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 | $ 13.00 | $ 48.38 |
Gross proceeds | $ 48.59 | NM |
Shares | 15.11 | 11.40 |
IPO | $ | $ |
Options/warrants | 3.99 | 3.00 |
Fully-diluted | 19.10 | 14.40 |
FDS market | $ 248.25 | $ 696.45 |
Working capital | $ 42.86 | $ 7.51 |
Long-term debt | $ – | $ – |
Warrant/option | $ 47.07 | $ 1.20 |
FDS | $ 158.32 | $ 687.74 |
Latest | $ 5.38 | $ 30.60 |
Latest quarter | $ 2.44 | $ 17.29 |
Est. calendar | $ 12.50 | $ 74.00 |
Latest quarter | $ (4.51) | $ (4.67) |
Revenue | ||
FDS | 29.4 | 22.5 |
FDS | 12.7 | 9.3 |
) |
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 | $ | $ | $ | 4% | |
Broadcast TV | $ | $ | $ | 6% | |
Direct Mail | $ | $ | $ | 7% | |
Yellow Pages | $ | $ | $ | 2% | |
Radio | $ | $ | $ | 9% | |
Magazines | $ | $ | $ | 4% | |
Business Publications | $ | $ | $ | 5% | |
Cable TV | $ | $ | $ | 8% | |
Outdoor | $ | $ | $ | 4% | |
Farm Publications | $ | $ | $ | 2% | |
Misc.* | $ | $ | $ | 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?
HarmonFinance tips! FREE! JOIN NOW! our new exclusive monthly email about the best Web investment services and info. Sign up here! |