blurGroup Announces More Revenue Issues, Financial Enquiry

Services procurement platform providers and old favourites of ours blurGroup announced a revenue / profits warning last Friday which saw their shares drop from around 90p to 56p. This arises from a further revenue recognition problem - not the first the firm has had. It appears that revenue may have been booked when projects were first advertised on the blurGroup services marketplace. But then if projects do not actually come to fruition, blur does not get most of their expected income, which arises  from its 20% share of revenue.

How and when to recognise that future revenue seems to be the issue. (Would it be simplistic to suggest that the revenue should be recognised only when the project is complete and the client agrees the need is met and pays blurGroup?) Not only was the warning issued on Friday, but the Financial Reporting Council is investigating the previous accounts.

"It said that following discussions with its auditor, KPMG, it had determined that sales from “a number of older projects started between late 2013 and early 2014” may never materialise.

The failure means Blur’s full-year results will be delayed while it answers enquiries from the Financial Reporting Council (FRC), on how the sales came to be booked".

A couple of other points points worry us. There appears to be a tendency to exaggerate in press releases. One example was a statement about a deal to seek sponsorship for a cycling team.

It was explained that this was an exercise to raise money for a Welsh professional cycling team. The idea comes from one Eifion Weinzweig, who was described in some reports as an ex "professional cyclist". I can find no evidence that he was ever that good - a club level performer based on the results on the British Cycling website. (To be fair, blurGroup did not make that claim in their press release).

So he has decided to try and put together a professional cycling team for Wales; we have no idea whether or not he will succeed. My friend Guy Allen is a keen cyclist and a big football fan; perhaps he could put together a Brentford FC cycling team and raise £17 million? But blurGroup are providing the platform to advertise that Welsh sponsorship opportunity, in order to try and raise £17 million. It all sounds a little unlikely, yet it was presented in two formal company announcements as a great opportunity for blurGroup. And if I did want to sponsor Weinzweig's team, why would I want to pay a hefty percentage of my money to blur as a fee? That's another mystery.

Then we have the claims that blurGroup have a range of big blue-chip names as "Enterprise clients".

"Argos and Tesco are the latest blue chip companies to kick off services projects via the blur 4.0 platform, joining Regus, Danone, Solvay, Amazon, Sabre and Menard who are already active repeat blur platform users". 

Spend Matters has asked a number of times if we can speak to clients, without success up to now. But I asked the CPO of one of the firms mentioned by blurGroup in that list, who happens to be a good friend of mine, how the firm was finding blur as a provider. But that person knew nothing about the relationship, and had not even heard of blurGroup. Now of course it may be that blur are dealing with some other part of the business without procurement involvement, but this is a pretty informed CPO.

So it would be good to know just how much business is going through these "enterprise clients". We have asked blurGroup again if we can do that, as we'd still be very happy to speak to one or two of them, anonymously if required, so we can feature some positive stories here.

We haven't talked here about the basics of their business model today, which has some interesting aspects, but you can read our previous comments here and here on that topic. And this is what my US colleague Jason Busch had to say this weekend (reflecting a market in the US which is arguably moving ahead of Europe in terms of people-based services procurement technology).

“blurgroup appears to be focusing its efforts primarily on enabling the transaction between buyers and suppliers and some aspects of matching and program management (to get paid), but less so on broader concerns of services procurement lifecycle management, compliance and risk mitigation. Unlike freelancer management system (FMS) solutions and talent marketplaces, a new class of services procurement technology tools which provide the full lifecycle support, including talent identification, sourcing, on-boarding, risk management, etc. for independent consultants (or small firms) and freelancers, including those who provide marketing and design services, blur continues to target areas which have less impact on helping mitigate overall compliance and supply risk.

Perhaps blur could learn some lessons from providers like Work Market, eLance/oDesk, Onforce and others in this area to build a more sustainable and procurement-centric model. Or maybe it will just be off to the AIM races (we can guess in what direction) as the broader services procurement and design/marketplace talent marketplaces peloton blurs past”.

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First Voice

  1. Nick @ Market Dojo:

    As I’ve mentioned before, it’s no surprise that procurement hasn’t heard of blur, as they basically encourage worse procurement practice than the typical 3 bids and a buy due to the automatic 20% fee that is added on top. Hence marketing, IT or legal etc would be keen to keep it in their own domain and not worry about the 20% surcharge, which inevitably the supplier will pass on to the client., as it saves them a bit of effort and it’s not their money.

    I’d like to think that if this was a personal project, say for example you wanted to buy a website for yourself, you’d avoid these guys like the plague – why would you want to pay 20% more than the market rate?! Not a sound model.

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