A non-traditional media and marketing services company that targets the demographic segment comprising persons in the United States between the ages of 10 and 24. It operates its business through three operating segments, Promotion, Media and Placement.
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Alloy is a youth oriented media and marketing services company, targeting customers aged between 10 and 24. Its promotion segment specializes in the event and field marketing, sampling and acquisitions programs, internet design services, and consumer research. Media segment comprises entertainment media assets, including its out-of-home, internet, database, specialty print and entertainment businesses, and the placement segment provides advertising placement solutions for marketers.
Competition in the industry is intense since the target population is the fastest growing demographic with 35% of the US population under the age of 24. Also, adults and teens spend considerable time watching television or surfing internet. Led by surging growth in the online sector, global entertainment and media sector is set to grow at a compounded annual growth rate of 6.6% till 2010. However, Alloy has not managed to capitalize on the opportunities in this money-spinning market. The company’s peers Omnicom or WPP Group have progressed much faster in this flourishing industry.
Alloy’s overall performance has been pretty mediocre with meager turnover growth. The growth of media segment that contributes about 26% has seen huge downslides in revenue growth. Also, placement segment is not in a good shape with substantial tumble in top-line. Revenues also suffered due to the termination of mall marketing sponsorship programme at the end of fiscal 2005. Though, leverage has improved, it was primarily due to slide in placement revenues that has higher variable costs. Besides, prior acquisitions of Dan’s Competition and dELiAs by the company have been a failure. Woeful tale continues as their Sconex acquisition appears in doldrums with massive decline in page views since April 2006. In the light of all these facts, the ailing stock seems to have hardly any upside potential
The media and marketing services company Alloy (ALOY) is just unable to catch the momentum of the intensely competitive industry. Endorsing the same, total revenues in 4Q’06 declined by 5% mainly due to the weakness in the promotion segment. This segment is still feeling the heat of the lost revenues attributable to a fiscal 2005 mall marketing promotion. Though the bottom-line showed a significant improvement, the prime reason is not related to any operational efficiency and hence the whole story does not sound impressive.Going forward, the company is looking for inorganic growth as it has lately acquired ‘Channel One’, which produces programming content for schools and the web. However, the transaction would deteriorate the financials of the company as ‘Channel One’ has incurred significant losses in the past year due to the high maintenance costs of aging distribution system coupled with their failure to attract and retain salespersons. Also, the company has acquired the assets of ‘Frontline Marketing’, which provides advertisers with efficient point-of-purchase advertising and merchandising solutions. However, it transaction could be viewed as a long-term opportunity as it raises the financial obligations for ALOY which has a worsened cash balance as compared to the fiscal ’06.The two acquisitions could ignite the revenues in the media segment. But ALOY does not have any vibrant plan of action to recuperate its ailing promotion and placement segments that form over 76% of the revenues. Thus, ALOY surely does not look a prudent ploy to invest.