If you build it, they will come
This iconic phrase from Field of Dreams captures the essence of LBG Media PLC (AIM:LBG)'s success in crafting content that not only draws audiences but also attracts global brands to its innovative platforms
In the film, Kevin Costner’s character, Ray Kinsella, builds a baseball diamond in a cornfield that draws in players from the past- a symbol of how creating something valuable attracts an audience.
This philosophy aptly fits LBG Media, the digital media group behind LADBible and its offshoots, which has created an irresistible draw- not just for audiences, but for blue-chip advertisers seeking meaningful connections with the hard-to-reach young adult demographic.
LBG’s success with its viral Snack Wars series showcases this approach. The hit format features stars sampling local snacks and has scored hundreds of millions of views.
Euros success
Snack Wars’ appeal came into sharp focus during the Spain vs. England Euros final over the summer, when the series attracted a seven-figure deal from Uber Eats featuring football pundits Micah Richards, Thierry Henry and Jamie Carragher, and presenter Kate Abdo.
This partnership brought to the fore LBG’s strategy of ‘building bigger briefs and deeper relationships’ using popular content to cut high-value advertising deals.
It was one of several seven-figure deals done in the first half of 2024, where LBG’s revenues surged by 55% to £42.3 million, while adjusted EBITDA soared by 240% to £10.2 million.
Such results underscore the effectiveness of a model that combines audience engagement with premium content and strong client relationships.
Notably, repeat business accounted for around 75% of LBG’s Direct revenue in 2023, highlighting the trust and value the company delivers to its blue-chip clients, including Nike, Disney, Visa, and Diageo.
For those unfamiliar with LBG, though aware of its, well, rather ‘laddish’ roots, the company has evolved while maintaining its quirky, irreverent, and humorous tone.
Significant player
CEO Alexander ‘Solly’ Solomou regularly describes LBG as a “champion of the environment, mental health, under-represented communities, and protecting women and girls”. This shift is more than tonal; LBG is emerging as a significant player in digital media, unburdened by legacy assets like magazines and newspapers.
LBG’s success is underpinned by its talented team of around 500 people, working across offices in Manchester, London, Dublin and New York. Together, this global workforce drives the company’s creative and operational excellence, reaching a global audience of over half a billion.
In 2023, its videos amassed 128 billion views, and LBG maintained its leading position in the elusive young adult demographic, a sweet spot for advertisers.
The company’s business model strikes a balance between its two core revenue streams: Direct, working with clients such as Nike, Disney, Visa and Diageo, and Indirect, so-called because income is generated via third-party platforms rather than directly from brands.
The Indirect operations leverage third-party platforms like Facebook, Snapchat and YouTube as well as programmatic advertising on its own websites.
Diversified revenues
Facebook remains a cornerstone of LBG’s operations, but its owned platforms are increasingly contributing to a diversified and resilient revenue base.
By the halfway mark of 2024, Direct revenues accounted for 52% of turnover, up 11 percentage points year-on-year, putting the company firmly on a path to achieve its goal of £200 million in annual revenue.
Organic growth has been robust, but the top and bottom lines have also benefited from a full six-month contribution from Betches Media, acquired just over a year ago for an initial $24 million.
Besides being a “highly accretive” deal, it expanded LBG’s footprint in the US — the world’s largest advertising market — with a focus on millennial and Gen Z women adding a further level of diversification and diversifying MBS’s appeal.
LBG has signalled its appetite for making further acquisitions and analysts expect the company to start exploring opportunities in the coming year as Betches continues to integrate. A market ripe for consolidation will likely offer ample opportunities when the time is right.
A change to the company’s financial year-end has led banks and brokers covering LBG to keep their current forecasts intact for now.
Increased valuations
However, it’s noteworthy that four out of five analysts polled increased their price targets for the stock, citing growing confidence that the company will hit its revenue and profitability targets.
Year-to-date, the stock has advanced 65%, pleasing investors who bought in at the start of January. But as Investec points out, the current share price values the business at around 11 times EBITDA, which is a discount to the sector and a big gap compared to big players like Meta.
“We believe there is significant upside in the equity story in the medium term, given the scope for consensus upgrades and more fundamentally given the role of LBG as a leading global entertainment business,” said Investec in a note. “It remains a key sector pick for 2024.”