XLMedia set for strategic changes after Google rankings demotion

Affiliate marketing specialist XLMedia has said it is to accelerate a number of its planned strategic initiatives in response to concerns over Google's changes to its search algorithm.

Last month, XLMedia revealed the move led to a “significant decrease in traffic” on certain websites, which it said in turn is likely to impact its revenue. Google rolled out its new search algorithm update on 13 January.

XLMedia said a total of 107 of its websites have been impacted since the initial announcement last month, with 84 of these being tier 3 or 4 sites and the other 23 tier 1 and 2 premium sites.

Most of the sites in question are related to online casino, with XLMedia saying that the demotion activity has not impacted other verticals of its business, such as personal finance.

XLMedia said while it is continuing to work with Google to understand why some sites have been demoted, with a view to restoring the rankings, it has opted to accelerate certain proposed strategic changes and refocus its activities on the sustainable growth of its publishing assets.

The affiliate specialist said this will involve a focus on its core and profitable tier 1 and tier 2 premium sites and a significant reduction in its tier 3 and tier 4 sites and non-core business activities.

XLMedia said it will immediately focus on tier 1 and tier 2 premium sites that have been impacted and prioritise efforts in getting these reinstated by Google. It has also begun the process of removing certain sites that are either old legacy sites, or that it believes are not sufficiently compliant with Google guidelines. 

The company noted certain tier 3 or tier 4 legacy sites may have had a collective negative impact on the ranking of a broader pool of its sites. These sites will now be removed or de-indexed such sites, but XLMedia said that until this process is complete, it will not be possible to be certain the issue will be resolved.

In addition, XLMedia has ceased certain activities which, following the closure of the majority of the media activity in March 2019, are no longer regarded as core to the future of the business.

In terms of the financial impact of such activities, XLMedia said until the process is complete, it will not be possible to determine the full effect. However, it did say that the demoted tier 1 and 2 sites will see an immediate impact of lost revenues of between $1m (£771,805/€904,498) and $2m for the period.

The removal and de-indexing of tier 3 and 4 sites, as well as the reduction in non-core activities, is expected to have an impact of between $3m and $5m for the 2020 financial year.

However, XLMedia noted that some of these actions were included within its proposed strategic changes and some of the associate costs budgeted for during the period, which it said will in turn reduce the full impact on earnings.

“There is no question that we currently face operational headwinds, but fundamentally, I firmly believe in the underlying quality and sustainability of our business,” XLMedia’s group chief executive Stuart Simms said. 

“However, I believe it is now time to accelerate a number of strategic measures that will create a short-term drag on revenue growth, but will ultimately strengthen our business by creating a much stronger and more transparent platform from which to grow.

“By proactively consolidating – and where necessary culling – our considerable tail of legacy websites and focusing a greater proportion of our efforts on monetising both tier 1 and tier 2 websites in addition to incubating new sites, we will significantly improve the medium-term prospects of the Group.”

Simms added: “I feel it’s important to reiterate that we continue to operate a global portfolio of content rich websites that deliver significant value for our users. This expertise remains a core competence for our business which I fully intend to capitalise on as management seeks to both enhance and expand our business over the coming years.”

London-listed XLMedia has seen its share price collapse in the last two months – dropping from 70.00p on 13 November to just 25.25p this morning.