CampusU - IPO, Expected on 10 Dec 2007

Interesting - but be on your toes

The moment I read the word "online communities", I can see trailer load of dollars, particularly after Microsoft's adventure. CampusU offers an online community devoted to college student market, at least for the time being. I am interested in investing in this one. Here is why

360Youth and Jupiter Research conducted independent research and concluded college student spend $200 billion every year shopping. Out of this, $4 billion is spent online. With so many credit cards on offer for students, this does not surprise me. 87 percent of the college students use credit cards, declares Online Advertising Habits Survey. I always wonder when these survey results are published what number constitutes the percentage, so this time i checked another statistics. There are 115,000 schools, 53.5 million students and 3.5 million faculty and staff in the k-12 market. 5,700 educational institutions, more than 17.3 million college students and 1.5 million faculty and staff belong to the higher education market. To be fair 87 percent covers a lot of students. If i dissolve the age considerations of the students, then adults who are returning to school, both full-time and part-time add the numbers. For long online communities have always focused on the student market to begin their business the reason being, this segment offers huge opportunities for commerce, advertising and marketing revenue. Being a part time student i spend close to 25 hours a week on the net browsing and downloading stuff, now the same online ad habit survey says 95% of all college students own a computer. Out of these 30 percent spend 20 hours a week online buying the same stuff I do. Most K-12 students and the youth in higher education are idealistic and prefer to take a stand on any and all topics. CampusU intends to exploit this by asking these college students to buy the brands on offer and show their loyalty life long. 

CampusU generates money (note: not earns) selling all its products and services to college students. These idealistic students should find a compelling reason to use the online community, CampusU offers blogs, videos and other multimedia content all generated by the students. All products and services are sold at discount prices of 80 percent. The company boasts of 8,000 distinct name-brand software and other technology products available at discounted prices. Manufacturers have made these products available on the condition that the sale be to students and other qualified purchasers in the academic community. So how does the company maintain its integrity? National Student Clearinghouse is a non-profit organization which maintains student's official school picture identification card and CampusU verifies all its buyers electronically. For teachers and academic institutions purchase orders on school stationery as confirmation of academic status is accepted. Advertisers deliver products and messages directly to college students on a regular basis and while students but on the websites through company's Internet marketing programs. So this forms a niche audience to target ads based on the student preferences. E-commerce activities are conducted through its campustech.com website.

Robert S. Frank is the President and Chief Executive Officer. He is an attorney by profession and used to work with Weil, Gotshal & Manges and Rosenman & Colin law firm. F3 Software Corporation, MCI Communications Corp., and the Hamilton Securities Group are some of the other places he has worked.

Christopher Eimas is the Chief Financial Officer and Treasurer. He handled Time Warner AOL's new products division's finances before joing CampusU. Before this he helped VIA NET.WORKS, Inc with its Initial public offerings. He served in the finance divisions of MCI and Price Waterhouse.

Susan Hogan is the Vice President, Marketing and Sales and is considered to be a key employee. She was the Senior Marketing Account Executive for Technology Resource Center, Inc.

Andrew Fredrick is the Vice President of Systems and Operations and again a classified as a key employee. Virtual Business group, Sprint Nextel Corporation,PeopleSoft ERP Consultant are some of the places he has worked.

The other Key employee according the company is Ramendra Singh who is the Director of Business Development. He joined CampusU from Time Warner AOL. He started his career in IBM Global Services, India before changing jobs.  

As i mentioned earlier CampusU competes with MySpace, Facebook, and YouTube, now owned by Google, Inc. All these companies target the youth audience and have blockbuster business model to generate revenues. Besides these big companies have started making profits. Apple Computer and Microsoft have always offered discounts to the educational institutions and students. CampusU needs to bring it own block buster application to raise above the herd.

I noticed the company has raked in $11.9 million in 2006 which is a 73 percent increase from the previous year. This year, until September the company says it has increased sales to 112.6 percent. No set number of dollars is mentioned. But this percentage increase is commendable in itself. The company plans to generate sales through its marketing and media businesses by the end of year 2007. CampusU does not have any fixed agreement with the advertisers and hence does not generate any revenues at the moment from them, but intends to start post its listing.  

The company is offering 3,500,000   for sale and has priced the shares between $5.5-$6. This i feel is a reasonable price considering it focuses on niche segment to do business.

Social networking sites have been a target for takeovers for a long time. The service offerings generally compliment the acquirers business strategies. CampusU for the moment does not have any differentiating factor to attract advertisers and users. But the current product portfolio is good. If I log in to buy a product I can connect with communities to understand the quality before I can buy. The data and habits of users that CampusU collects will be invaluable when it starts signing agreements with advertisers. CampusU will get greater visibility because of the IPO, and might generate some interest from different sectors. For the moment I feel this stock is a good investment.