Is CX Digital Finally Dead in the Water?

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Last week mThink reported that CX Digital had been hit with a $4.8 “charge back” from Yahoo. According to the report, Yahoo was demanding $4.8 back from Tsava media, also owned by Cyberplex, due to “low quality traffic, ranging back over many months during 2011.” Since Cyberplex is a public company, although with little value anymore, they were required to report this via their public reporting system. While this may have gone unnoticed, for many companies this comes at a horrible time for Cyberplex and the once major CPA Network, CX Digital

Here’s the problem however. CX Digital, like much of the industry, was hit last year with the wave of acai and reoccurring chargeback issues. In their most recent report, they reported $16M of income in the last three months – but compare that to the $45M they had last year, during the same time, there shows a significant dwindling income. However, this was to be expected.

This is why they bought Tsavo Media, to be able to own their own media. However, their model required that they sell the inventory to Yahoo, and depend on large checks from Yahoo. Even with this, their most recent statement shows a net loss of $4.5M in income, and an ever-growing dwindling amount of cash.

Lucky for them, they had already agreed to restructure a major credit agreement with American Capital, LTD on the purchase of Tsavo Media. That’s because Tsavo Media was the profitable division that was holding Cyberplex up especially after the huge issues with the Acai and rebill kings. CX was one of the companies that has serious issues with these offers — the same company that put COPEAC out of business. Now, with the major income source for Tsavo coming back and asking for a great deal of income back, it wipes out most of the profit from the deals, and puts CX Digital in an worse position.

The problem I see here is simple, and I’m not the only person pointing it out. Tsavo Media has a network that completely depends on Yahoo buying the inventory and selling it out on their exchange. For whatever reason Tsavo media never built out a serious sale steam, and while they claim to have a portfolio of major content sites, and even say they are “top-trafficked network of sites” there doesn’t seem to much truth to those statements.

Their model, similar to Demand Media, creates content-based websites that supposedly drive visitors from Google and other sites. Basically, they do article sites that should interest visitors on different topics, like heath, pets, home improvement and gardening.  Well, despite their claims of having millions and millions of visitors, this claim doesn’t seem to ring true. First, it doesn’t show up on Comscore on their top 50 ad networks list, and next Compete.com shows almost no traffic whatsoever to any of their major websites listed. For example, LumaGardening shows only 1K visitors, Occasions365.com a grand total of 4,000 visitors, PlusPets 11k visitors and so on. In fact, their entire portfolio of websites are all poorly trafficked and so small that Compete admits they can’t really gauge how many visitors go there. Some of their sites, like WealthyGeek have basically no traffic. Manolith, which is basically their tits and ass website seems to be the most trafficked with 50,000 visitors.

What’s even weirder is that if you go to the websites, you’ll notice that there is a serious lack of advertising on any of them, for example their PlusPets site has no banners whatsoever, and the rest of the sites seem to have poorly placed CPA ads such as free gift card ads. Manolith it itself only running Ads by Google. There’s a noticeable lack of actual advertisers?  Some of the sites have no ads whatsoever.

 

I have to wonder seriously where Tsavo Media is getting their traffic from, and how ever they were able to sell to CX Digital for a grand total of $45M, when it seem they have virtually no traffic. I wouldn’t have paid $450,000 let alone $45M for this collection of poorly trafficked websites – but for some reason CX Digital believed there was value. Whatever value that was, Yahoo obviously disagrees calling the traffic that was sold to them “poor quality” which often in our industry means “crap brokered from another network.”

I’d love to know if that’s where the majority of the Tsavo traffic comes from: another ad network, resold to Yahoo?

Personally, I don’t see where CX Digital and Cyberplex go from here. The Tsavo Media deal seems to smell really bad, their affiliate business is already flopping around and now they’ve been forced to throw-back their biggest ad catch with Yahoo. I don’t see Yahoo continuing to buy media in the same amount now that they’ve discovered they’ve been paying for Tuna and getting Catfish.

The question still remains, will Cyberplex & CX Digital survive this?

What's your opinion?