DoubleClick Posts First Profitable Quarter

Alley-based online ad giant DoubleClick announced Thursday that it has met third-quarter Wall Street estimates — which called for it to turn a profit for the first time.

The company reported net income of $3.7 million for third quarter — a profit of $0.03 per share. Last quarter, the company reported a loss of $3.8 million.

“Today, we have passed an important milestone for DoubleClick and our shareholders in achieving profitability,” said chief executive officer Kevin Ryan.

“Each year our customer base in our core businesses continues to grow, and we continue to create new products and add strategically even as we show consistent diligence and preparation in expense control.”

DoubleClick reported revenue of $135.2 million for the third quarter of 2000, an increase of 79 percent over the year-ago period.

The company also ended the third quarter with a sizable $894 million in cash and marketable securities, $12 million more than last quarter. The company attributed the increase to $34 million in cash generated from operations.

The industry bellweather’s reports of a profit come as a breath of fresh air for online ad companies, who have been pounded by a hostile market and hounded by questions about the value of banner ads and impression-based accounting.

In a call with analysts Thursday afternoon, Ryan attributed much of DoubleClick’s strong quarter to improvement of internal operations, to technology sales, but also to DoubleClick’s wide brand recognition among advertisers.

“The last few months have shown the importance of scale,” said Ryan, “and our ability to execute through any market conditions.”

DoubleClick executives also said it has been making efforts to seek out reliable, longer-term advertisers for its network, and said it would continue to do so. Less than one percent of DoubleClick network advertisers come from Barron’s list of the top 100 fastest cash-burning firms, Ryan said, adding that revenue from dot-coms account for about 50 percent of the company’s network income.

From the company’s recently announced acquisition of email marketer NetCreations, Ryan said the company expects to have a total of about 30 million email addresses. This effectively will make DoubleClick one of the dominant players in a field where, less than a year earlier, it had only minimal capabilities and lagged behind multi-service competitors like 24/7 Media and specialty firms like NetCreations.

But Ryan and chief financial officer Stephen Collins conceded some news with which they were less than satisfied. CPM rates, for one, dropped about 20 percent from last quarter.

The company also said that customer database manager Abacus Direct, which the company acquired earlier this year — touching off privacy advocate concerns — failed to produce expected results in what is typically its strongest quarter. As a result, Ryan said DoubleClick has revamped Abacus’ leadership and will continue to restructure as it heads into the fourth quarter, traditionally a slower time for the division.

Collins said DoubleClick sees overall fourth quarter growth of between four and six percent, and that they expect earnings for that quarter to match third quarter’s. However, due to continued unpredictability in the media business, the company also gave what it said was a conservative estimate of a first quarter 2001 loss.

“Now, [first-quarter seasonality] hasn’t been the case for the last two years, but current conditions definitely suggest that it will be this time. Seasonality was always a wildcard, as far as Q1 profits were concerned, so we do expect to have a pro forma lost in the first quarter 2001.

Collins said the company expects the remainder of 2001 to be profitable.

However, guidance for 2001 did not include revenue and costs from NetCreations and online ad planning metrics firm @Plan — which DoubleClick also said it would purchase late last month. Those acquisitions close in fourth quarter 2000, at which point Collins said the company will restate estimates.

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