letter to Eric Schmidt of Google - 12th January 2009

Eric Schmidt, Chairman and Chief Executive Officer,

Google Inc,

1600 Amphitheatre Parkway

Mountain View, CA 94043

 

Dear Mr Schmidt.

Like many consumers, I love YouTube and use it all the time for many reasons. It is one of the wonders of the age.

 However, I believe I am correct in saying that Google as a company has so far failed to monetize YouTube, to the point where offering the service is a major drain on Google’s resources.

There is a company which I believe could solve these problems for Google.

I am a shareholder in Blinkx, the self-described “world’s largest and most advanced video search engine”. As I am sure you are aware, Blinkx was spun out of  Autonomy some 18 months ago and since then has released a raft of video search-related products including Ad Hoc and the new un-roll feature announced recently. The company has also indexed in excess of 32 million hours of online video, including content from major partners such as MSN UK.

Sadly Blinkx’s technical delivery has not been matched by a delivery of shareholder value. I have been a shareholder for over a year now, and have seen the value of my investment decrease significantly.

Of course global stock markets have had a torrid time of it, and Blinkx management has blamed general conditions for the decline in their stock price. I’m afraid however that I don’t quite buy that. I believe that the inexperience of the senior management team – and the CEO Suranga Chandratillake not least – has been largely responsible for the share price decline. For example, Blinkx has been trying to execute a takeover of Miva, and has in my view – and that of many other shareholders – botched the process very badly. Blinkx made an initial approach at 120c which was rejected, and then some time later delivered a letter to the Miva board ‘reviving’ the offer at 55c. Since when Blinkx shareholders have been kept totally in the dark about whether the offer has been accepted or rejected (indeed, there is even some doubt about whether a second formal offer exists at all).

The ensuing uncertainty is, I believe, what has caused the Blinkx share price to decline to its current parlous state of c13.5p.

The current situation does, however, present a great opportunity for Google. I am suggesting that Google should launch a takeover bid for Blinkx. I believe such a takeover would offer the following strategic advantages to Google:

 

·         Google would further cement its leading position in online video. It would not only have the hundreds of millions of hours of UGC video on YouTube, it would acquire the Blinkx indexes to 32 million hours (and growing) of professionally-produced video. That figure of 32 million hours represents, I believe, approximately two-thirds of all such video on the web.

·         Blinkx technology could automatically index YouTube videos to place contextual ads against or within them (pre-roll, un-roll etc): it could also automatically index UGC videos as they are uploaded (I believe I am correct in saying that 8 hours of video are uploaded to YouTube every minute – manually indexing such a volume is impossible)   

 I cannot be the only Blinkx shareholder despairing of management’s ability to deliver shareholder value (by which I mean a strong and growing share price). Blinkx’s IPO price was 45p – the 9 major shareholders who bought into that IPO have seen 65%+ wiped from the value of their investment in only 18 months – and this for a company that claims to lead the world in a red-hot market sector. In the current uncertain market conditions I’m sure these large shareholders would entertain an offer of 50-60p. If successful it would be the deal of the century for Google, and could provide you with unassailable lead in online video.

Yours sincerely