iVillage Says Scale Helps Overcome Ad Slowdown

New York-based online media player iVillage said its position as the dominant vertical portal for women — following its acquisition in June of Women.com — has helped it weather the Internet advertising downturn.

In its third quarter earnings announcement, the company said it was near net profitability, posting $400,000 in before-charges earnings.

That pro forma profit is an improvement from a pro forma loss of $16.1 million last quarter. A year ago, the company posted a pro forma loss of $24.2 million. Including one-time charges (including those associated with the company’s restructuring after it purchased rival Women.com) iVillage posted a net loss of $5.9 million for the third quarter, or $0.11 per share. That’s 87 percent better than last quarter’s $18.4 million net loss (or $0.56 per share), and the firm’s net loss of $44.4 million (or $0.81 per share) a year ago.

Quarterly revenues totaled $18.1 million, up 19 percent from second quarter’s $15.2 million, but down from last year’s $29 million income. $9.2 million of the decrease in year-to-year revenues was attributable to revenue from dot.com companies.

Chairman and chief executive Doug McCormick attributed the upswing in fortunes to iVillage’s market position as one of the chief media sources targeted at women — a fact that make the site attractive to advertisers.

“With our acquisition of Women.com, we took two companies that were losing money and, in the span of a quarter, created one, strong company that has turned EBITDA positive,” McCormick said. “At the very core of our success is the solid brand name that delivers a consistent, high-value product that 1 in five women in the Web come to 3 times a month.”

He added that iVillage had undertaken studies with Web survey firm Dynamic Logic to prove a return on investment for advertisers — and said results showed that a buy on iVillage.com was “five times more impactful than on a generic site.”

“Our sales team worked with outside research services and with our clients to document the value of iVillage,” McCormick said. “Advertisers know their ads work best … in a trusted environment. And as advertisers construct their patchwork quilt of their media plan, they see the value of iVillage.”

The news bodes well for niche online media plays, as mainstream portals like Yahoo have reported slipping quarterly revenues — which Sunnyvale, Calif.-based Yahoo said would result in restructuring and possibly, layoffs.

At the end of the third quarter 2001, iVillage had approximately $43.7 million in cash, cash equivalents and restricted cash on its balance sheet. The Company continues to carry no debt.

Meanwhile, during its third quarter, iVillage signed 23 new advertisers and added 16 new brands from current advertisers. New advertisers and companies expanding their brand advertising include Johnson & Johnson, MGM Pictures, Procter & Gamble and Revlon.

During the quarter, iVillage also streaming ad units, dubbed “NTVQ” — short for “Near Television Quality.” The units feature repurposed TV spots for advertisers including P&G’s Pampers, Swiffer and Tide brands.

Yet iVillage admitted that it too continues to feel pressure from the lagging ad market. McCormick said the company’s subsidiary businesses — such as Lamaze Publishing (an ads-supported printing division) and the Newborn Channel (a cable TV service it delivers to hospitals) — are cushioning the blow.

“We have no delusions about a quick recovery in the advertising marketplace, or the economy,” he said.” But the company is operating according to what he termed “a plan of strict fiscal discipline.”

McCormick added that iVillage planned to relaunch Women.com as a separate site skewed toward a younger age group. The move is likely an effort to better segment the portal’s audience and nine million registered members for better advertising effectiveness, although the company said it would release more information on the Women.com relaunch at a later date.

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