SLI Systems: Stunning Factoid
October 21, 2014
SLI Systems reported its financial results in mid October 2014. The numbers were interesting. The company reported revenue of $22.1 million, which is good for search software. However, the company said that it lost $5.9 million. See “SLI Systems Poised for Continued Growth in Rapidly Expanding E-Commerce Industry.”
In the write up was a remarkable factoid; to wit:
More than 500 e-commerce businesses are using SLI’s solutions, which can service more than a billion queries in a single month,” said SLI CEO Shaun Ryan. “That’s ten percent of the volume that Google reportedly serves in North America in the same time frame. And with continued growth, we expect to continue adding scale to our high-margin business.”
From my point of view, this is an intriguing number. In order to break even, SLI Systems needed almost $30 million in 2013-2014. Based on the information I have gathered over the years, search vendors dependent on venture funding find themselves in an SLI Systems boat frequently.
Keep in mind that the cost of maintaining a search system is often higher than revenues can support; therefore, search vendors face red ink each time the accountant tallies up the numbers.
Why not get more customers? Well, that costs money.
Why not charge more? Well, savvy customers may look at open source options like Magento.
Well, why not come out with a killer product? Most search vendors believe they have killer products.
Convincing analysts and prospects is a different type of pizza. But if the factoid is correct, SLI Systems is generating hefty traffic when aggregated. Is it time for a revised business model?
Stephen E Arnold, October 22, 2014
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