Adrageous: 24/7 Media's IPO Vs. DoubleClick

In the battle for delivering ads to eyeballs--"adballs"--there's DoubleClick (NASDAQ:DCLK), privately-held Link Exchange, and 24/7 Media which is scheduled to go public this week and sell 3.25 million shares at $13 per share through lead underwriter Merrill Lynch.

Our abacus thumping shows that 24/7 (proposed ticker :TFSM) wants to debut at an estimated $248 million market capitalization, or 36% of the already public DoubleClick (NASDAQ:DCLK).

That valuation agrees with the weaker revenue and size of 24/7. Its latest quarterly (March) data shows $2.4 million revenue vs. DoubleClick's June quarter which surged passed $17 million. Full-year 1997 results also show the gap with 24/7 posting 14% of DCLK's market-leading results. Check the handy table below:

Internet Stock Report compares...	IPO pending	Already public
24/7 Media vs. DoubleClick	24/7	DoubleClick
Proposed ticker or ticker	TFSM	DCLK
Does what?	ad network	ad network
Shares offered	3.25	NM
Greenshoe	0.49	NM
Target share price / Aug 10 share price	$ 13.00	$ 48.38
Gross proceeds	$ 48.59	NM
Shares outstanding	15.11	11.40
IPO cap / market cap	$ 196.41	$ 551.33
Options/warrants	3.99	3.00
Fully-diluted shares (FDS)	19.10	14.40
FDS market cap	$ 248.25	$ 696.45
Working capital	$ 42.86	$ 7.51
Long-term debt	$ -	$ -
Warrant/option inflow	$ 47.07	$ 1.20
FDS enterprise value	$ 158.32	$ 687.74
Latest full-year revenue	$ 5.38	$ 30.60
Latest quarter revenue	$ 2.44	$ 17.29
Est. calendar (CY) 1998 revenue	$ 12.50	$ 74.00
Latest quarter (losses)	$ (4.51)	$ (4.67)
Revenue multiples
FDS enterprise/latest year rev.	29.4	22.5
FDS enterprise/CY1998	12.7	9.3
) 1998 Mecklermedia, Internet.com (NASDAQ:MECK); all figures in millions except per share and multiples

After trucking in boatloads of options and warrants, and factoring in working capital and long-term debt, we get $158 million enterprise value for 24/7 vs. DCLK's $687 million. The surprising part in some ways is DCLK's smallish pool of working capital, $7.5 million, vs. 24/7's pro forma IPO working cap of $43 million.

Still, there's room for several ad networks to manage the onslaught of ads being delivered across a growing universe of Web sites that gulp them down as a primary business model. Internet Stock Report estimates this year Internet advertising expenditures could exceed $2.4 billion, growing to more than $6.4 billion in two more years. Compare that to other mediums and you'll discover the hot growth prospects for ads:

Internet Stock Report's Ad Forecast 1998-2000
Year		1998	1999	2000	CAGR**
Estimated Ad Revenue		(billions)	(billions)	(billions)
Newspapers		$ 38.73	$ 40.28	$ 41.89	4%
Broadcast TV		$ 37.72	$ 39.98	$ 42.38	6%
Direct Mail		$ 35.08	$ 37.53	$ 40.16	7%
Yellow Pages		$ 10.61	$ 10.82	$ 11.03	2%
Radio		$ 13.60	$ 14.82	$ 16.15	9%
Magazines		$ 8.69	$ 9.04	$ 9.40	4%
Business Publications		$ 4.08	$ 4.28	$ 4.49	5%
Cable TV		$ 3.46	$ 3.73	$ 4.03	8%
Outdoor		$ 1.26	$ 1.31	$ 1.37	4%
Farm Publications		$ 0.27	$ 0.27	$ 0.28	2%
Misc.*		$ 20.41	$ 21.12	$ 21.86	4%
Internet		$ 2.39	$ 4.18	$ 6.27	62%
Hybrid webTV		$ 0.02	$ 0.08	$ 0.15	174%
Web appliances		$ 0.01	$ 0.02	$ 0.03	58%
INTERNET TOTAL		$ 2.42	$ 4.27	$ 6.44	63%
TOTAL		$ 176.30	$ 187.45	$ 199.49	6%
Internet % of total		1.4%	2.3%	3.2%
*Misc= weeklies, shoppers, etc; **CAGR=compound annual growth rate (c) 1998 Mecklermedia, Internet.com

24/7 Media has several networks (May, 1998 stats): the 24/7 Network of more than 85 sites delivered more than 335 million advertisements in May 1998; the CliqNow! network of 75 medium- to large-sized sites delivered 45 million ads; ContentZone with more than 2,000 small- to medium-sized sites delivered 40 million ads. Some of the sites in its networks include ATT Worldnet, AllApartments.com, Earthlink, Doonesbury, and FreeEdgar.

It also licenses its Adfinity ad system to independent sites. All totaled 24/7 delivered more than 420 million ads in May, 1998 through sites that reached one-third of all Internet users, according to Media Metrix.

The race for adballs is on. May the better capitalized win?

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