I am sure they have a patent protection on there design. Not all worrried because no one has even come close to getting a COPPA certification except OINK. It is very difficult not only to design the software, but to go thru all the FTC requirements is arduous.
Here is some recent news about the Discover partnership and the growth in user sign up. This is all good news!
Expansion into in-store payments
Virtual Piggy (VPIG) has announced a partnership with Discover Financial Services, which will enable users to make in-store purchases at merchants within the Discover Network. This will provide users with more opportunity to spend their money via Virtual Piggy’s service and has the potential to drive incremental in-store transaction volumes on top of existing online transactions. This could also accelerate user sign-ups above the recently achieved one million target.
Year end Revenue ($000s) PST* ($000s) EPS*
($) PIE (x) Yield
12/09 0 (907) (0.02) 0 N/A N/A
12/10 0 (1,347) (0.03) 0 N/A N/A
12/11 4 (2,486) (0.04) 0 N/A N/A
12/12 1 (7,492) (0.09) 0 N/A N/A
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Discover Network deal
Virtual Piggy has announced that users should soon be able to access in-store payment capabilities via the Discover Network using pre-paid cards. The card will be linked to the Virtual Piggy user account giving parents control over spending limits and locations and enabling the user and parents to track spending online and in store. This will give Virtual Piggy the opportunity to support users across multiple channels, and hence gain a larger share of wallet, potentially driving higher transaction volumes.
From Virtual Piggy to Oink
In anticipation of the move to in-store payments and a more mobile-focused strategy, the company rebranded the name of the service from Virtual Piggy to Oink in December. Registered user numbers have grown from the 250,000 reported in June 2013 to more than one million by the end of January 2014, with gaming users key drivers of transaction volumes. The company continues to sign up new merchants to the service and to integrate with key e-commerce platform providers.
In the early stages of commercialisation
Virtual Piggy is in the early stages of commercialisation and has not yet generated material revenues, as the push to sign up end users only started in earnest in March. At the end of Q313, Virtual Piggy had net cash of $4.6m and during Q114 raised $7.6m from the issue of new preference shares and the conversion of warrants. Milestones to track that should demonstrate progress towards break-even and profitability include user sign-ups, value of transactions processed and partnerships with larger players including merchants, payment processors and online communities.
Since we last published in July, Virtual Piggy (VPIG) has continued to grow its registered user numbers, has expanded the number of merchants accepting payment via Virtual Piggy, has expanded its partnership with WorldPay to include the US, has rebranded, and has signed an agreement with a credit card network to expand usage of the service into physical stores.
Name change: Virtual Piggy becomes Oink
In December, the company announced that it had changed the name of the service from Virtual Piggy to Oink, and had rebranded the service with a new logo. The rebrand was partly in anticipation of the company’s move into physical stores but also has the advantage for mobile users of being a shorter name. The company continues to be called Virtual Piggy.
Growth in user sign ups
At the end of January, VPIG announced that it had beaten its one million registered user target. Exhibit 1 shows the pace of user sign ups through 2013. A registered user is defined as a registered account that has accessed the Oink product in the last 12 months. Until FY13 results are available (likely in mid-March), we do not have any data on the revenues generated by the growing number of users in Q413. The company has noted that gaming users tend to generate a higher volume of transactions as they tend to visit gaming sites frequently, whereas users purchasing physical items from online retailers tend to transact online less frequently.
Exhibit 1: Growth in registered users (April 2013 to January 2014)
1,200,000 1,000,000 800,000 600,000 400,000 200,000
29/04/2013 29/06/2013 29/08/2013 29/10/2013 29/12/2013
Source: Virtual Piggy
Contract signed with Discover Network
On 12 February, VPIG announced that users would soon be able to access in-store payment capabilities via the Discover Network.
Background on the Discover Network
Discover Financial Services runs the Discover Network, the fourth largest credit card company in the US. It is accepted at 25 million locations globally, including 9.6 million in North America and 2.5 million in EMEA. Discover owns Diners Club International, which is accepted in 185 countries, and is partnered with JCB in Japan and with China Union Pay.
How it will work
We understand that Oink will be able to issue pre-paid Discover cards to users aged 13 and over, with a parent’s permission. These will be loaded up via the Oink service online or via the Oink
mobile app, and can then be used to make purchases in stores that are part of the Discover Network. Parents will still be able to apply spending restrictions to the card, so that the child can only make purchases in stores that the parent has approved. Discover does not currently have a card programme for teens, unlike Visa, MasterCard and American Express, which all offer pre-paid card schemes for children aged 13 and over.
We would expect Discover to pay a proportion of the merchant fees levied to Oink. In addition, Oink may impose fees on the card user, although this is yet to be decided.
Broadening the addressable market
Although teens spend a large proportion of their money online, in particular when gaming, by offering an in-store payment mechanism, Oink can access the whole of a teen’s wallet, rather than just the online portion. Even if Oink will earn a lower percentage of merchant fees when payment is made via the Discover Network, this should be outweighed by the potential for a significantly higher volume of transactions. We note the trend for online payment processors to seek partners for in-store payments; in 2012 PayPal partnered with Discover to enable users to pay in-store with their PayPal accounts using a PayPal Access card.
Since we last wrote in July, VPIG has raised funds through the issue of preference shares and the exercise of warrants. We estimate below the amounts raised from the end of Q213 to date, totalling c $7.6m.
• Preferred shares: 50,450 series A preference shares worth $100 each were issued in January 2014, raising gross proceeds of $5,045,000. Each preference share is convertible into 100 shares at a value of $1.00/share. We note that the preference shares are entitled to an 8% cumulative dividend per annum.
• Warrants exercised: on 7 February, 5,042,287 warrants were exercised raising gross proceeds of $2,521,143 and resulting in the issue of 5,042,287 shares. In July/August 2013, 34,500 warrants were exercised at $0.50 per share resulting in the issue of 34,500 shares and gross proceeds of $17,250.
The company had a net cash position of $4.6m at the end of Q313, after paying $3.7m in cash operating expenses and $0.1m in capex in Q3. We will have a clearer picture of ongoing cash operating costs when the company reports FY13 results in mid-March.