Bits and Bytes for April 30, 2004

ValueClick Reports Another Record Quarter, Raises Guidance

Online advertising and marketing firm ValueClick this week reported record first quarter results and raised its guidance for 2004.

ValueClick’s revenue for the quarter was $36.7 million, an 89 percent increase over revenue of $19.5 million for the first quarter of 2003. The company’s net income was $5.4 million, excluding a one-time gain, or six cents per diluted common share. In comparison, net income was $1.2 million, or two cents per diluted common share, for the first quarter of 2003.

The revenue boost is partly owed to the company’s extensive 2003 acquisitions. In December, ValueClick acquired affiliate marketing firm Commission Junction. The firm also added Hi-Speed Media, an opt-in email service provider, that month. Earlier, in June, it had added Search123 to its portfolio of Web marketing companies. Hence, first quarter results include income from all three.

Organic growth for the company, normalizing for acquisitions, was in the neighborhood of 33 percent.

A group of analysts polled by Thomson/First Call had expected earnings of four cents per share. This also excludes the one-time gain, a gain of $8 million from ValueClick’s sale of ownership in ValueClick Japan.

The results, deemed “extraordinary” by an analyst, were driven primarily by growth in both the affiliate marketing and media elements of ValueClick’s business.

“When you look at the operating metrics of the company, they were better than everybody expected,” said Kyle Evans, an analyst with Stephens Inc.

“The media business was strong, but it was strong last quarter and we [analysts] expected it to be strong. The strength of the affiliate marketing was a positive surprise,” said Kyle Evans, an analyst with Stephens Inc. Affiliate marketing revenue for the quarter was about $14.4 million.

Despite the sale of ValueClick Japan and the loss of income from that business, the company raised its guidance. For the fiscal year 2004, ValueClick raised its guidance to $147 to $150 million in revenue from its former prediction of $145 to $148 million in revenue. The company now expects twenty-six cents to twenty-nine cents per share in diluted net income excluding the one-time gain from selling ValueClick Japan. Formerly, it expected twenty-one to twenty-seven cents diluted net income per share.

ValueClick became markedly more visible in 2003. Rather than compete with the dominant players in online advertising and ad technology, the company has tried to position itself as a one-stop shop, with offerings in nearly every category of Web marketing.

Rebuffed Return-To-Sender Bill Will Return, Lawmaker Vows

A California bill requiring mailers sending unsolicited CDs or DVDs to include postage-paid return mailers defeated in committee this week will return, the author has said.

AB 2166, introduced by Assemblywoman Loni Hancock, D-Berkeley, was voted down 4-3 by the Assembly Committee on Arts, Entertainment, Sports, Tourism and Internet Tuesday.

The bill, sponsored by Californians Against Waste, was introduced last week. Hancock has promised to re-introduce it next year.

“This is the Return To Sender legislation and Loni has vowed it will return,” said Hans Hemann, Hancock’s chief of staff. “She will introduce it next January when a new legislative session begins.”

The bill’s defeat is “good news” for California consumers and both small and large companies in California, according to Nicholas Graham, a spokesman for America Online. Graham said the “burdensome” bill would have unnecessarily taxed the software industry.

When Hancock introduced the bill last week, two California residents dumped thousands of unsolicited America Online CDs onto the state Capitol steps. Jim McKenna and John Lieberman of El Cerrito have gathered the CDs for nearly three years. They run the Web site NoMoreAOLCDs.com.

Poindexter To Speed Ad Delivery

Poindexter Systems, an online ad campaign optimization company that also serves ads, has re-worked its systems to speed the delivery of ads, by partnering with content distribution networks that operate “edge” servers.

Poindexter’s clients’ ads will now be cached on 20,000 servers worldwide.

Poindexter’s core product, the Progressive Optimization Engine (POE), works when a user requests a Web page. The accompanying ad request is redirected to Poindexter. The company analyzes the user’s demographics anonymously and, in a millisecond, decides which of a series of an advertiser’s ads — if any — would be best served to that user. Then the ad is served.

SmartServe, the Poindexter application that collects the ads, runs POE and delivers the ads, has been installed on the servers of Akamai, Mirror Image Internet and Speedera.

The move means that ads will be delivered more quickly because they will originate from servers close to the users. The content distribution networks (CDNs) have ad servers strategically positioned all over the world. Also, delivery will be more reliable because there’s a huge amount of backup. If one server should go down, the request will be directed to the next closest, and so on.

Five-year-old Poindexter used to host its own servers in its New York office. But as more and more customers signed up, the company needed to scale up.

“About 18 months ago we were doing probably 20 million impressions a month. We’re now doing about 100 billion. We realized we would either have to invest a lot in new servers or find a different approach,” said Joe Zawadzki, chairman and founder of five-year-old Poindexter Systems.

The company did a full rebuild of SmartServe to make it run in the distributed environment. Though the rebuild was labor-intensive, in the end it was far more economical than purchasing a number of new servers, Zawadzki said. Hence, fewer costs will be passed on to clients.

“Going to companies like Akamai makes sense. These are companies built on having high connectivity to the Internet. They’re physically close to the consumers. A lot of ad servers use Akamai to host their creative. They have fast connections and are very reliable,” said Marc Ryan, director of analysis for Nielsen//Net Ratings.

Poindexter segments audiences to help advertisers hit the users most likely to be interested in their offerings. Segmentation is based on such factors as time of day, connection speed, income, age and gender. The company partnered with Digital Envoy earlier this month to augment its existing geographic targeting capabilities.

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