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Scott Paterson has always had a gift for sensing where the action will be. He entered the investment business as a stockbroker in the 1980s, just as an epic bull market was gaining momentum; later, as an investment banker, he pulled Yorkton Securities into tech stocks just in time for the Silicon Valley gold rush of the late '90s.

Now this. Google is paying $1.65-billion (U.S.) to buy YouTube, an Internet video website that's not quite as old as the cream cheese in your refrigerator. Could there be a bigger endorsement of Web video than that? And guess who had the foresight, only a couple of months ago, to take public his own Internet TV play: one G. Scott Paterson, now chairman and CEO of JumpTV.

In between Yorkton and now, of course, there was that little dustup with the Ontario Securities Commission. Mr. Paterson was accused of being a bit too aggressive promoting Internet stocks and agreed to a two-year ban from the investment business. But everyone deserves a second chance, and he is making the most of his. JumpTV, enjoying the afterglow of Google's big purchase, is now up 27.6 per cent since the initial public offering. That gives it a market value of nearly $250-million (Canadian) and makes Mr. Paterson's personal stake worth about $37-million.

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Is this another YouTube in the making, or have investors been teed up for disappointment?

The two do have a few things in common. Like YouTube, JumpTV is new, unprofitable and has modest revenue but great hopes. Both are unproven businesses.

Beyond that, the similarities are few. YouTube is a mass-market site, a popular gathering post for webheads to share their own goofy creations. JumpTV is focused. Its business is to get foreign-language TV programming and pipe it over the Internet for a subscription fee. Its customers are mostly immigrants in the United States and Europe who want to stay in touch with the homeland. If YouTube is where you'll find clips of office nerds reciting Jenna Fischer's advice on how to get laid, JumpTV is where you can get your fix of Punjab Today.

It's a neat idea, and unlike some earlier Paterson ventures -- Book4golf.com -- it appears to serve a real need. Management points to the massive expatriate Hispanic, Asian, African and Arab population -- more than 80 million people in seven key markets, including the U.S. and Canada. The service had just 18,000 subscribers as of this summer, and revenue was $777,496 (U.S.) in the first six months of the year. So there's, ahem, plenty of room for growth.

The good news is that those subscribers showed up even though JumpTV has done little advertising. The bad news that's obvious to everyone -- Mr. Paterson included -- is that the number won't grow very quickly unless real money is spent. This isn't an Internet business that takes off because the cool kids like it and spread the word.

So JumpTV will spend about $20-million (Canadian) of the $70-million in IPO proceeds on marketing. Mr. Paterson declines to guess when the company will be profitable, only that he thinks it will produce positive cash flow without having to return to the market for money. And he hopes to find new revenue by morphing JumpTV into something of an ethnic YouTube. "Social networking -- blogging as an example, and user-generated video -- is a big, big part of JumpTV's future," Mr. Paterson said in an interview from Cannes, France. "If you're Chilean, from Chilean descent, whether you live in New York, Toronto, London or Madrid or Sydney, you have a real affinity, likely, to user-generated video by other Chileans from other parts of the world."

That's all well and good, but as an investor, a great idea is only a great investment if it can be bought at the right price. What's the right price for a company that doesn't make money and doesn't know when it will? Run some pie-in-the-sky numbers. Suppose JumpTV can increase its subscriber base tenfold, to 180,000 people, and that each of those people is willing to pay about $120 (U.S.) a year in fees. That's $21.6-million in revenue.

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Then assume the company can squeeze a 35-per-cent profit margin, which would be excellent in any business (Google's net margin is less than 30 per cent). That would mean $7.6-million in earnings. JumpTV is already valued at 28 times that theoretical profit.

In short: this is a concept stock. Maybe it will turn out to be another YouTube. Shareholders had better hope so, or it's going to be a long, long way down.

vox@globeandmail.com

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