When Your Investment Site Tips Your DAM Vendor Is It Time To Sell?

The investment site, The Motley Fool, has tipped Czech Digital Asset Management vendor KIT Digital as a stock to watch noting that the Video Asset Management sector is a growth area as more companies outsource their video content management facilities:

“It’s a simple thesis, really. Video content is going to increase: everything from more handheld electronic “access points” (tablets and smartphones, for instance) to cheaper and faster bandwidth point to this upward trend in video volume. As it increases, it will become increasingly less efficient for companies to handle all the necessary functions in-house.” [Read More]

While the investment case seems favourable, statements like the following may be less palatable for existing and prospective customers:

“Like salesforce.com, KIT digital benefits from highly efficient economies of scale by offering its products and services in a “software as a service” model that locks in clients for an average contract length of 24 months — that also gives the company two years to get its solutions entrenched in a customer’s operations, increasing the switching costs and deterring existing clients from jumping ship. No wonder customer cancellations have historically been less than 2% per year.” [Read More]

In the dotcom era 10+ years ago, it wasn’t unusual for tech savvy investors to note that while they might but the stock of emerging WCM vendors, their actual products were less impressive.  One would have to hope that history is not about to repeat itself with a Digital Asset Management bubble that ends in a collapse in confidence in this sector.  Rather than basing the investment case on vendor lock-in (which is never as secure as those that pursue it hope it will be) I would prefer to see DAM companies promote positive benefits like the versatility of their product and compliance with open standards.  To me, these seem like more effective methods of encouraging a critical mass of user adoption which will ultimately lead to the opportunity for long-term sustainable revenue generation (which is what investors should be looking for).

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