3Q Growth Strong at aQuantive

Marketing services, technology and media all drove growth for aQuantive in the third quarter, resulting in revenue of $78.8 million and earnings of $9.4 million, or $0.13 per share.

“I believe aQuantive is reaping the rewards of a major transformation in the overall advertising industry. Brand dollars are beginning to follow their direct response counterparts,” said aQuantive President and CEO Brian McAndrews.

Net income came in higher than the company had previously expected, but at $9.4 million, or $0.13 per share, it didn’t compare favorably to the year-ago quarter, when aQuantive reported earnings of $24.1 million, or $0.34 per share. That’s because last year’s third quarter included a one-time tax-related event that boosted earnings. Without that event, third quarter 2004 net income would have come in at $3.5 million, or $0.05 per share.

All of aQuantive’s businesses — digital marketing services, digital marketing technologies, and digital performance media — saw growth in the quarter.

Digital marketing services, which comprises Avenue A/Razorfish, brought in $48.5 million in revenues, up from $28.3 million in the year-ago quarter. Operating income was $8.9 million. Both Web site development and Web media experienced strong quarters, bringing in $32.8 million and $15.7 million respectively.

“This revenue has come from strong performance across the division,” said McAndrews. “The Web site design and development business has proven to be a critical part of the overall Avenue A/Razorfish offering. We believe that, in due course, the Web site will replace the 30 second television advertisement as the central expression of an advertiser’s brand. Television will not go away. However, it will increasingly become a vehicle to direct consumers to a company’s Web site.”

On its conference call with investors, company executives spoke of plans to grow the marketing services business internationally.

“We’ll likely make acquisitions, but we also have the ability to grow organically if that makes sense,” said McAndrews. “We have many international clients who would like us to support them around the world.” McAndrews added that the company’s first priority would be to expand in Europe, after which it would target Asia. He said the company would have more to say about expansion a year or 18 months from now.

The company’s technology business, Atlas, recorded $23.5 million in revenues in the third quarter. During the year-ago period, it brought in $15.6 million. Operating income was $10.6 million.

Drive PM and MediaBrokers, which make up the digital performance media business, grew substantially over last year, when they were just getting started. The unit brought in $6.8 million in the quarter, compared to $2.8 million a year ago, resulting in operating income of $972,000.

“As behavioral and other forms of targeting become increasingly popular with advertisers, we expect this business to continue to grow significantly,” said McAndrews.

In the fourth quarter — typically a seasonally strong one in the media business — the company expects revenues between $78 million and $82 million, resulting in net income of between $0.11 and $0.14 per share.

Full-year revenues are expected to reach between $299 million and $303 million, with net income of between $0.96 and $0.98 per share.

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