Dot-Com Survivor CafePress Shows IPO Profit and No One Cares
Pity poor CafePress. Just hours after filing papers with the SEC for an IPO, this profitable dot-com with a functional business model was eclipsed by the unconfirmed rumor that Facebook also had set a date to go public.
It's a shame because CafePress -- the web service that lets you buy customized T shirts, hats, mugs and other junk -- has done almost everything right. It's a contrast to more high-profile offerings from Pandora and Groupon, neither of whom show any indication of losing non-profit status anytime soon.
In 2010 CafePress made a profit of $2.7 million off $128 million in sales. In Q1 2011 it saw a loss of $831,000 on sales of $32 million. It's been largely profitable for the better part of a decade. Rather than congratulating management for surviving the dot-com bust and the credit crisis and still finding a way to make cash from discretionary purchases, the tech press has greeted the IPO with the equivalent of a golf clap:
Right now, CafePress is a $127 billion business, and it's got some growth ahead of it obviously. But is it ever going to be a $1 billion business?
... while the company's financials are certainly solid, one could argue they're not exactly spectacular.No, it's not going to be a $1 billion business, obviously. What a ridiculous statement. It's a T-shirt company. That question is like asking American Apparel (APP) if it's ever going to become a $1 billion business.
Goosing its numbers
Having said that, there are signs that CafePress has been goosing its numbers a little bit to make itself look better than it is for new investors. Its sales and marketing budget increased 86 percent in Q1 2011 to $8 million, following a 50 percent increase for FY 2010. That marketing budget is not large in the grand scheme of things but almost all of it is spent on the web to acquire new customers. For a digital ad budget, that's a very large account.
The move led to a big increase in sales, up 24 percent in 2010 and up 46 percent in Q1. It came at a cost, however. The more money CafePress threw at web advertising the less successful its ad dollars became. Here's a quarter-by-quarter breakdown of how many dollars in revenues were earned by each dollar CafePress spent on sales and marketing (note the Christmas spikes every fourth quarter):
If it is to remain profitable, CafePress will need to exercise a little more marketing discipline in the future.
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