Gotham City Research initiates coverage on Blucora, Inc (a.k.a. Infospace).

“Google’s first step is easy: Fire InfoSpace (a.k.a. Blucora). Google doesn’t need InfoSpace, and there’s zero reason for this relationship to continue in light of InfoSpace’s repeated failings.”

– Harvard Business School Professor Benjamin Edelman, author of The Darker Side of Blinkx, and the “Doogie Howser of online investigative work” according to former federal prosecutor Richard Boscovich

GOTHAM CITY RESEARCH’S OPINIONS

• +60% of BCOR’s revenue will evaporate in coming quarters, as Google realizes it is better off without BCOR. Google and Yahoo can walk away from Blucora any time.

• At least 50% of BCOR’s traffic is derived from malware, click fraud, illicit traffic (e.g. child pornography), and otherwise suspect traffic.

• Blucora and its partners’ practices will receive scrutiny from Google, advertisers, FTC, DOJ, FBI, IRS, &/or the SEC.

• BCOR shares are worth no more than $5.00/share, and <$1.00/share if BCOR compensates affected parties.

SUMMARY OF FACTS

• 94.81% of Infospace.com visitors go to css.infospace.com, a known redirect virus/browser hijacker.

• Infospace.com/Iminent.com generate clicks via cloaking, a practice forbidden per Google’s Webmaster Guidelines.

• 3 of dogpile’s Top 10 search words are child porn-related. Webcrawler aggressively purchased child porn search traffic in recent quarters.

• Google prohibits advertising related to child pornography.

• 80+% of webcrawler’s visitors originate from outside the US, yet only ~1% of BCOR’s revenues are international.

• Ads displayed in Blucora-branded search results violate requirements set in their 2011 Amended Agreement.

• Metacrawler is the 3,301st most visited site, yet is defunct.

• ~10% decline in Google revenues wipes ~50% of BCOR EPS.

• BCOR has a storied history of defrauding investors, customers, and vendors over the last 15+ years.

• Free cash flow has gone negative over the last 9 months.

• ~50% of recent cash flow from operations consists of increases in accrued liabilities.

• Non-GAAP reporting, not seen since 2003, is back.

• Audit fees declined sharply, after changing auditors in ‘12.

• Gotham City Research contacted Blucora on several

• occasions and did not hear back from the Company.

The full report: