Author Topic: RIWI.V / RWCRF - RIWI Corp.  (Read 1277 times)

orion

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RIWI.V / RWCRF - RIWI Corp.
« on: July 31, 2020, 02:18:24 AM »
All values in US Dollars.

RIWI Corp. (“RIWI”) is a global trend-tracking and prediction technology firm. RIWI stands for “real-time interactive worldwide intelligence” and offers clients tracking surveys, continuous risk monitoring, predictive analytics and ad effectiveness tests in all countries. The company originated from the work of Neil Seeman, RIWI’s founder and chief executive officer, at the University of Toronto. Tasked by the Ontario government with collecting data on how the public responded to various global pandemics, Neil Seeman found existing methods of data collection to be unreliable, inefficient and difficult to compare across different countries. Looking for a solution, he invented a new method to collect data called Random Domain Intercept Technology (RDIT™).

How does the RDIT™ method work? Let's imagine that someone wants to visit a certain website, enters the URL but makes a spelling error or other typo. If that person is located in a region currently of interest for RIWI data collection, then there is a chance that this person is redirected to a website RIWI created and invited to participate in a non-incentivized survey.

In the background, RIWI’s system evaluates and selects appropriate domains, improves data quality by removing bot traffic, recognizes devices and OS data, validates locations, and more. RIWI supports its clients in the survey design (e.g., how to structure and frame questions to remove the risk of biases), and delivers the harvested data to the client on a continuous basis via an interactive web-based dashboard. The client pays for this service through a monthly, annual or multi-year subscription.

The patented RDIT™ technology (see “Method of obtaining a representative online polling sample“ at https://patents.google.com/patent/US8069078B2/en) is the key asset of RIWI. The patent expires in 2030, but according to RIWI management, the moat lies not only in the patent itself, but also in the intellectual property that differentiates RIWI from possible competitors (e.g., knowing what domains to use, how much to pay, and how much to spend to obtain the desired number of responses). RIWI management also highlights that key leadership and technical personnel have been awarded the highest level security clearance and have been vetted by the US State Department, a long and expensive process.

RIWI has an impressive track record predicting world events, from predicting the fall of Hosni Mubarak in 2011 to predicting the Electoral College votes for Trump and the popular votes for Clinton in the 2016 US presidential election ( more examples can be found here  https://riwi.com/predictive-work/ ). RIWI has also been successful with predicting economic developments; for example, they are able to predict surprises in official US nonfarm payroll data. 

To date, more than 1.6 billion responses have been collected from 229 countries and territories. The data collection method has been validated by G7 agencies, and the RIWI technology platform has been reviewed by researchers at elite universities, like Oxford and Harvard, and profiled in top scientific journals, such as PLOS Medicine and Nature.

CUSTOMERS

Following competitive tender and technical compliance reviews, RIWI has been awarded, and currently holds, multi-year procurement agreements with leading international Organizations, including Freedom House, Omidyar Network, United Nations World Food Programme, USAID Human Rights Support Mechanism, and The World Bank.

MANAGEMENT

Neil Seeman owns 34.6% of the company (32.2% is owned through a family trust together with his brother, Bob Seeman), and the management team and board of directors combined own 56.9%, so insiders are well-aligned with shareholders.

FINANCIALS

The balance sheet is clean (17,857,382 common shares outstanding / 18,949,882 fully diluted shares), no long-term debt and about $3.2 million in cash. The company has been profitable since 2018 and RIWI therefore has no need to raise additional capital and can execute their growth plans self-funded - a rare combination. The best way to evaluate the progress is probably on an annual basis because revenue can be lumpy from quarter to quarter due to different contract sizes and revenue recognition. 

INVESTMENT OPPORTUNITY

In the past, the biggest bottleneck has been sales. Until the end of 2019, their sales team consisted of only two external sales people in the United States (partly on commission) and project managers engaging in sales besides their normal work. This proved to be inefficient. They are now building out a dedicated sales team. Their first step was to hire a seasoned sales professional as Chief Revenue Officer (Mr. Weitzman), who started in February 2020 and whose job is to build a sales team and optimize the sales processes. Additionally, they try to increase sales through partnership deals. In March 2020, RIWI signed a new $1 million contract for work related to COVID-19 for a healthcare client through a partnership deal with ThinkData Works Inc. In May, RIWI extended this partnership and signed a reseller partnership with ThinkData Works Inc. to sell more RIWI products through this channel.

MARKET OPPORTUNITY / COMPETITION

The company does not specify their total market size, saying that it is several billions generally. Even though competitors have a variety of different research offerings, knowing the total research market size would be interesting. Nielsen is considered the largest player in this space, with revenues of $6.4 billion. Ipsos, another competitor, estimates the total research market at $79.8 billion. Even if the exact market size for RIWI’s services is unknown, with its current $3.1 million revenue, there is ample room to grow.

$30 MILLION GOAL

In their 2019 MD&A, RIWI presented a new revenue goal: $30 million by 2024. RIWI missed their previous goal, making many investors skeptical about this guidance.

VALUATION

Looking at traditional valuation metrics, the stock is currently not cheap. So even if the market is not buying into the $30 million goal, many positive expectations are already priced in. However, RIWI is an outstanding business and should trade at a premium valuation (High margins, unique and proven technology, high operating leverage, and a capital and asset-light business model).

In conclusion, RIWI’s stock is not cheap when considering this year’s numbers, but if RIWI comes remotely close to their target, the fair valuation may be multiples higher than today. An added bonus is their work related to COVID-19. Depending on how this pandemic unfolds over the next months, this may lead to an increased demand for RIWI’s services.

DISCLOSURE: I`m long shares of RIWI Corp.


manuelbean

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #1 on: July 31, 2020, 04:37:37 PM »
I've been following Riwi for some time now. Apart from all the good things that you've mentioned. here's  what I don't like about it:

It's hard to sell. I like products/services that sell like hot buns. The company has got to educate users and that takes a lot of effort.

Management isn't clean. Just look at the Q2 earnings. Management talks about 6 months net income and sales while the quarterly numbers were down sequentially, but they didn't bother to mention that minor detail.

Insiders selling. Why? It's a mistery.

They've failed miserably at prior guidance. Why on Earth would they get $30M in revenue if this pandemic is the best opportunity the company has ever had, and still no growth (sequentially. given that there's no seasonality, there's no reason to look at it on a yoy basis).

I might be wrong, and if I am this will explode, but.....




A Dhandho Investor

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #2 on: August 01, 2020, 09:30:08 AM »
Glad to see a thread on the company here. I'm long the stock. For those interested here is a recent interview with the CEO and CFO that is a good intro on the company: https://www.youtube.com/watch?v=u_a-Qn-ANQY

It's hard to sell. I like products/services that sell like hot buns. The company has got to educate users and that takes a lot of effort.

The flip side of that is that most client relationships are longer lasting (BofA has been for instance one of their initial customers and they recently renewed their contract) and that they have such a high margins.

Management isn't clean. Just look at the Q2 earnings. Management talks about 6 months net income and sales while the quarterly numbers were down sequentially, but they didn't bother to mention that minor detail.

I also don't like the way they presented their Q2 results. They basically presented half-year results instead of Q2 results. This is however not the typical SaaS company - it's rather a business with lumpy sales - that's why the CEO continues to tell investors to focus on the longer term picture instead of quarterly revenue figures. H1 2020 revenues were up over 50% over H1 2019, so in that respect they are still on track. 

Insiders selling. Why? It's a mistery.

Insiders still own over 50% of the stock, so I don't see a major issue here. I have more issues with the stock based compensation given the fact that they are cash flow positive and have sufficient cash to run the business. In Q2 2020 they started to remunerate directors partially in cash, which I prefer over SBC.

They've failed miserably at prior guidance. Why on Earth would they get $30M in revenue if this pandemic is the best opportunity the company has ever had, and still no growth (sequentially. given that there's no seasonality, there's no reason to look at it on a yoy basis).

I few comments related to that:
- This is still a start-up - the CEO only started working full-time for the company around 2016 if I remember well.
- They only started recently to invest more heavily in sales
- It takes time to educate the customers on the product like you mentioned - they might have underestimated this
- They were founded in the context of a pandemic and should benefit from it. However, I believe that Q2 2020 was a particular situation in the sense that quite a lot of RFP's were put on hold so that their customers could focus on the business as usual.
- In the MD&A they refer to potential contract sizes over $5m (in the interview I posted the CEO refers to contract sizes of $10m for Gallup, one of their competitors). A few of those big contracts could quickly move the needle (current contract sizes are maximum $1m)

I might be wrong, and if I am this will explode, but.....
I definitely hope so!

deleuze68

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #3 on: August 01, 2020, 03:16:04 PM »
I take it RIWI has contracts with domain registrars to capture traffic from dormant/expired domains. GoDaddy was one of the first registrars to destroy whatever soul remained of domain snipers. There was a time in the early naughts when homegrown bots competed against mega computers run by Snapnames, Enom, etc. every week at 11am attempting to be the first to pick up that week's hottest domain drops. This practice actually bankrolled my initial foray into the stock market. But then registrars figured they could just renew the domains themselves and auction them off rather than allow them to expire. Generally this resulted in an auction landing page with some adverts but now this traffic is being leased more profitably to companies, including RIWI.

I do see a few challenges with this market opportunity. First, RIWI is essentially buying inventory from the registrars but how much inventory is available for purchase at any given time. Traffic from dead links/domains is known to decay as dead links are eventually removed from SEs and scraped from websites. There are many programs that can be used to scan links on one's website and automatically remove dead links so this decay is pretty rapid. Thus traffic from dead domains has to be constantly replaced with fresh traffic from newly dead domains. Over time I don't know if the overall inventory is increasing or decreasing. Domain expirations are increasing as is web traffic but so is the process of stripping dead links. With respect to traffic from typo domains I guess these would remain constant if not increase - although this traffic is under threat from improved autocorrect software. RIWI's revenue has been increasing but how long can this continue, how close are they to maxing out their traffic inventory. At that point the only revenue growth would come from increasing prices to their customers.

Secondly, RIWI's margins are pretty insane. If they can monetize this errant traffic at 70-80% margin by throwing surveys at lost souls, what is to say competitors won't emerge to compress these margins? Not necessarily through offering surveys but through any other form of geo-targeted advertising. The same way Google Ads campaign margins compress over time I could see the same thing happening here once the market opportunity is realized by others. And are the registrars really going to turn down more money for the traffic they control?

And finally since RIWI has no control over their inventory they are subject to not only the vagaries of registrars but also more advanced AI (including ad blockers, plug-ins, etc.) that could potentially intercept and redirect this traffic browser-side. RIWI isn't the first Canadian "tech" company to discover a treasure chest piggybacking on features they neither birthed nor nursed only to have it crushed suddenly and unexpectedly once the behemoths decide on a whim to change how things work (Re: Good Life Networks for a recent example). Does RIWI really have any leverage to overcome their relative position in the supply and demand chain?

I don't see RIWI as anything other than a boutique venture founded by a creative individual who discovered a unique way to exploit a little corner of the web. The scalability of this is probably quite limited and there is just way too much risk both from competition for this finite traffic and from the possibility that these "loopholes" being exploited could be shut at any time. As to their patented technology isn't it just a geo-targeted code that works on all devices and can transmit data instantaneously? Doesn't sound that innovative but even if it is what is its value outside of its current employment? Again see Good Life Networks (now Aquarius AI) for a company that lost its revenue source but attempted to re-invent themselves by seeking a new use for their patented technology.

matthewd98

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #4 on: August 03, 2020, 06:58:44 PM »
@deleuze68:

RIWI integrates directly with APIs of various web domain brokers to lease domains for a given period of time (hours, days or weeks). They developed an ML algorithm to decide which domains to bid on to maximize survey completions while balancing cost. Therefore, some of their inputs are cost of the domain rental per unit of time, number of page hits by geography and how many people have answered surveys in the past on the domain (which is obviously exclusive knowledge to RIWI.

I'm not too concerned about the expired/abandoned domain inventory. I think it's correlated to the web traffic, which as we know is on an uptrend that should persist. Additionally, since they rely on web domain brokers to lease domains, I don't believe they are at the mercy of a single registrar's vagaries -- their surveys are broadcasted around the world so there's no shortage of registrars they can borrow domains from.

On competition, I think you're overlooking their experience and knowhow. Experience in survey question formulation is imperative. If you don't ask the question in the right way, your data and insights extracted from it could be quite off from reality. Obviously, they aren't the only ones with this knowledge, but they do have the experience doing this at a mass scale across the globe. They have a few billion survey completions under their belt.

Foreign Tuffett

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #5 on: August 04, 2020, 08:03:33 AM »
At first glance I am inclined to agree with deleuze68 that this may be more of a gimmick than a sustainable business.

Also, I don't understand how they can reliably get robust survey data out of web users who:
 
(a) navigate to the wrong URL, or an abandoned URL
and
(b) are willing to take a survey or "ad test" despite having no incentive to do so

Given this methodology, aren't significant sampling bias errors baked in? I would imagine that the people actually doing these surveys exhibit characteristics like boredom and difficulty using the web that are far in excess of the general population.
Former Teldar Paper Vice President

A Dhandho Investor

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #6 on: August 04, 2020, 08:30:50 AM »
At first glance I am inclined to agree with deleuze68 that this may be more of a gimmick than a sustainable business.

Also, I don't understand how they can reliably get robust survey data out of web users who:
 
(a) navigate to the wrong URL, or an abandoned URL
and
(b) are willing to take a survey or "ad test" despite having no incentive to do so

Given this methodology, aren't significant sampling bias errors baked in? I would imagine that the people actually doing these surveys exhibit characteristics like boredom and difficulty using the web that are far in excess of the general population.

The data gathering methodology ensures that the data is unbiased, you’d be surprised by the number of people who fill in such a survey they stumble upon.

They developed this methodology because traditional studies lead to biased data (e.g. by paying applicants to complete a survey you always get the same type of people who respond to your surveys).

matthewd98

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #7 on: August 05, 2020, 07:48:41 PM »
@A Dhandho Investor @Foreign Tuffett

Clearly they're doing something right -- they have a very high success rate in predicting events. All the case studies are on their website. They also have billion of respondents who've completed their surveys.

People answer surveys for various reasons: they want to give their opinion (because someone on the other end cares about it and/or they don't have free speech in their country), they're bored, etc. Have you never answered those surveys before YouTube videos? I hardly ever answer them, but I still do maybe <5% of the time because why not. If you contrast to survey takers using traditional methods, paid surveys or phone surveys, you would find that it's almost always the same people answering either because of the financial component, they don't have anyone to talk to or they're bored. Not to mention the banks of people they call isn't as random and large as the web's.
« Last Edit: August 05, 2020, 07:51:37 PM by matthewd98 »

Jurgis

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Re: RIWI.V / RWCRF - RIWI Corp.
« Reply #8 on: August 05, 2020, 10:55:19 PM »
@A Dhandho Investor @Foreign Tuffett

Clearly they're doing something right -- they have a very high success rate in predicting events. All the case studies are on their website. They also have billion of respondents who've completed their surveys.

People answer surveys for various reasons: they want to give their opinion (because someone on the other end cares about it and/or they don't have free speech in their country), they're bored, etc. Have you never answered those surveys before YouTube videos? I hardly ever answer them, but I still do maybe <5% of the time because why not. If you contrast to survey takers using traditional methods, paid surveys or phone surveys, you would find that it's almost always the same people answering either because of the financial component, they don't have anyone to talk to or they're bored. Not to mention the banks of people they call isn't as random and large as the web's.

I fill out surveys from companies I have relationship to (bank, broker, store, etc.).

I would never fill out survey on a mistyped domain and would strongly suggest to anyone I know not to do it either. Most likely purpose of information gathering on mistyped domain is a honeypot for hackers/social engineering/spamming/scamming. The right approach is zero trust to someone collecting info on mistyped domain.

But hey apparently people trust unknown parties on the Internetz. Apparently people also click on ads on the Internetz. Who would have thought. I pretty much would not click on ad either. And that's way bigger business than RIWI. ;)

And, no, I've never seen a survey before Youtube video. Ad blockers FTW.
« Last Edit: August 05, 2020, 10:56:54 PM by Jurgis »
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