Here's why the Redbubble share price is tanking today

Redbubble Ltd (ASX: RBL) is finding organic search traffic harder to attract.

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The Redbubble Ltd (ASX: RBL) share price is down 11% to 98 cents in trade today after the fashion and arts focused online marketplace revealed an operating cash outflow of $25.9 million for the quarter ending March 31 2019.

That's not as bad as its sounds though because Redbubble explained that its sells a lot of goods in the Christmas quarter, but has to pay the artists for the goods sold in the March quarter in an impact that distorts the quarterly financials somewhat.

However, another reason the stock is coming under pressure is because the group once again flagged that "organic search headwinds" remain partly due to search engine giant Google seemingly re-indexing how it classifies Redbubble content.

Lower organic search traffic is a problem for the business as this is what produces strong gross profit margins, as otherwise Redbubble is forced to rely more on paid for marketing via online ads on Google or other 3rd party website display or banner type adverts for example.

On the bright side total market place revenue was up 40.3% (32.6% FX-adjusted) over the prior corresponding quarter, although you have to account for the acquisition of TeePublic in that number.

Zooming out a little over the nine months to March 31 2019 the group has posted an operating cash profit of $2.95 million and has a healthy $29.1 million cash on hand.

However, its mixed performance indicators are likely to continue to divide the bulls and bears.

Others in the online classifieds space to consider include REA Group Limited (ASX: REA) or Carsales.com Ltd (ASX: CAR).

Motley Fool contributor Tom Richardson owns shares of REA Group Limited and Alphabet You can find Tom on Twitter @tommyr345 The Motley Fool Australia owns shares of and has recommended REDBUBBLE FPO.The Motley Fool Australia has recommended carsales.com Limited and REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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