Banks.com is struggling. The didn’t sell Look.com because they wanted to. They sold it because they had to. They needed the $400K to make it though tax season and it was one of the few “non core” assets they owned. Banks.com just reported their third quarter earning and it wasn’t pretty. In the third quarter of last year (2010), Banks.com reported income of $1.4 million dollars. This quarter, $613,000. They blamed it on one thing. Google. Here’s how they explained the huge drop in income
“Our third quarter results were once again marred by revenue charge backs leveled upon us by Google. As we’ve talked about before, these charge backs generally come with little to no substantiation, making them extremely difficult to adjust to. As such, we have essentially exited the search business to focus our attention on our finance related sites,” said Dan O’Donnell, Chief Executive Officer of Banks.com.
They explained it in a little more detail in their 10-Q filing.
Our recent financial performance has been negatively impacted by a series of revenue charge backs from our advertising network partners in our non tax related, search business, due to traffic quality. The revenue associated with these charge backs also has significant corresponding traffic acquisition costs that are often not recoverable from our traffic partners. Revenue credits recorded for the three and nine months ended September 30, 2011 were $217,000 and $596,000, respectively, and $364,000 and $601,000 for the three and nine months ended September 30, 2010. As a result, we substantially reduced our marketing efforts in our search business in the fourth quarter of 2010 and reduced our cost structure accordingly in an effort to become less reliant on this business line during the off U.S. tax season. Our decision to reduce our reliance and exposure in our search business resulted in decreased search engine marketing efforts and a reduction in our revenues for the period ended September 30, 2011. We expect that our reduced emphasis on our search business will continue to adversely impact our revenues for the foreseeable future. As a result, we are focused on increasing our revenues from sources such as tax preparation, tax extension and stock brokerage services and reducing our traffic acquisition costs through search engine optimization efforts and other internally developed analytics. Our ability to grow also depends on our ability to continue to increase the number of advertisers who use our services and the amount these advertisers spend on our services.
In short. Banks.com feels they need to stop relying on Google for revenues and move to a self generation model. Instead of paying for traffic they want to improve SEO (don’t we all) and generate more tax prep revenue. It seems they want utilize Google to generate revenues, they just don’t want to pay to do it. Either way they are relying on Google. One last interesting piece of data includes the value they put on their domains (and other intangibles). They are valued at $9.8 million. I think it’s a pretty fair assessment considering their two best domains, banks.com and irs.com. They also own a few others like easytaxreturns.com and بنوك.com which is banks.com in Arabic. Take those assets away and the balance sheet gets pretty ugly.