Ann: Prospectus, page-7

If I've understood their investor presentation MPire are essentially a middleman - sitting in between their advertising customers (who pay to advertise on their network) and the Affiliates / Publishers who drive traffic to advertisements or run ads on their sites. (The Advertisers sites and affiliates ARE MPire's "network")

It might help to consider it as similar to the Google display ads - exactly like the ones that run on the top banner of HotCopper you're looking at now. (And the side banners too for that matter!)

So, an "Advertiser" (e.g. Commonwealth bank, Coles, a share advisory service, etc.) buys ad space from Google and agrees to pay a $$ amount per "click" they receive - usually to drive potential customers to their (the advertiser's) website.

In this example, HotCopper is the "publisher" of the ad and they receive a share of the click $$ revenue from Google. In the Google case, they may split the revenue 50/50 or 80/20 - don't know - but it's made Google a billion-$$$ company - and that is operating on a Cost-Per-Click model.

MPire operate in the Cost-Per-Action space - which is much more profitable. Instead of paying for "clicks", they focus on people actually taking some form of measurable "action" - e.g. fill in a form, or request a sample product, etc.

Whereas simple "clicks" are typically low-value (e.g. worth under a dollar) - because the customer might get to the website and then leave - Cost-Per-Action values are orders of magnitude higher, as they are much more valuable to the business - they typically represent a qualified prospect.

So - MPire's operating margins are essentially the difference between the amount their advertiser's pay per action, minus whatever percentage they pay their affiliates / publishers for delivering the customers. Their Cost-Of-Sales would be higher than a "typical" company, and they may not need a large sales force of their own - as they could run online ads to attract new customers to sign up on their platform and/or new affiliates / publishers.

Hopefully this puts the costs into some perspective.

The upside of this business model is that the profit margin is "baked in" to the model, and as their network grows, it becomes easier to attract new customers and new affiliates / publishers. And the more the network grows, the more "conversions" they achieve, driving more revenue. Bit of a virtuous circle.

So - once their profits are covering their fixed costs (office, salaries), I expect the business profits will scale very well. Certainly worked out ok for Google.

Well worth reading through the investor presentation - explains it in more detail than I have and with pictures. Investor Presentation (HC)

Hope this helps - naturally DYOR