FindWhat.com Expects $10M Profit in 2003

The paid search company expects an enhanced relationship with Terra Lycos will make up for the anticipated end of its Applied Semantics partnership.

Paid search provider FindWhat.com reported solid first-quarter results Wednesday, raising its full-year guidance to a $10 million profit this year.

FindWhat said it anticipated losing its partnership with Applied Semantics, now owned by Google, but that it would make up for this loss by wringing more revenue out of its Terra Lycos deal.

For the first three months of the year, the Fort Myers, Fla.-based company reported $15.8 million in revenue and net income of $2.7 million. Revenue was up 18 percent and net income by 35 percent. FindWhat ended the quarter with 25,400 active advertisers accounts, up 13 percent from the previous quarter. Click-throughs also showed strong growth, up 18 percent from last quarter to 89.2 million.

For the full year, FindWhat bumped up its revenue expectations from $60 million to $65 million and its pre-tax earnings to $10 million from $8.9 million.

Coming off Overture’s earnings-warning bombshell, company executives stressed that guidance is inherently volatile, only more so in the fast-changing search industry.

Phillip Thune, FindWhat’s chief operating officer and chief financial officer, said the company enjoyed more robust click-through rates than anticipated. While bullish on the future, he cautioned that the company did not anticipate the revenue growth to continue as strongly through the rest of the year.

One factor sure to hurt the company: Google’s recent acquisition of Applied Semantics, which ranked as one of FindWhat’s top five distribution partners.

“While we think very highly of the Applied Semantics team, and will seek to continue to work with them, we believe it is prudent to anticipate that revenue from that relationship will decline significantly,” he said.

The company said it expected its relationship with Terra Lycos, which uses FindWhat’s private-label service, would continue to thrive. Despite Overture’s renewal of its paid listings deal with Terra Lycos, FindWhat said it expected the private-label listings to gain a more prominent position on the page in the next couple of months, driving higher click-throughs.

FindWhat has carved out a profitable niche as a second-tier paid search provider, stitching together a network of smallish sites to offer advertisers a lower-priced alternative to industry heavyweights Overture Services and Google. Two weeks ago, the company took steps to increase its price per click by upping its minimum bid to 5 cents, which is at Google’s minimum and half of Overture’s.

This quarter, FindWhat’s average price per click remained at 18 cents, unchanged since the second quarter of 2002 and up just a penny since the third quarter of 2001. Across the industry, price-per-click rates appear to be in flux. Overture said its click rates would not grow as quickly as anticipated, and Ask Jeeves reported declining rates in the quarter. While Overture drastically cut its annual guidance, Ask Jeeves offered a cautious outlook for the year.

FindWhat executives cautioned that price-per-click rates tell only part of the story, as the company tries to impress upon advertisers the tangible benefits of its service. As part of that effort, in March the company rolled out AdAnalyzer, which adds up the return on investment of FindWhat keyword programs.

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