* Advertising accounts for 94 pct of revenue
* Seeking Nasdaq share listing this year
* Aims to raise $115 mln from listing
By Steven Scheer
JERUSALEM, Jan 8 Translation software provider
Babylon expects continued strong revenue growth this
year thanks to increased advertising income on the back of its
plan to offer its latest product free of charge.
The Israeli company decided in 2011 to change its business
model from a paid-for service and saw revenue in the first nine
months of 2012 leap to $121 million, nearly double the $62
million achieved in the whole of 2011.
Net profit in the nine months was $17.1 million, against a
full-year profit of $7.8 million in 2011.
Babylon says that 94 percent of its revenue now comes from
advertising and credits some of its recent success to the
internet becoming more accessible in the developing world.
"We will continue with this growth along with (growth in)
advertising revenue," Chief Executive Alon Carmeli told Reuters
ahead of next week's launch of its new Babylon 10 translation
Babylon, which started in 1997, provides translation of
words, phrases, documents and web pages in 77 languages in more
than 190 countries. The company says that it translate more than
100 million terms every day.
Babylon 10 is a downloadable product that translates as well
as provides word definitions while being able to hear voice
The company's vice president of sales and marketing, Liat
Sade-Sternberg, said that the Arab Spring has also played a key
role in the company's success, increasing people's thirst for
knowledge and the need for foreign online content.
Noting that Babylon is ranked among the top 10 websites in
Sudan, Tunisia and Libya, she added: "Only 27 percent of people
online are native English speakers, but 55 percent of the
content online is in English, making translation programmes like
Babylon 10 invaluable to the vast majority of people worldwide."
Until now, Babylon's products have largely been priced at
about $100, but Carmeli believes that it can expand its user
base by offering Babylon 10 free of charge, though customers
will still have to pay for some premium features.
"Online advertising is so efficient that it can serve as an
alternative currency," Carmeli said.
Babylon's products are most popular with users in Brazil,
Mexico, Europe, Asia and with non-native English speakers in the
United States, Carmeli added.
Most translations are to and from English, followed by
Spanish, French, German and Portuguese.
"The challenge Babylon has had for many years is how to deal
with markets and countries that suffer from a low penetration
rate for credit cards and PayPal," he said.
Babylon competes to an extent with Google, which
also has a service that translates words, phrases and websites.
Among the Israeli company's mobile apps is Babylon Touch,
which allows users to point a camera at signs or menus and
receive instant translations.
In November, Babylon filed for an initial public offering
(IPO) of its shares on Nasdaq, with the aim of raising $115
million early this year.
Carmeli declined to comment on the IPO but in a filing to
the U.S. Securities and Exchange Commission, Babylon said that
it may use some of the proceeds to make acquisitions or
investments in complementary companies.
Babylon trades on the Tel Aviv Stock Exchange at a market
value of about $300 million, having risen about 15 percent so
far this year after a 134 percent jump in 2012.
The company has been paying between 50 percent and 100
percent of its profit as dividends, but said that it does not
intend to pay dividends for the foreseeable future and would
retain future earnings to finance its expansion.