Andy, I am not very concerned about accounting here. It is a big...

Andy, I am not very concerned about accounting here. It is a big unknown if JIN is going to boost earnings by overstating intangibles. But with marketing costs expensed in one and a half years, there is hardly any wriggle room. As to the disclosure, I have read some articles about Groupon, one of the largest IPOs in this industry, it did not disclose anything about customer churn rate neither. Regarding the customers base, again, this is a question I am not in the position to answer. By experience, it should be a combination of both increasing ARPU(average revenue per user) and customers.

As to website valuation, I can only guess, so do not take it very seriously. I think website valuation services are valuing websites on the basis of monthly unique users. That said, as those users are gaining scale, the websites are becoming more valuable. The valuation also tends to increase faster than the users' quantity. So it is no wonder OZ is worth a lot less because it has so little unique users.

However, the reason people were using the method above is because there were no other way to do it. 10 years ago, when almost no online businesses were profitable, how do people assess its businesses? And when Facebook is not profitable, how do you guesstimate its vale? Ultimately, all valuation comes down to how much future cash flow an asset is going to bring you. Do not take those valuations too seriously, IMHO.

I spent almost nothing on lottery although my wife does it all the time, so it is hard for me to imagine if anyone wants spend 30 dollars a week.... for lotteries. Many customers like my wife chooses a number and buys it all the time. A similar customer on JIN's website would setup the number and let it roll week over week until the setup was cancelled. Customers of JIN do not spend a lot of time on the website but the revenue is quite sticky(only my guess). It is hard to switch to a new website if there is no motivation, i.e. lower price. Sadly, we are all slaves of our own habits.

Did you check how much revenue Tats has online? I read the annual reports but did not remember the numbers. It is funny to mention the EX-CEO of Tats is now sitting on the board on AMA. It gave me a cue since why the hell a guy who used to run a 2 billion company wants to sit on a board of a company like that.

I think ultimately, the outcome is decided by how much value OZ can add to Tats. Tats' motivation is very simple. Because almost all costs are fixed, the marginal cost to sell a new lotteries is declining fast, which means it becomes far more profitable when one more ticket was sold. So JIN will benefit Tats in 2 ways. First, JIN will generate revenue Tats could not. It means a large part of JIN's customers were out of the reach of Tats. But since Tats has its own website, there is a real possibility that Tats wants to force JIN out and try to migrate the users to its own websites. Second, JIN's more effective at marketing for the online lottery market. This is a statement based on common sense, not data. It is a fact that Tats wanted someone to open the online market for them instead of venturing into a whole new space. I think JIN added tremendous value to Tats on this side.

With all these in mind, we can try to predict how things will evolve in 3 years. If Tats decides to not to renew the contract, it faces risks of losing revenue. Tats gives 9% as commission. If JIN is forced out, it is very unrealistic to assume that all customer will migrate to Tats even though Tats will be the only alternative around. I guess a lot of players are marginal, meaning they probably played because JIN offered the convenience. So Tats will be facing the risk of losing revenues, and this is the last thing it wants since Tats cannot even estimate how many percent of customers it will be able to retain. So the more revenue JIN generates, the harder for Tats to get rid of it.

I think there are two outcomes mostly possible. First, JIN's overseas business really starts to take off. In this case, Tats has no choice but to continue the contract. It will be a super home-run for shareholders at current price. Second, if JIN has no other revenue sources, Tats then has the bargaining power to either demand lower commission or acquire JIN. Lowering commission is kind of infeasible because the commission is standard. If Tats chooses to acquire JIN, it will 1. get the cusomters 2. get the technology 3. boost profits at this dirty cheap valuation. But I doubt Mike will give up so easily without a good fight. It will be all about negotiation.

Andy, JIN is a very good risk/reward in my opinion. I have around 4-5% of money attached to it. I think at some point in the future, the management will start buying. That is when something is bound to happen. And that is the ultimate signal that we should back up the truck.

I am still waiting.