Ziff Davis: The Internet’s Invisible Toll Booth – QAV America #32

In this episode of QAV America, Cameron and Tony open with reflections on the tragic Bondi attack and Australia’s long-standing gun laws before turning to the week’s U.S. stock market action. They discuss recent market jitters, AI-driven volatility in tech stocks, and the ongoing rotation into “value” names. Cameron then delivers a deep dive on Ziff Davis (ZD) — a little-known but highly profitable owner of the internet’s comparison-shopping and review infrastructure. The conversation explores ZD’s long history, its reinvention after the dot-com crash, its heavy reliance on SEO and affiliate monetisation, and the existential question hanging over the business: will AI replace human-driven product reviews? Rather than forecasting the future, the episode frames ZD through the QAV lens — cash flow, valuation, optionality, and downside protection — and examines why a business that looks structurally threatened may still offer attractive value today.

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00:00 – Australia, violence, and context
Reflections on the Bondi tragedy, Australia’s gun laws, and why mass shootings remain rare compared with the U.S.

01:40 – U.S. market news: jittery but selective
U.S. indices drift lower as investors wait on jobs and inflation data; discussion of “value” rotations and why index definitions of value differ from QAV’s approach.

02:40 – AI stocks wobble
AI-linked stocks pull back sharply, with Broadcom (AVGO) highlighted as suffering its worst three-day decline since 2020.

03:30 – Commodities and energy signals
Basic materials outperform; copper strength linked to data centres and electrification; weakness in oil and LNG despite geopolitical tensions.

04:30 – QAV America portfolio performance
Short-term underperformance versus the S&P 500, but strong long-term outperformance since portfolio inception in September 2023.

05:00 – Winners, laggards, and watchlist highlights
Review of top portfolio performers and notable stocks previously covered but not purchased.

07:30 – Deep dive : Ziff Davis (ZD)
Introduction to Ziff Davis (ZD) and its role as the hidden infrastructure behind tech reviews, VPN comparisons, speed tests, and product rankings.

[00:00:00]

Cameron: Welcome to QAV America. Tony, episode 32. What do you know? Tk?

Tony Kynaston: Well, it’s reached the shores of America and America’s new outlets, but it’s been an unfortunate. Well, worse than unfortunate time in Australia. So, um, a lot of, uh, reflection going on in Australia over the terrible things at Bondi Beach. I had lived in Sydney where I was living, uh, we would’ve been pretty close to it.

Cameron: Yeah, very shocking. Um, I think it’s maybe the third mass shooting we’ve had in. Nearly 30 years.

Tony Kynaston: Mm-hmm.

Cameron: Does that sound about right?

Tony Kynaston: Yeah. I can only think of poor Arthur and this one being that bad as being a couple of. know, sort of murder, suicide things, farms or whatever along the way. But this is the first,

Cameron: Yeah.

Tony Kynaston: uh, with, you know, weapons that shouldn’t have been licensed, I don’t think in the first place to people.

Cameron: In public,

Tony Kynaston: Mm-hmm.

Cameron: you know, civilians, uh, all of that kind of stuff. The first one [00:01:00] like that, since 1996. That we’ve had every 30 years. So yes, very shocking, very sad, very tragic, very complicated. Very complex. Uh, but, um, yeah, it’s something that we’re, we’re used to reading about in the front cover of the New York Times, but not, uh, about Australia.

So anyway, moving right along. Um. Let’s talk about stock market news in the United States over the last week, Tony. And then I will do a deep dive on Ziff Davis. ZD is the ticker

Tony Kynaston: Would that be

Cameron: as IZD. Yeah, ZD you’re right. And as I mentioned, there’s an Isaac Asimov, uh, leak to this, which you will enjoy ’cause they’re both big fans of Asimov.

Tony Kynaston: Mm.

Cameron: Well, the market’s been a little bit wobbly in the US again. Uh, finished the week with modest [00:02:00] losses s and p 500. The Dow and the NASDAQ are all trending. Lower traders over there are waiting for key economic reports on job and inflation. Um, stocks saw pressure as investors are moving into. Value area, Tony?

Value.

Tony Kynaston: Oh, we can, got someone to sell to.

Cameron: Yeah. Although quite often what we’ve seen over the years is when they talk about value, it’s not the same way that we talk about value.

Tony Kynaston: not.

Cameron: Our definition of value is a little bit more specific. I think

Tony Kynaston: Yeah.

Cameron: the AI.

Tony Kynaston: the indices normally talk about value as being the lowest deciles of the PE ratio range, but as we know, PD ratios aren’t a great guide to the value of a company

Cameron: yeah.

Tony Kynaston: mm.

Cameron: We’re looking, we’re looking at their ability to outperform, uh, as businesses and getting a bit of discount. [00:03:00] What else? AI and tech sectors, uh, sort of jittery as a result of some of this stuff. Some AI linked names like Broadcom have had some big declines. It had its worst three day drop since 2020 was some of the AI investment narratives, uh, facing some scrutiny.

Basic materials and financials have outperformed. Uh, in our Australian show, we were just talking a lot about copper. And, uh, you did a deep dive on one of the Australian copper miners. There is resources, obviously there’s, uh, gold is still doing well from a commodities perspective. Uh, prude oil and LNG are not doing well, and we aren’t really sure why.

But movements around Russia, Ukraine, and Venezuela might have something to do with it. And we also we’re talking about the fact that all of the. Urgency around building data centers and the energy requirements for data centers. Uh, playing a big role in driving copper prices up. [00:04:00] Um, what else have I got?

That’s basically it for the us I think, uh, general overall market news, it’s a bit jittery over there at the moment, but our, before our portfolio has had a good 30 days. Relative to the s and p 500, it’s up 3.2% in the last 30 days. Our portfolio in the us, that is versus 1.22% for the s and p 500, but year to date, we haven’t had a good year.

Still, I think we’re down about 10, 11% versus the s and p up 14%. But, uh. All time. If I go back, since the beginning of our portfolio in the us, September, 2023, we’re up 64% versus the s and p 500, up 53% over that period of time. So we’re doing okay over that two plus [00:05:00] years.

Um, big performers in our portfolio, uh. See, I’ll stack rank and by game still, Willis Lease Finance Company up 186% in Nova International, up 169% Euro Cs up 99% BLX. The Foreign Trade Bank of Latin America is up 84%. RM Regional Management is up 70%. UBS is up 38. Gas, stealth gas is up 37, 30 8%. Sarcos Energy Navigation.

TEN is their ticket. They’re up 32%. KT is up 23%. Your initials in reverse. Jackson Financial is up. 17. Renaissance Air Holdings is up four, and our most recent acquisition career Electric Power is up one and a half percent since we added it a few weeks ago. And then I like to talk [00:06:00] about the companies that we’ve talked about but haven’t actually bought because our portfolio is full.

Uh, it’s been some great performance, uh, from these companies. Obviously the top one Zep, the Chinese watch company, uh, is up 850% since we talked about ’em in July. Uh, ChemX is up 106% since we covered ’em back in March. Lot of around 40% Canadian imperial banks, up 46, uh, ORX corporations up 40. Precision Drilling is up 43 IHS is up 37.

Sasol is up 26. Ford is up 26. People told me on Reddit that Ford was a dud, shouldn’t, shouldn’t even be looking it for, it’s up 26% since May. American Airlines is up 11% since we talked about ’em. Topgolf is up nine air cap that we talked about. The end of November is up [00:07:00] 8% since then. So all in all, uh, we’ve talked about 29 companies on the show since March 22 of them are up, seven are not the win ratio of 76% so far with those.

So. They’re doing okay. The system is working as we would expect it to in the us Tony. So today I am going to talk about a little company called Ziff Davis. As I said, um, you know, you’d be familiar with Ziff Davis, I’m sure. I know you’re not necessarily a big tech head, but you, you’ve heard of Ziff Davis, I’m sure zd.

Tony Kynaston: You’d lose that bet. I hadn’t heard of ’em until I started researching them today.

Cameron: Really? Oh, okay. Well, you haven’t been in the tech industry like I have for the last 30 odd years.

Tony Kynaston: no.

Cameron: you are,

Tony Kynaston: But wasn’t there once, but not, not for a long time.[00:08:00]

Cameron: yeah. So if you, if, if you are trying to Google the best tech product, uh, best VPN because you care about your privacy, you’re probably gonna end up on a Z Davis. Um, which cameras should I buy? Ziff Davis. Which phone? Which anti forest package. If you’re ending up on a website, you’re probably ending up on one of the many, many properties owned by Ziff Davis.

Tony Kynaston: I

Cameron: They make about half a, yeah, I mean, I am your Ziff Davis. Yeah. What should I get then? I’ll ask Ziff Davis and then I’ll come back to you and tell him. Um,

Tony Kynaston: so

Cameron: a half a bill.

Tony Kynaston: that

Cameron: Hmm.

Tony Kynaston: you are not your surplus to the chain. Now I can just, uh, yeah, speed things up.

Cameron: Yeah, but then you, that would, that would require you going online and looking something up. So how old are you now?

Tony Kynaston: That’s

Cameron: 60. What? Yeah. Yeah. So people are over 60. Dunno how to dunno how to [00:09:00] internet like us young kids. 55. You miss the cut. Uh, they make about half a billion dollars a year by. Basically being the people that tell you what to buy.

Uh, particularly with tech stuff. It’s not all tech, but particularly tech. But they’ve got an interesting story and, uh, uh, uh, an interesting, maybe somewhat challenging future. Ai, uh, may kill off businesses like this. Uh, and I think that’s one of the reasons why the share price for ZD is where it is at the moment.

And it’s funny, if you look at where their share price has gone since the AI came around it, there’s not been a great story. They were up around about 130 bucks at the end of 2021. They’re now trading about 36 bucks. So it’s been a rough few years.

Tony Kynaston: you reckon that’s a R related camp?[00:10:00]

Cameron: I think some of it is. Yeah,

Tony Kynaston: Because

Cameron: I think.

Tony Kynaston: of it may be, but um. The, don’t forget, they’re also publishing a lot of magazines and, uh, online magazines and businesses associated with those. And they were, they would’ve been at their peak during COVID, I would’ve thought. And now they, the share price has come off since then.

Cameron: Yeah, there’s probably some of that. You’re right. Um, and you know, there’s a lot of competition for online advertising and, uh, a lot of money’s moving away from. Banner ads and that kinda stuff into influencer marketing and that kinda stuff. So there’s always constant competition for ad dollars. And these guys were one of the first companies to figure out SEO advertising driven.

Well, they borrowed it from the porn industry. The porn industry invented online advertising, of course, but these guys went broke and then figured it out pretty quickly. [00:11:00] They basically own the Internet’s comparison shopping infrastructure brands like cnet, Mashable, IGN, which is mostly gaming related stuff.

If you’re looking for a game review or a walkthrough for a game like No Man Sky or something, whatever the latest game is, you go to I, you’ll end up an IGN speed test.

Tony Kynaston: haven’t heard of him.

Cameron: Yeah.

Tony Kynaston: Yeah.

Cameron: S speed. I don’t think they published any golf magazines, Tony. Yeah, something like that. Jigsaws and golf. If they had magazines about jigsaws and golf, you’d know all about.

Tony Kynaston: And crosswords.

Cameron: Speed test. Have you ever used speed test to check your internet speed?

Tony Kynaston: because occasionally when we try and do this podcast, you go check you internet speed

Cameron: It’s been a while. Ever since you got, uh, Elon’s satellite dish here, that’s gone away. Uh, they, they own all these guys. They own all of these brands. Um, and when you click a buy now link on one of their [00:12:00] websites, they get a cut. They also get advertising revenue straight into your eyeballs, but. Uh, the way that they’ve built their business is, a lot of it is kind of evergreen.

You write, once you do a review of all of the different routers or all of the different microphones for podcasting or whatever it is, and it’s good for, it’s not like news, which goes outta date quickly. This stuff is good until the next iteration of those things come out. So it’s good for six months, 12 months.

And they monetize the crap out of this stuff. Operating cash flow is about 374 million against a market cap of 1.4 billion, so like a 3.8 times multiple. Um, it’s, uh, generating a lot of cash. The founding story is interesting, so it goes back to 1927 in Chicago.

Tony Kynaston: before the internet camp?

Cameron: Um, well. Some people would say that Tony, although I would argue that [00:13:00] pigeons were the original internet.

So the pigeon net is what we called it back in the day. Yeah. They were publishing hobbyist magazines for, uh, amateur radio tinkerers is where they started. And then in the PC era, they had PC magazine, computer shopper, popular photography, lots of titles like that. But then they nearly died in the early two thousands after the.com crash.

They were drowning in debt. They bought a lot of stuff in the late nineties. Ad revenue disappeared when. Steve Baer decided to crash the internet. Allegedly. It’s a story that I believe assets were sold off for scraps, uh, but the brand survived and it was reinvented around being a purely online play. But the founding guys, William Bernard Ziff Senior, and Bernard George Davis, [00:14:00] started at 1927.

Davis died in the early fif, no sorry, Ziff Senior died in the early fifties, uh, I think, and then his son took over the, his share of the business and Davis sold his share of Z’s son in 1957. Davis then went on to buy Alfred Hitchcock’s Mystery Magazine in 1975 and analog science fiction. In fact, in 1980.

And in 1977 he launched Asimov’s Science Fiction. And I read a bit about that ‘ cause it has nothing to do with this story, but I wanted to know about it. So as AOV. Went into the company to pitch, um, a story that he had written for their analog science fiction magazine, I think. And they had, they, they floated this idea of launching a science fiction magazine with his name attached to it, [00:15:00] and he didn’t wanna do it because there were other, there was a couple of science fiction magazines and he was friendly with the owners of them and he didn’t wanna damage their business, but.

Davis and the owners of the other magazines convinced him that his brand on a science fiction magazine would be good for the whole industry. It would be a rising tide carries all ships kind of thing. So he agreed to do it as long as he didn’t have to do anything. I don’t wanna have anything to do with it except I’ll write a, an article or an editorial or something like that once a, a month or whatever it was.

So, yeah. And that’s how it came to be.

Tony Kynaston: wasn’t that our conversation starting up QAV?

Cameron: Pretty much, yeah, I don’t want anything to do with it. Use my name. Um, uh, getting back to Ziff, senior Major Zionist, who got himself into trouble with the British government in 1938. He wrote a book called The Rape of Palestine, where he was [00:16:00] criticizing British. Policy in, uh, Palestine when it was, uh, the, a protectorate of the British after World War I, the British Foreign Office declared the book violent and offensive and put him on a watch list.

So, uh, interesting character. But anyway, it was his son, Ziff Jr. Bill Ziff Jr. Who redirected the company towards enthusiast magazines and trade publications. He bought Car and Driver Popular Electronics, P PC Magazine, world Aviation Directory and Computer Shopper. But then, as I said, it kind of, uh, crashed in the early two thousands after the.com crash.

They had to reinvent the business over the next 10 years and uh, some private equity owners came in, rebuilt it around online only SEO driven digital content, evergreen revenues, affiliate commerce. They realize that [00:17:00] people don’t trust ads, but they do trust best of lists, even though those best off lists.

It’s just a big ad, but if you call it a best of list, you know, people will believe it if they think it’s a genuine, independent review and they don’t realize that it’s just how much money’s changed. Hands behind the scenes that determines who’s at the top of the list.

Tony Kynaston: Isn’t the internet just a series of loose, like the

Cameron: Yeah,

Tony Kynaston: real estate, car selling, they’re just loose because

Cameron: lists.

Tony Kynaston: Used to buy

Cameron: Lists of lists.

Tony Kynaston: the internet.

Cameron: And Google was just a list of lists, telling where all the lists were.

Tony Kynaston: yeah.

Cameron: remember back in the days when the lists were all manually compiled too, and you had to submit your website to Yahoo and then they would add you to the list of blogs about Seinfeld or whatever it was. Um, but these guys have become really good scavengers as well.

Give you an example of this. [00:18:00] In 2008, CBS bought CNET for $1.8 billion in 2020. They sold it to Red Ventures for $500 million, and then Ziff Davis picked it up a few years later for a hundred million dollars. So that’s kind of been their playbook is buying faded digital. Empires for pennies. Then they strip out the costs, plug them into the monetization engine, and just harvest the cash that’s left.

They don’t chase Pulitzers. They chase Google rankings and purchase intent. Basically very, very focused, and they’ve done reasonably well out of it. But I think there’s a big chance AI is gonna kill this business today. People don’t trust AI to, uh, tell ’em what to buy. Um, I [00:19:00] do, but most people don’t. Um, I will ask AI for, I’ll, I’ll ask GPT for an its opinion on something, and then I’ll run it through Gemini and Grok and Claude and say, fact, check this for me and tell me what you think.

But I think most people aren’t doing that yet. They may ask AI for some tips, but then they’ll end up on a Ziff Davis website to read reviews. And, you know, that’s still the, the purchasing mechanism for them is going to these review sites. Most people still run a trust loop. You know, it goes from AI to a review site.

Tony Kynaston: Yep.

Cameron: That may change in the future if AI becomes trusted enough and then becomes the purchasing agent. And obviously the AI companies are trying to figure out how to make money. There’s been talk recently that they’re all planning on putting advertising into the AI AI platform. And as Cory Doctorow o refers to it, the in acidification [00:20:00] of, uh, AI will happen.

But it that may or may not. Happen. And even if it does, there may be an opportunity for companies like Ziff Davis to get licensing revenue because at the end of the day, the AI is gonna refer to these human written reviews and say, well, based on. The internet that I gobbled up here were the best rated products.

Um, it’s not testing the latest mobile phones or the latest microphones itself. It’s gotta rely on human content at some level to do that.

Tony Kynaston: There is actually a core case going on between this company and one of the AI about that very fact.

Cameron: Yeah. As there are with lots of media companies and publishing companies, et cetera. And, um.

They’re probably not gonna win. The publishers aren’t gonna win these court cases, but they may be able to negotiate some sort of a licensing [00:21:00] revenue deal. So they cut their losses so they don’t lose everything, but they get something out of it. Bit like, uh, the media companies in Australia have done with Google over the last however many years, and Facebook, you can link to our stories if you pay us money.

Uh, and then they got the government to enforce that. Which again, corporate socialism get the government to force you to pay me money. But this is, um. You know, it, it, where, how this plays out is forecasting and we don’t forecast. Um, I got into arguments with people on Reddit about the valet show that we did last week.

People were forecasting the future of iron ore and China and all of this, and that’s gonna fail and this isn’t gonna work. And I’m like, yeah, well, I don’t forecast. I look at the numbers today. And, uh, the [00:22:00] valuation today and ask myself, can I buy it based on its amount of money it’s generating today? Can I get it at a discount?

I’m not looking for growth. I’m looking for value. And if, if the thing changes a year from now or six months from now, I’ll sell it. I’ll change my position on it, but you.

Tony Kynaston: And of course the forecast. people who argue with you are using it bugged into the share price already, but at some point it, it’s our list as being cheap enough that things have gone too far one way, and then we wait for the pendulum to swing back to what it should be valued at. Taking all the forecasts and the actual things that have happened into account.

Cameron: And as, as we see quite often too, um, in some cases it’s not because those businesses that we’ve invested in have a magical recovery. It’s because somebody else comes along and goes, you know what? This is cheap. I’m gonna buy it. And then a bidding war starts and the price goes up, and they’re all trying to figure out what’s the fair value of these assets.

And because we’ve bought it less than the [00:23:00] fair value for the assets. The share price goes up and it gets sold, and we, we do well out of it. So we’re not always necessarily planning on a miraculous recovery of a sector. It’s, uh, some, sometimes we’re just buying something until

Tony Kynaston: Yeah.

and

Cameron: dealt with.

Tony Kynaston: I

Cameron: Yeah,

Tony Kynaston: case we said, Hey, the iron ore price is going down, so we track the iron ore prices well, so we wouldn’t necessarily be buying valet at the moment.

Cameron: no. Until the iron oil price turns around. If it turns around.

Tony Kynaston: Yeah.

Cameron: But I did, I did go through some of the potential scenarios for a company like this. Then there’s a few things that you know, you can imagine might happening. Let’s say the AI. Uh, sector does break these businesses to a large extent, uh, which I think will probably happen.

That would be, my guess is people will end up in the next few years trusting their AI to make decisions for them, which, [00:24:00] and even if it is using content, it’s gobbled up from Davis. I’m not going to the Zif Davis website. I’m not clicking on their link. I’m not clicking on their thing. I’m going straight to Amazon or straight to.

Walmart or whatever the Australian equivalent of that is. Amazon to buy the thing that I want.

Tony Kynaston: goes away and I wanna buy a new phone, know, how does AI tell me that this one’s easy to carry in my pocket or is too heavy a long day on my feet carrying this around or whatever it needs, still

Cameron: Reads,

Tony Kynaston: doesn’t it?

Cameron: reads, Amazon reviews would be be my guess.

Tony Kynaston: Oh, okay.

Cameron: Yeah. Reed’s customer review sites, you know, you were talking about wisdom of crowds on the last show and poly market. You know, there will be. There are, and there will always be. Review sites and they get gamed as well. But they’re probably more trustworthy than a, if Davis best of list because you know, there, there are perhaps [00:25:00] commercial interests, gaming review sites to some degree.

We all understand that. But to what degree is debatable? Um. Uh, you know, I I, I could be pretty sure that money is changing hands behind the scenes at some level of a publishing company and the, the vendors of products to make sure that their products are reviewed. Well, it’s, uh, payola, payola from the radio industry 30, 40 years ago, right?

That’s the way capitalism works.

Tony Kynaston: Zif Davis, but I know when there’s a product review on the AFR, there’s generally an ad that goes with it.

Cameron: Yeah,

Tony Kynaston: Yeah.

Cameron: AFR for Americans is the Australian Financial Review, our version of the Wall Street Journal. So anyway, a couple of the ways this could possibly play out, and again, this is prognostication, which doesn’t factor into my investing thesis, but it’s just we’re talking about it, so we might as well.

Drill down into some of these. There’s sort of the sum of the parts breakup, the chop shop model. Um, it’s the most immediate safety net, I guess. Ziff [00:26:00] Davis is really just a holding company, so if the media side, IGN Mashable PC Mag goes to zero, they still own massive profitable software and subscription assets that have nothing to do with Google shirt.

A search, sorry. They’ve got ler, which is speed test.net. Uh, telcos pay millions for this data to prove that their networks are fast. So it’s sort of a alternate revenue stream that they have. Um, AI’s probably not gonna kill that off. They could spin it off or sell it to a huge infrastructure giant, like a, a Cisco or some sort of telecom tower, REIT.

It’s probably worth. 500 million to a billion given its dominance. It’s that. And fast.com, which I think Netflix owns are the two main ones for speed tests. Uh, and then there’s also something called humble bundle. It’s a game store and charity. Bundler has [00:27:00] direct email list of millions of gamers. It bypasses search entirely, so they could potentially flip that to a gaming giant like Steam or uh, epic Games or one of these guys as a revenue source.

So they have diversified outside of advertising, they’ve got a couple of interesting assets. The other one could be the take private. Private equity buyout, which they’ve already done. The current CEO Vivic Sha has already did that. Uh, did that a few years ago. He took it over with a private equity firm the last time they had financial trouble.

It’s basically run like a private equity firm already. If the stock price crashes because of AI panic, the cash flow could still be attractive to PE firms who don’t really care about public narratives. They just wanna get access to the 260 odd million in free cash flow that it has. Even if AI takes a lot of, it takes a lot of the advertising revenue, it’s still gonna have revenue coming in from some of [00:28:00] these other assets that I mentioned.

Um, so, you know, the, the current. CEOs already taken it private once before, um, could perhaps do it again or somebody else could come in and do it again. Then there’s sort of the data rentier pivot, the NewsCorp model, instead of fighting ai, they become a landlord for it. So they basically say, you know, we will do a licensing deal with AI to keep providing human written reviews and access to the archives.

As you said, they’re suing them at the moment. Uh, but they could end up as some sort of a settlement or a licensing deal issued by the courts where it gets paid, I dunno, 5,000 million dollars a year from open AI to keep the doors open and legally train on their content. Um, and then there’s the desperation, merger option, the consolidation, if the industry really does start to [00:29:00] collapse.

There will be mid-tier players that will try and merge to cut costs and, uh, do a sort of a big mega roll up roll up. Um, there’s a company called IAC Dash Meredith that owns the other half of the Internet’s, how to Content Better Homes and Gardens, Investopedia the Spruce. The two of them could do some sort of merger combined.

Back offices, fire, half the staff, merge sales teams, create a single giant fortress of content that’s too big to ignore for advertisers and could do a licensing deal with the AI platform. So there’s a, a lot of different probabilities even, you know, if the AI thing comes to pass in terms of killing its business model that could, uh, rescue it.

But you know, it’s probably not gonna 10 x [00:30:00] um, it’s not gonna, it’s not gonna be a Nvidia, that’s not what we’re looking for. We’re looking for businesses that are generating cash that we can buy at a discount and then have some sort of a moat, which these guys do for at least one more harvest cycle, I think.

Tony Kynaston: I mean, I, I couldn’t forecast what will happen in the space. I dunno if anyone can really, all of those scenarios you spoke about are all possible as is.

Cameron: Yeah.

Tony Kynaston: One where they keep trundling along like they are for a long time too.

Cameron: Yeah. And maybe we, the world runs outta copper. We have no more data centers. AI falls in the heat. Who knows? Um, just quickly, I’ll take us through the numbers, Tony. Uh, so average daily trade is about 22 million. So it’s big enough for most investors. A big one for us is of course, price to operating cash flow, which is 3.8 times for these guys, so it’s, uh, quite cheap for us.

Stock Edia [00:31:00] quality rank is 98. So we give it a score for that. Uh, its stock rank is very high too. Let me just find that. Um, stock rank is 97, so we score anything over 90. Uh, it’s F score, Petrovsky F score. Looking at its financial trend is a nine out of nine. I think that’s only the second time we’ve seen that since we’ve been doing this show.

Do you remember who the other one was? Me either, but Nine outta nine’s pretty good. Um, the price is above our first IV uh, inherent, uh, intrinsic value. I was gonna say internet value, intrinsic value, um, but it’s below our second. Uh, and let me tell you what the intrinsic values are. IV one is $16 and five.

It’s currently trading at 36, [00:32:00] but IV two, which is looking at the, the future. Is, uh, $68. So there’s quite a lot of upside between the current price and our IV number two. Uh, what else have I got? Uh, price is less than book price is less than book plus 30 of course as well. It doesn’t have a new three point upturn.

Actually it does have a new three point upturn. Yeah, why did my table said it didn’t, does have a new 0.3. It’s very close to its cell line, but it’s just gone above its byline as well. So I dunno. So I should get an extra point for that as well. Yield. The P is not less than the yield. They don’t pay a dividend because they’ve been doing massive share buybacks,

Tony Kynaston: Hmm.

Cameron: which is something else we like to see.

That’s where all their money is going. We don’t score our US checklist for buybacks yet, but we should. And if we did, and I, we will [00:33:00] get around to that. They get another point for that as well. Uh, so.

Tony Kynaston: that uh, with all the cash they’re throwing off, they’ve been buying back shares. Buying back a lot of shares in the last five years. But they’re also, I mean, their business model is about acquiring new things,

Cameron: Yeah.

Tony Kynaston: companies, as you said before, uh,

Cameron: Old things.

Tony Kynaston: that are on their, you know, being paid.

They’re paying pennies in a dollar for,

Cameron: Yeah.

Tony Kynaston: cash to do that, as well as buy back the stock. So that’s shows you how much cash is being thrown off by this business.

Cameron: Yeah. I dunno what they’re gonna be buying in the future, but, uh, we’ll see.

Tony Kynaston: Oh cha, GPT, uh, when

Cameron: Yeah. A reverse. Yeah.

Tony Kynaston: in the

Cameron: Well there are, there are plenty of stories going around that GP T’s gonna need. Uh, OpenAI is gonna need a US government out ’cause they’re just Yeah, yeah, yeah. Well that was [00:34:00] just because Gemini came out with a new model, but, um. I look, Google is really crushing it by all accounts, from what I can read between the lines.

Tony Kynaston: I’ve gotta say like, you know, not, not to labor a point here, but it was six months ago that people were saying, oh, Google’s dead. You know, AI’s gonna take over from Google. No. are smart enough to, you know, adapt.

Cameron: Well, you know, it gets back to the old Clayton Christensen thing, right? Of the innovator’s dilemma.

Tony Kynaston: Yep.

Cameron: Are, are you willing, and is your culture able to kill off your existing revenue base in order to protect yourself and get on the new thing? You know, the ironic thing with Google, of course, is the whole large language model, um, approach to AI came out of Google’s labs, but then they didn’t do anything with it commercially.

They didn’t launch it. As I [00:35:00] assume, because they were scared of what it would mean for their search revenue. Then OpenAI, poached Ilia out of Google, launched chat, EPT, and then Google was like, oh shit, okay, game on. And yeah, now they’re just crushing doing such a great job.

Tony Kynaston: every time you do use Gemini, you get an ad. So they’ve, they’ve monetized it as well.

Cameron: I don’t get ads when I use Gemini. Where do you get ads when you use Gemini?

Tony Kynaston: Oh, I just use Gemini. I just type into the search bar. Tell me about blah, blah, blah.

Cameron: Uh, you don’t go to Gemini. You just go to Google?

Tony Kynaston: Yeah, but it

Cameron: Yeah. Right,

Tony Kynaston: here’s the, here’s the answer using Google Gemini.

Cameron: right.

Tony Kynaston: Hmm.

Cameron: Yeah. But they, you know, their search revenue is. You know, gonna take a hit. Um, but whether or not they can replace it with other forms of revenue and you gotta hand it to Google, like obviously they’ve done a pretty good job over the last, uh, 30 years of, uh, staying on the top of [00:36:00] their game. So we will see.

Anyway, uh, what else have I got for you? That’s it. Like it, uh, uh, QAV score, quality score is 77% and they should be a little bit higher. Uh, but. The QAV score was 0.20 when I did my buy list yesterday, my US buy list. So, um, I like it. I like it. I can’t add it to the portfolio right this week because we’ve got nothing.

We’ve got no money. We’re fully invested. But, um, I kind like this, uh, business.

Tony Kynaston: I had a look at their results, their last quarterly, uh, quarter three announcement, and a couple of good things to report from that were, uh, that they started to show some organic growth. Um, so this, I think one of the reasons why the business went down in sh stock price in the last five years is that a lot of it’s been based on their m and a activity, so. They’re, they’re running to stand still. They’re buying things, they’re using capital to buy things, and that’s replacing [00:37:00] things that they’re closing down. Uh, but this has been, uh, they, they reported in their latest quarterly that the, uh, uh, recorded Goodwill impairment charges, um, which was 17.58 million for the quarter. And this has ended September 30, compared with $85 million in the prior year. So. That and Goodwill impairment is basically writing down what they’ve acquired in the past because it’s not worth what they paid for it or be, or what they put it on their books as. So, um. a good thing. And it says that they, they’re getting more organic growth out of they’ve acquired.

Um, and so I think there was a bit of a tick up in the share price probably why it hammered by on our, um, on our system, uh, some of the analysts like that. Uh, and that’s, it’s gotta be a risk for this company going forward that they just run outta things to buy. And if they don’t get organic growth, then it’s a

Cameron: Mm-hmm.

Tony Kynaston: a lot of roll-ups that we see in Australia where [00:38:00] someone goes around buying up. Smash repairers and um, eventually they run outta Smash Repairers to buy, but they’ve gotta be good at running. Smash Repairers are the ones that they bought at the right price, otherwise their share price just goes down. So up are always tricky. This is a roll up, um, by any other definition. but this is the first quarter where you’ve seen a lowering of the Goodwill impairments for a while, which is a sign that they are actually getting some organic growth out of what they bought, which is good.

Cameron: Hmm. Well, that’s Ziff Davis do your own research. But um, I think it’s sort of a classic Berkshire textile mill sort of a company, you know, maybe a business on its last legs. Yeah. Maybe a business on its last legs, but it might have another five years, 10 years of generating cash and who knows what could happen to it over that [00:39:00] period of time.

Tony Kynaston: Yeah, look, it could be on its last legs. I dunno if I necessarily subscribe to that. Certain parts of the business could be on its last legs, like the comparison site nature of it. If that, if that, how it plays out. And I dunno that it will play out that way. But there are underlying assets which will survive, as you say, like, um, the speed test side of things and other direct to

Cameron: Mailing lists and Yeah.

Tony Kynaston: which, um, are

Cameron: Yeah.

Tony Kynaston: survive. I saw a good list of, um. Saw a good list of the risks and challenges, when I was doing my search for this. um, they think this, this, the analyst who said, who made this list said that, uh, about 35% of their revenue could be affected by search engine changes, which I guess. of ai. So that’s, uh, a large slab of the business, but certainly not all of it. Um, and I think also bundled up on that wasn’t just ai, it was the fact that SEO changes, that the rules change as to what gets [00:40:00] promoted in, in SEO and that that sort of search algorithm volatility can impact the rankings and the affect this company as well. Um, market saturation and key segments was another one. Um, economic pressures affecting consumer spending if you’re not, you don’t have enough money to buy a phone, and what’s the point of going to a site that recommends which is the best phone to buy? So there are plenty of risks and challenges for this company, not, um, withstanding that AI might impact it, um, they’re pretty diversified. Um, two, you know, there’re at pains to say there are two big slabs to the business. One is the, web advertising business, but one is also the, um, the subscription business, which is a, a large part of their revenue as well. So I also think they’ve had an near death experience in the past, or a couple of them, that they might be. Prepping for different options now in case it happens again. So they could, they could position them, they could be positioning themselves already for what they see as coming down the track and, [00:41:00] um, might not mean the share price tank doesn’t tank, but it may mean that they live on for longer uh, current predictions may suggest.

Cameron: Meanwhile generating a lot of cash,

Tony Kynaston: That’s what we like.

Cameron: which gives them options.

Tony Kynaston: Yeah.

Cameron: Alright, well check it out. Zd, this episode was brought to you by the letters Z and. D Tony Ziff Davis. Have a good week. Tk.

Tony Kynaston: Thank you. holidays to all the people overseas. I’m gonna take a week off next week. So you’ll be either not doing it yourself or doing it yourself without me.

Cameron: Yeah.

Tony Kynaston: Okay. Thanks.

Bernard: Q A V is a checklist-based system of value investing developed by Tony Khighneston over 25 years. To learn more about how it works and how you can learn the system, visit our website, Q A V Podcast dot com.

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