Could a company that generates per year what a similar company does per month, one whose market cap equals that bigger company’s quarterly revenues, be considered the “next” iteration of it? That appears to be the question that CGI Holdings Corp., d/b/a Think Partnership might just be answering. At a run rate now surpassing $20 million per year and a current market cap of $90 million, Think Partnership still has a long way to go before they challenge the company they most closely emulate, Valueclick, but daunting a task as that might seem, especially for one that did not have the benefit of an IPO during the early internet heyday, the little company that could might just pull it off. This week, we’ll take a closer look at Think Partnership, a company that we wrote about back in March when they first appeared on the industry radar with their acquisition of web marketing company, Primary Ads.
Reading through their history, CGI Holding Corp doesn’t seem like a company that would be where it is today. They say this about themselves in a filing this year, “We have lost money historically. We had net losses for the years ended December 31, 2002 and 2001. Our future operations may not be profitable. If we are not profitable in the future, the value of our common stock may fall and we could have difficulty obtaining funds to continue our operations. Our balance sheet is weak. We lack the capital to compete aggressively. Our growth is capital constrained.” Granted, those statements are in the risk factors section, but they don’t give the immediate impression of a company that will challenge or be similar to Valueclick. But, those statements, while true, are also perhaps overly modest and cautionary. Think Partnership’s story is one of growth, leveraging a good market and knack for acquisitions.
CGI Holdings is not a new company. It was incorporated in 1987, but it didn’t really become active in the space until 1997 but more so in 2001 when it purchased Internet stalwart but outdated Worldmall.com. That was renamed Websourced in 2002 and became a division of CGI Holdings, focusing on search engine marketing. Websourced was best known by one of its subdivisions, KeywordRanking.com, run by Patrrick Martin, who founded Worldmall.com. In 2003, Think Partnership, under its Websourced division launched affiliate dating site Cherish.com. The two, along with the upturn in the Internet advertising economy helped the parent company to achieve strong revenue growth in 2004, this after becoming profitable in Q2 2003.
The real fun began in 2004. That June they made their first of many acquisitions to follow, buying Engine Studio, creators of a product to help small businesses get listed on the search engines. Engine Studio’s assets presumably helped beef up the competency of Websourced and the value perception of Think at a time when Google was getting ready to go public. And, thanks to the strong revenue growth coming from their search business, their only division at that time, CGI decided not to push ahead with its reverse stock split. They did continue buying, announcing the acquisition of WebCapades in August. Then, in November, they signed a letter of intent to merge with privately held MarketSmart, which ran three companies. That merger led to Think’s dramatic rise in 2004 revenues to $20 million, up from $7 million in 2003.
Just before the close of the year, Think outlined their future strategy, raising $15 million in a private placement offering to help continue their aggressive acquisition strategy. Shortly thereafter, also in December, the company declared its intent to merge with another, Proceed Interactive, at the very end of 2004. That deal ultimately fell through but the buying spree marched forward. In February of 2005, Think purchased two other companies – Personals Plus, which extended their dating business, and Ozona Online, a small web shop that does design, hosting, and custom builds. The price was $2 million and $300,000 respectively. Also in February, in a win for the group, its stock moved from being an over the counter to the American Stock Exchange, trading under THK.
Things got really interesting in March when they announced their desire to purchase affiliate marketing software company Kowabunga - a scaled down version of Valueclick’s Commission Junction. They followed that up in April with a merger with Vintacom and Real Estate School Online in deals worth almost $5 million each. Also in April, Think announced its desire to purchase Primary Ads for $10 million. That deal was followed up by its decision to purchase Babytobee.com. It was the Primary Ads deal that had most of us taking notice of Think, as their, now well documented but still under the radar, spat with Direct Technologies lasted several months this year. Think, though, marches strong, increasing their revenues and profits and now having a suite of skill sets from search engine marketing, to an affiliate platform, their own advertising campaigns, internal inventory on which to run them, and a company that can help promote theirs and other offers to third parties. No doubt, we will see more acquisition announcements from them in the future. Theirs is a trend not necessarily started by Valueclick, but they have thus far executed on an aggregation strategy that has taken a relative tiny player and turned them into a future force to be reckoned with. Others will no doubt follow, as this is just the beginning of the mass roll-up, and they a leading example.