Controversial online video advertising agency Blinkx lost more than half its value on Wednesday — in little more than a blink.
Shares in the London-based agency fell 46.2 percent after it warned preliminary results for the second quarter were “below management expectations.”
The market’s swift and violent reaction to Blinkx’s warning speaks to investor skittishness over the largely unregulated but irresistibly fast-growing business of online video advertising.
For Blinkx in particular credibility has been hampered by a Harvard professor’s blog in January that insinuated its outsized profits came from its use of “adware, forced-visit traffic, and other black-hat practices.”
The blog, by Ben Edelman, stirred controversy not only because of its revelations but because a couple of unidentified and possibly short-selling hedge funds had financed the investigation that uncovered them.
Blinkx, with offices in San Francisco, said revenue increased only 5 percent in the quarter and that Ebitda, or earnings before interest, taxes, depreciation and amortization, came in a little light.
The performance may not seem debilitating for a company that in its most recent year reported Ebitda of $40 million on sales of nearly $250 million. A Blinkx spokesman, however, admitted the entire industry was under watch.
“There are a number of very serious category-wide issues that have to do with supply, transparency, click fraud, malware and others,” he said. “It’s also a nascent and very fast-moving industry, where the rules change every six months.”
And while the spokesman insisted Blinkx had moved past the blog “philosophically” — a 14-page publicly issued rebuttal addressed Edelman’s charges point by point — “the reality is there’s still a lingering, residual and commercial effect.”
Blinkx shares closed at 31.50 pence, down 52.1 percent.