More NewsPaid Listings Search Engines Top Estimates

Paid Listings Search Engines Top Estimates

Rivals Overture and FindWhat continue the sector's good news -- throwing the rest of the Web ad industry's troubles into sharp relief.

Overture and FindWhat.com, two rivals in the paid search engine listings business, topped industry expectations in a further illustration of the performance-based sector’s relative health, compared to the rest of the online advertising industry.

As expected, Pasadena, Calif.-based Overture posted fourth-quarter revenue of $101.2 million, up 40 percent from the previous quarter.

Overall, the firm posted net earnings of $20.8 million, or $0.35 per share, up from $9 million, or $0.15 per share, in the previous quarter. Wall Street had expected earnings of $0.19 per share, according to Thomson Financial/First Call estimates.

For the full year, Overture saw net income of $20.2 million, or $0.36 per share, on revenues of $288.1 million. In 2000, the company posted a net loss of $458.6 million, or $9.54 per share on $103.1 million in revenue.

“By continuing to execute on the fundamentals, Overture was able to conclude the year with a tremendous fourth quarter,” said Ted Meisel, president and chief executive officer, Overture. “We look forward to building on this momentum by strengthening our relationships with key affiliate partners, providing additional value to our advertisers as well as continuing to grow internationally.”

Meanwhile, competitor New York-based FindWhat.com posted a fourth-quarter profit of $1.6 million, or $0.08 per share, on revenue of $7.9 million. Previous guidance had the firm earning $0.06 per share for the quarter.

A quarter earlier, the company brought in revenues of $5.4 million and posted net income of about $650,000, or $0.04 per share.

For the full year, FindWhat reported a loss of $347,455, or $0.02 per share, on revenue of $20.4 million. About $1 million of that loss was attributable to a one-time charge associated with the sale of its remaining airtime under a radio advertising contract.

A year earlier, FindWhat.com’s net loss was $8,805,446, or $0.63 per share.

“The fourth quarter capped off a tremendous year,” said FindWhat president and chief executive Craig Pisaris-Henderson. “We generated over $20 million of revenue in 2001, became the first publicly-traded pay-for-performance search engine to show a quarterly profit [which it posted in second quarter], and we anticipate an even better 2002.”

Both companies said they would be increasing their guidance for the coming quarter and year.

For all of 2002, FindWhat management said the company expected to post earnings per share of $0.29, an increase of 21 percent over previous guidance. Additionally, they said revenue would come in at $36 million, 16 percent above prior projections.

For next quarter, the company said it expects to report $8 million in revenue, and earnings of $0.06 per share.

Overture had a similarly rosy picture for the year, giving guidance for 2002 revenue of $442 million, leading to net earnings of $58 million, or $0.93 per share. For the first quarter, Overture said it expects to post a profit of $21 million, or $0.34 per share, on $122 million in revenue.

Coupled with the positive results from space’s third major contender, LookSmart — which also reported better-than-expected revenues and pro forma earnings for the quarter — the trend further attests to the relative insulation that paid search listings providers are feeling from the rest of the troubled online ad market.

Online ad leader DoubleClick, for instance, posted better-than-expected results for the fourth quarter, but predicted flat revenues for 2002, with company management saying it saw no discernable end in sight for the current downturn.

Another bellwether, Yahoo, raised its estimates for 2002, based in large part on its efforts to diversify away from the online advertising business. The Web portal recently completed its exchange offer for career listings and software site HotJobs.com.

While the numbers look promising, trouble still may be in store for the paid listings providers. Earlier this month, FindWhat sued to have Overture’s patent rendered invalid and unenforceable. Since then, Overture fired back, alleging patent infringement in its own suit.

While the litigation is just beginning, FindWhat chief financial officer and chief operating officer Phillip Thune said his company anticipates reduced margins as a result of legal costs.

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