Cloud Stocks: 2 Haves and 2 Have-Nots

The broader market opportunity is huge, but not every company is ready for the big leagues

     

Not Ready: Bazaarvoice

BazaarVoice Cloud Stocks: 2 Haves and 2 Have NotsDate of IPO: 02/23/2012
Return: -22%

Yesterday, Bazaarvoice (BV) demonstrated the risks of the cloud as the stock plunged 17% on news of its disappointing earnings report.

Now it’s true that BV is in a hot industry, providing tools to analyze and improve brand marketing. Each month, the system manages the sentiment of more than 400 million people, and BV features a roster of top-notch customers that includes Macy’s (M), Walmart (WMT) and IBM (IBM).

However, the social marketing industry is chock-full of rivals, such as Pluck, Reevoo, Gigya and Viewpoints, not to mention traditional agencies, and on top of that the potential for companies such as Google and Facebook (FB) to leverage their massive platforms into a market entrance.

The other problem is that BV’s technology is not seen as must-have by customers. From Bazaarvoice’s 10-K:

“In particular, we believe our success will depend to a large extent on the willingness of brands to use online word of mouth in their marketing and advertising materials. Many of our potential clients remain hesitant to embrace our solutions, such as Ratings & Reviews, since they are uncomfortable displaying negative reviews about products or services offered on their websites.”

This likely is a key reason Bazaarvoice had a difficult time closing large enterprise deals in the future, and it’s a difficulty that isn’t showing signs of dissipating.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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