The shareprice will rise gradually throughout the remainder of...

The shareprice will rise gradually throughout the remainder of this year IMO for the following reasons:

1. Incremental revenue growth
Consistent incremental increases will increase institutional interest, and the timeline to profitability will become evident in the first half of this year IMO.

2. Less reliance on partners
Since LOK are becoming more reliant on their own traffic and technology licensing revenue, results will become more predictable, and LOK will be less affected by rises in TAC.

3. Increased margin
All the growth in Q4 came from LOK's new revenue streams and owned traffic, and it even offset the higher TAC. As more and more revenue comes "TAC free", the % increases per quarter will increase, until TAC only applies to 30-40% of LOK's revenue.

4. Profitability on the horizon
After a couple of quarters of consistent revenue increases, we will be able to extrapolate a timeline to profitability. As the high margin new revenue streams kick in, it will become evident to the market that Piper Jaffery's revenue prediction for profitibilty is in fact very high of the mark, providing upside. I would estimate profitability at around 16m revenue per quarter given the new model.
ALTHOUGH PROFITABILITY COULD BE 3-5 QUARTERS AWAY, THE SHAREPRICE RISE WILL START AS SOON AS THE TIMESCALE IS EVIDENT. This is likely to be during the next two quarters IMO.

5. Visibility
As LOK becomes more reliant on its own traffic, there will be more visibility and less surprise. Whilst partners can be kept confidential from the market, own traffic trends can be monitered by anyone with access to rudimentary tracking tools.

6. Publicity
Just as "tagging" was the hot topic of 2005, vertical sites may well be in 2006. Hills has already got out there and established himself as an authority on the subject. Expect more of the same in 2006.

7. Increased CPC
The vertical strategy is ALREADY working. LOK's own network generated enough high-margin revenue in Q4 to offset the TAC increase, and provide a lower loss per share DESPITE the higher TAC.
As these verticals get more traffic, CPC will undoubtably increase over this network. So not only will growth come from more traffic, but also from higher monetisation of existing traffic via higher cpc.

8. More advertisers.
Higher cpc means advertisers are getting results. This will result in more advertisers, and in turn, higher cpc.

All in all, there is plenty of upside on many of the 2006 predictions we are seeing here.
The main factor to look at I think is that as TAC affected revenue becomes less of a percentage, the total revenue required for profitability drops dramatically. Do some modelling - see for yourself.