Blinkx is showing how tough the switch to mobile can be

Gigi Hadid, Doutzen Kroes, Lily Donaldson, Jared Leto and Carine Roitfeld attend the Paris Fashion Week Tasting Night with Galaxy featuring Brad Goreski, model Jessica Stam and Executive Vice President of Global Marketing, IT & Mobile Division at Samsung Electronics, Younghee Lee at Four Seasons Hotel George V on March 7, 2015 in Paris, France. (Francois Durand/Getty ImagesGigi Hadid, Doutzen Kroes, Lily Donaldson and Carine Roitfeld at a Samsung Galaxy event during Paris Fashion Week

Online video advertising company Blinkx, listed on London’s junior AIM stock market, has full-year results out today, and they tell an interesting story.

Revenue at the company slipped from $US247.21 million (£157.82 million) in 2014 to $US214.96 million (£137.23 million) in the year to March 31.

But the big change was in pre-tax profit: the company swung from a $US12.17 million (£7.77 million) profit in 2014 to a $US20.79 million (£13.27 million) loss this year.

The problem Blinkx is facing is one that almost any consumer-facing Internet business will have to deal with at some point — the shift from desktop to mobile.

While video advertising is doing well at the moment, Blinkx’s traditional desktop market is dying. As more and more people browse the internet on their smartphones,
advertising money is being redirected to mobile.

Blinkx is overhauling its business to adapt to the changes. But this is costly — research and development rose from $US24.69 million (£15.76 million) to $US30 million (£19.15 million) over the last year. That’s on top of falling desktop revenue remember.

The rise of programmatic advertising, the practice of buying space using automated programmes, is also adding to costs. Blinkx has to spend money to integrate its business with various programmatic buying platforms.

Blinkx CEO Subhransu Brian Mukherjee said today: “In 2015, both the industry and Company went through a significant structural shift. The Company deliberately realigned the business to focus on Mobile, Video and Programmatic advertising channels, as the industry continued to move in this direction.

“Through organic investments and strategic acquisitions, the Company reconstituted over half of the desktop revenue shortfall experienced year-on-year. Historically, companies in the sector that have evolved their strategies to capitalise on emerging trends and offer fully integrated solutions — through either acquisitions or organic growth — have been rewarded in the long run.”

Despite Mukherjee’s calls for investors to play the long game, Blinkx opened down 8% this morning. That’s despite warnings earlier in the year that results weren’t going to be pretty and a share price slump last week.

Blinkx’s performance should be a warning to other ad companies facing the shift to mobile — or even any business that interacts with its customers online. Make the shift early or prepare for a painful transition.

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