..........Velti's fundamental problem..............
"The question now is whether Moukas and Baker can solve Velti's fundamental, underlying problem. While Velti is a big business physically — with 900 or so employees it's probably the largest pure-play mobile ad company on the planet — the slice of that business it keeps for itself is tiny.
Velti reports topline revenues. But lower down in its income statement it reports that much of that sum goes on third-party media costs. Pass-through billings, in other words. In the most recent quarter, Velti reported $31 million in "revenues" — that's still a decent sized business in mobile.
But after third-party costs are taken out, Velti keeps only $8.7 million in net revenues. Its sales and marketing expenses alone are $11 million.
$9 million in sales per quarter makes Velti a rather modest business — much too modest to support 900 staffers in $3 million offices.
Employees and investors should therefore expect more cuts at Velti in the near future."