A notable surge of 23.93% in Auddia Inc.’s (NASDAQ: AUUD) stock was observed during its recent trading session, closing at $4.04. This upward trajectory was triggered by an acquisition endeavor. A definitive purchase agreement has been inked by Auddia to acquire Radio FM (RFM), a prominent AM/FM streaming app. Financing of the acquisition cost is critical to the completion of this acquisition.
As one of the top mobile radio streaming applications, Radio FM received significant attention when Google in January 2024 selected it as an Editor’s Choice application in the Play Store. This distinction, alongside giants like iHeart and Pandora, underscores the app’s standing in the market.
Auddia has witnessed robust subscription conversion rates from its free tier, indicating a substantial portion of AM/FM streaming listeners are willing to subscribe to avoid commercials. The acquisition of Radio FM presents an opportunity to acquire 4.6 million retained users at a substantially lower customer acquisition cost compared to direct marketing methods, promising a more efficient avenue for revenue growth and subscriber expansion.
The Radio FM acquisition entails $2.3M in 2023 revenue, with $1.4M in related operating cash flow, and boasts approximately 4.6 million monthly active users on the free tier. Priced at $13M cash at closing, with an additional $2M paid six months post-closing, subject to certain performance milestones, this acquisition aligns with Auddia’s strategic growth objectives.
Auddia anticipates driving significant synergies through the Radio FM acquisition by integrating its AI technology into the existing platform. This integration will offer users the option to subscribe for ad-free AM/FM listening, without disrupting the existing revenue from ad placements on the free tier.
Premium subscriptions are expected to commence within two quarters post-acquisition, bolstering revenue streams. Furthermore, Auddia’s recent development of an AI technology extending ad-free listening to podcasts enhances its value proposition. With a user base already engaged in mobile AM/FM streaming, Auddia aims for a 5% subscription conversion rate across Radio FM’s acquired user base of 4.6 million monthly listeners to achieve profitability by 2025.
The path to profitability is expected to be accelerated through the successful execution of targeted acquisitions. By acquiring Radio FM, Auddia is positioning itself to take advantage of the growing demand for ad-free streaming experiences and achieve sustainable growth and profitability in the near future.
