Follow-up letter to Charles Lytle at Citigroup

19^th January 2010

Mr Charles Lytle,

Citigroup Global Markets Limited,

Citigroup Centre,

33 Canada Sq.,

Canary Wharf,

London E14 5LB,

United Kingdom

Dear Mr Lytle

Thank you for your letter of 5^th January, and your confirmation that the Blinkx roadshow did indeed take place last May.

I have to say, though, that from where I’m standing it doesn’t appear to have had much positive impact: there does not appear to have been a rush of institutional buying in the open market, and I note that Autonomy – the company from which Blinkx was spun-out – was left with a significant amount of the shares from the recent placing they underwrote. The placing wasn’t exactly oversubscribed by non-Autonomy investors, was it Mr Lytle? Clearly the institutional investors presented to on the roadshow either weren’t convinced by the Blinkx story and/or weren’t convinced by the telling of it.

As for the company’s share price being ‘volatile’, I’m afraid I disagree – it has been remarkably stable for most of the past year: but unfortunately within the 16-20p price range, somewhere between a third and less than half the IPO price of more than two years ago now, and this despite good apparent growth since then.

Of course the economic situation has been extremely challenging over the past few years, but I’m sure that I don’t need to tell you that we are currently in the middle of a massive market rally (biggest for 300 years on some measures) and especially a tech stock rally – both of which have passed Blinkx by completely. Only to be expected, I suppose, from a company so consistently incompetent at news management and PR: if Blinkx has a good story to tell, Mr Lytle, why are they so utterly woeful at telling it? With Apple, Google, Microsoft and Yahoo squaring up for a full-scale war online, I don’t think that RNSs about deals with the likes of BobVila.com quite cuts it. Do you?*

Find enclosed a copy of a recent letter to Michael Lynch of Autonomy which might give some reasons for this ‘volatility’ (I’m afraid I’ve long since given up addressing any points to Chandratillake – it seems as though he’ll talk to anyone except those unfortunate enough to have invested in his company, who might ask awkward questions about company strategy and non-delivery of shareholder value). It may be true, as you say, that the company is delivering ‘to plan’, but then that was a plan created before floatation in a very different world. Just to give two examples; three years ago there was no iPhone and apps economy, and Facebook was still a walled garden for US students. Blinkx may be delivering ‘to plan’, but online video is exploding massively, so large and so fast as to make Blinkx’s growth rate seem positively conservative and unambitious. The apps economy, for example, is estimated (in the latest edition of Wired UK) to be worth billions of dollars a year in app sales alone, let alone associated service/advertising revenues – and Blinkx are managing to miss out on every cent of that.

Since I wrote to Dr Lynch, I have seen an announcement that TVCatchup, another video-streaming service, has submitted an iPhone app to Apple for approval. Why can they manage it and not the self-proclaimed “world’s largest and most advanced video search engine”? Not to release a Blinkx-branded iPhone app and/or Facebook widget strikes me as negligence bordering on incompetence given the potential cost/benefit ratio of such an effort.

Unless the share price starts to recover – and very soon – I shall be writing to the large institutional investors agitating for a change of management at Blinkx and the installation of a new management team: one which understands and can react to the realities of the current digital media market, and which is prepared to invest in the company’s shares as a vote of confidence in its future. It will be interesting to discover whether institutional investors (those that bought at the IPO, not those that didn’t buy off the back of the failed roadshow) are as sick to death of waiting for this company to deliver on its many promises as smaller investors.

Chandratillake was right about one thing – there is a perfect storm of opportunity out there. Unfortunately he seems to me incapable of getting more than barely damp in it...

Yours sincerely,

____________

xxxxx xxxxxxx

*This letter was drafted before Tuesday’s RNS about Blinkx moving up the Nielsen rankings, but that RNS – of information already in the public domain, which completely failed to set the share price alight – only proves my point rather than otherwise. It is crystal clear by now – to everyone except, apparently, Blinkx management – that the markets aren’t remotely interested in how much traffic Blinkx is doing. What the markets – and investors – care about is how that traffic is being monetised and Blinkx’s costs in acquiring and servicing that traffic. Following the Zango/Pinball deal, why no full trading statement to update the markets and shareholders, Mr Lytle?