ValueClick, Fastclick Post Strong Results

ValueClick reported strong results for the second quarter, exceeding its guidance for revenue and net income. Revenue grew to $54.6 million, an increase of 58 percent from $34.6 million in the year-ago quarter. Net income for the quarter was $8.1 million, or $0.10 per share, compared to $5.5 million, or $0.07 per share, for the second quarter of 2004.

Revenue growth was led by ValueClick’s media properties, which gained 89 percent year-to-year, while its affiliate marketing business grew by 37 percent. According to James Zarley, ValueClick’s chairman and CEO, the affiliate business grew because of the addition of quality merchants like Buy.com.

“When we bring on strong clients, it attracts strong publishers. The more we build the merchant base, the stronger the publisher base will become,” he said.

During the quarter, ValueClick launched its PriceRunner comparison shopping engine in the U.S. and expanded its Commission Junction affiliate network in Europe. The company acquired both E-Babylon and Web Clients in June 2005, and there may be more acquisitions in ValueClick’s future.

“We’ve shown that opportunities still exist, and we’re still on the lookout,” Zarley said. He added a target company would have to provide some synergy to ValueClick’s existing properties, such as delivering traffic to its comparison shopping properties or expanding its affiliate marketing position worldwide.

For its first quarter as a publicly traded company, Fastclick reported $19.3 million in revenue for the second quarter, a 58-percent jump from $12.2 million for the same period in 2004. Net income was $1.5 million, or $0.07 per share, compared to $1.7 million, or $0.15 per share, for the second quarter of 2004.

The company is trying to improve the user experience by reducing its reliance on pop-under ads. The units now make up less than 35 percent of overall revenue, where that number was above 50 percent just a year ago. As a result of reducing these more lucrative, but potentially annoying ads, the average CPM dropped by $0.10 to $0.70. To compensate, Fastclick began raising its prices by 10 percent in May, and has seen a corresponding 10 percent increase in average CPM so far this quarter.

Fastclick delivered over 27 billion ad impressions across its network of 9,000 sites during the quarter, a 17-percent increase from the previous quarter. The company has made a concerted effort to grow its network without compromising the quality of its publishers, said CEO Kurt Johnson. While more than 7,400 sites applied to join Fastclick’s network, only 16 percent were accepted. In addition, the company removed more than 200 sites from the network because they did not meet Fastclick’s quality standards, he said.

Fastclick added nearly 100 new advertisers in the quarter, now exceeding 540, and retained more than 90 percent of its top 100 advertisers. A growing number of those advertisers are ad agencies, which contributed nearly a fifth of Fastclick’s revenue last quarter.

The company expects to add contextual, demographic, and geographic targeting to its ad network in coming months. A beta test of a new paid search management product is nearly complete, and a full launch is expected this month. The tool will use advanced analytics and predictive modeling to manage bids on keywords in major search engines.

The company had hoped to launch it last quarter, but took extra time to make improvements. “Although the product is a little bit behind schedule, believe me, it’s worth the wait,” Johnson said.

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