DoubleClick Turns 3Q Profit, Expects Steady Growth

DoubleClick , the largest provider of online ad technology, Thursday reported bringing in $75 million in the third quarter of 2003, resulting in a profit of $6.3 million, or $0.04 per share.

This is the third consecutive profitable quarter for the company, which has pulled off a recovery from the dot-com downturn and the resulting crash in online advertising spending.

The company’s data business saw the most dramatic growth in the quarter, as catalogers spent to prepare for the holiday season. Data revenues came in at $31.2 million, up from $20 million in Q2, and up from $26.8 million in the year-ago period. It was the best revenue quarter the division has seen to date.

Technology brought in $43.5 million in the third quarter, compared to $43.4 in Q2, and $45 million in 3Q of 2002.

While company executives said transaction volumes in the technology business reached their highest level since the first quarter of 2001, revenues didn’t increase significantly because DoubleClick has been signing larger clients — clients who could negotiate lower prices because of the volume of business they were doing.

In the third quarter, DoubleClick signed AT&T Wireless, Fox Sports, CondéNet, and Internet Broadcast Systems to use its ad management solutions. Revenue from these products, which include DART for Advertisers and DART for Publishers, dropped in the quarter. These segments brought in $31 million in 3Q 2003, compared to $35.4 million in the year-ago period. DART for Advertisers saw an increase in revenues in the third quarter, while DART for Publishers declined, the company said. The fall was attributed to consolidation among publishers.

DoubleClick has high hopes for its DART Motif rich media ad serving and tracking product, which is scheduled to add multi-event tracking and analysis functionality next month. The product is currently in use by Viacom’s CBS and MTV Networks sites, Cox Newspapers, and Ogilvy Interactive UK. DoubleClick has initiated a large testing program for Motif, with its largest agency customers and nearly all of the Nielsen//NetRatings top-ten sites participating.

“We except Motif to become a significant part of our Tech Solutions sales in 2004,” said Kevin Ryan, DoubleClick’s chief executive officer. “Pricing for Motif is significantly higher than it is for regular ad serving.”

DoubleClick’s email business suffered during the quarter. It brought in just $9.6 million of revenues, down from $9.7 million in the period one year ago. It was up slightly from Q2, when email accounted for just $9.2 million. The company attributed the decline to concerns about spam, along with the increasing sophistication and demands of email users. This week, the company released the 4.0 version of DARTmail, which it says is a significant improvement over the previous version.

DoubleClick’s multi-channel marketing automation and analytics products, Ensemble and SiteAdvance, contributed $2.9 million in revenues in Q3. These are fairly new products DoubleClick is working to cross-sell to its customers. The company notes 24 percent of technology clients used more than one product, up from 21 percent in the last quarter, and 16 percent in Q3 2002.

In the fourth quarter, DoubleClick expects revenues between $69 and $71 million, with earnings per share coming in between breakeven and $0.03 per share.

For the full year 2003, DoubleClick raised its guidance slightly, predicting earnings to come in between $0.09 and $0.12 a share. Previously, it estimated a wider range, between $0.07 and $0.12 a share.

Looking ahead to 2004, the company is optimistic. It expects earnings for the year to come in around $35 million. That would be more than double what it expects to bring in during 2003.

“With the improving business climate as well as the successful actions we have taken to reduce our cost structure, we expect very strong net income growth in 2004,” said Bruce Dalziel, DoubleClick’s chief financial officer.

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