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Synacor's new shareholders are greeted with good news Online revenues continue to grow

Synacor Inc., the Buffalo Niagara region's newest public company, welcomed its shareholders for the first time Thursday, and company executives said they expect plenty more growth in the years to come.

If that prediction comes true, it could turn out to be good for the region's economy, too.

Synacor has grown to more than 300 employees locally, and Ronald Frankel, the company's chief executive officer, said he expects to keep hiring.

"That's a lot of great jobs for the Buffalo community, and I think you'll see us grow significantly in the next couple of years," he said.

Synacor's business is built around the Internet home pages it designs for its customers, which include a number of telecommunications and cable television providers. When those companies' customers sign up for service, their Internet browsers often are set to that provider's home page, which is designed and managed by Synacor.

If a customer does a search using the Google search box that's prominently displayed on the home page, Synacor gets paid by Google. Synacor also has its own staff that sells advertising for those Web pages, another source of revenue for the company.

As more people visit those Web pages, Synacor generates more revenues. And that traffic has been growing rapidly.

The websites Synacor operates for its customers averaged 21.3 million unique visitors a month during the first quarter, an 81 percent increase from 11.8 million a year ago.

The challenge for Synacor is to keep those visitors coming back by providing a one-stop portal where they can access email, voice mails, news and other information.

"It's like a local newspaper," Frankel said. "It's where they go for email, and voice mail and other essential services."

Synacor executives said they see even more opportunities to increase revenues as consumers use more devices that can connect to the Internet, from smartphones to tablet computers. The challenge for Synacor is to have its content available on multiple platforms, said Scott Bailey, the company's chief operating officer.

"It creates a destination," he said.

The increased traffic led to a 64 percent jump in Synacor's overall revenues during the first quarter, when sales rose to $30.7 million from $18.7 million. Revenues from search and display advertising through those websites jumped by 81 percent to $25.8 million from $14.2 million as consumers made more search queries through those sites and viewed more advertisements on them. Synacor gets about 60 percent of its revenues from search queries that go through Google.

Synacor expects that growth to continue during the current quarter. It forecasts that revenues will jump about 58 percent to around $31 million, while its earnings before interest, taxes, depreciation and amortization are expected to almost double to between $2.8 million and $3 million.

Bank of America Merrill Lynch analyst Nat Schindler said in a report last week that he believes Synacor has the potential for winning a "transformative" new customer, such as cable companies Time Warner Cable or Cox Communications or an electronics manufacturer such as Dell. He noted that Synacor has never lost a significant customer, other than to bankruptcy.

One topic that no shareholder broached was the spike in trading volume in Synacor's stock, which has been linked to stock promoter Jonathan Lebed and a website called the National Inflation Association, which is registered to another stock promoter, Gerard Adams.

Synacor's shares have jumped by more than a third since the beginning of this month, when the stock was hit with a huge spike in volume that coincided with the stock promoter's first recommendations. Volume has eased over the last two weeks but remains far higher than it was in the first 2 1/2 months of trading.

The stock closed Thursday at $11.14, down 7 cents. The shares, which have hovered in the low $9 to low $11 range for the last two weeks, have more than doubled from their $5 initial public offering price.

email: drobinson@buffnews.com