AQuantive Soars with Sector

AQuantive’s Q1 results reinforced recent upbeat reports and predictions about digital marketing. The company reported net income up 55 percent to $6.4 million, as compared to 2004’s first quarter.

Growth was led by the technology and marketing services units, though its performance media business impressed as well. Importantly, executives said Avenue A/Razorfish is drawing more spending from clients interested in its full suite of marketing services.

“It’s becoming increasingly clear that all the capabilities Razorfish brought to aQuantive have positioned us well for 2005 and beyond,” said Brian McAndrews, president and CEO of aQuantive. “Each of our three operating units delivered tremendous contributions and performed well above our expectations during the quarter.”

aQuantive reported total revenue of $65 million for the quarter, a tripling of results over the year-ago period. Net income was $6.4 million, or .09 per share, a leap of 55 percent. While much of the company’s growth came from the acquisition of Razorfish last June, executives said organic growth came in at 61 percent, up from 59 percent in 2004.

The upbeat results, at least in part, led the company to raise revenue guidance for the full year, from a range of $150 to $160 million to between $165 and $175 million.

aQuantive’s digital marketing services unit, which includes Avenue A/Razorfish, posted the highest gains and overall income. Its $39 million in revenue was up from $9.9 million for Q1 2004, before the Razorfish acquisition. In part, the company credited higher margins, achieved, execs said, by focusing on higher billing rates and higher margin clients.

McAndrews said clients are rapidly adopting the full range of services offered through this unit, including search, site development, strategy, creative and e-CRM. He said search accounts for approximately 28 percent of its marketing services revenue, roughly equal to last quarter and somewhat below the industry average. Headcount is about what it was at the end of 2004, with several new hires and a handful of layoffs in the Razorfish business.

Last quarter, the company said it wanted to expand overseas business in the Avenue A/Razorfish operation, but didn’t offer any insight on the status of those plans. McAndrews characterized foreign growth as “important but not crucial.”

The digital marketing technologies unit, also known as Atlas, did well, reporting income of $10.3 million on $20.6 million in revenue. During the quarter, Atlas announced both a name change and the launch of its long-awaited rich media platform.

aQuantive’s performance media unit, which operates the DRIVEpm and MediaBrokers networks, reported revenue of $5.3 million, up from $785,000. It was the third profitable quarter for the division, out of a total five quarters of operation. McAndrews called the performance media sector “hot and growing.”

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