet’s largest source of revenue, accounting for 68% of revenue.
For the year, Team Internet took in $566.9 million in revenue from Google, up from $492.8 million in 2022.
This is primarily from Google Adsense, which Team Internet uses to monetize much of its traffic. Team Internet’s Online Marketing segment grossed $558.9 million from Google in 2023, up from $483.2 million in 2022.
The Online Presence segment, which is mostly registry revenue, took in $8.0 million from Google in 2023, compared to $9.6 million in 2022. (Google sold its domain registrar business to Squarespace in September 2023.)
RPMs and Ad Partners
A large part of Team Internet’s business is advertising arbitrage. It buys traffic from social media and search partners and then monetizes it through ad partnerships (mainly Google) and affiliate relationships.
RPM, or revenue per thousand visits, fell from $105 in 2022 to $95 in 2023.
Team Internet stated, “this is owed to the macroeconomic environment and the weakness in click prices across the market.”
The company pointed out that while RPM is important, the company creates value anytime its RPM exceeds its CPM (cost per thousand visits).
And while RPM dipped in 2023, the company grew visitor sessions by 27%.
Team Internet expects its RPM to stabilize going forward.
The company announced a deal with Microsoft Bing last year. Its annual report said, “This agreement focuses on leveraging Bing’s platform to monetise traffic from alternative search engines, a traffic source that is challenging to monetise with our current workflow.”
This seems to suggest that Team Internet will monetize traffic with Bing when it can’t monetize it with Google, perhaps because of quality concerns or Adsense rules.
There are a few risks on the horizon for Team Internet’s arbitrage business, as I see it:
- New EU consent requirements could negatively impact ad monetization.
- In addition to buying traffic, Team Internet also gets organic traffic to some of its content properties. Some of these sites are generated with AI tools. In its annual report, the company stated that a “machine learning algorithm identifies high-traffic potential expired domains, registers them, builds websites using templates, populates them with relevant content and native ads, and promotes its articles on social media, to drive qualified leads”. Google recently implemented a significant change to its search algorithm, designed to reduce low-quality sites in its SERPs. It will be interesting to see how this impacts Team Internet’s organic traffic.
- Team Internet moved into short-form video ads in 2023. Potential US regulations over TikTok could impact this traffic stream, and a change in ownership could create some uncertainty.
Return of Capital
After years of reinvesting in its business through acquisitions, Team Internet undertook a radical change a couple of years ago. Its current capital waterfall is:
progressive dividend > capital projects to drive organic growth > bolt-on acquisitions > share buybacks > debt repayment
It paid its first-ever dividend of 1 pence per share last year and plans to double it to 2 pence this year. This would equal 11% of 2023’s cash flow.
The company is also finishing up an aggressive share buyback program.
It is worth noting that net debt increased 31% between 2023 and 2023 but is still within the company’s stated debt/EBITDA ratio of <2x and interest coverage of >4x.
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Tyler Fields is your internet guru, delving into the latest trends, developments, and issues shaping the online world. With a focus on internet culture, cybersecurity, and emerging technologies, Tyler keeps readers informed about the dynamic landscape of the internet and its impact on our digital lives.