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LifeMinders Looking for Buyer

LifeMinders is actively shopping itself for prospective acquirers, the Herndon, Va.-based online marketer and technology firm said Thursday.

The announcement came in conjunction its first quarter operations report, which revealed a 52 percent drop in revenues from fourth quarter's $11.6 million. Its direct marketing revenue -- which it made by delivering advertiser messages to targeted segments of its user base -- dropped sharply by about 53 percent, to $5 million.

Aside from one-time charges, the firm reported a first quarter loss of $6.9 million, or $0.27 per share, 18 percent smaller than its previous quarterly loss. Including a restructuring charge of $2.5 million, net loss totaled $13.0 million, or $0.50 per share, down from fourth quarter's $70.5 million, or $2.77 per share, which included an impairment and intangible assets write-down of $54.0 million.

The company blamed the losses on the online ad market's sharp decline -- which reduced the number of advertisers and the amount clients were willing to spend.

"We are seeing deterioration across literally the whole market," company president Alison Abraham said during a call with analysts. "We are seeing deal size coming down dramatically, down to $20,000 to $29,000 per advertiser, down from $50,000."

"There's a large amount of inventory in the marketplace, particularly from struggling dot-coms ... we don't see a recovery in sight," she added.

Clients also increasingly demanded cost-per-action deals, Abraham said. Those sorts of contracts typically are harder to agree upon, often because distributors' getting paid depends on the strength of the creative or offer.

"About 80 percent of our contacts are performance-based, up from 66 percent," she said.

One of the firm's recent and most promising initiatives, its Outsourcing unit -- which provides e-mail marketing technology to clients -- also was impacted by the online ad market.

In addition to price pressure from other players entering the e-mail marketing technology field, LifeMinders said clients' growing reluctance to launch new Web marketing ventures contributed to prohibitive costs for that division, and a much-tempered outlook for the future.

The firm didn't reach this state due to a lack of trying. During the quarter LifeMinders cut its customer acquisition marketing spending, reduced its work force, renegotiated major client contracts, and trimmed general and administrative budgets. In earlier quarters, the company also discontinued its wireless messaging service.

However, with only a skeleton staff of 30 to 35 employees -- down from 203 in fourth quarter -- executives now say it's likely time to throw in the towel, and are looking for a buyer or to merge with another player. Failing that, executives said that they wouldn't rule out complete liquidation.

"At the beginning of Q1 ... we streamlined our focus to our core direct marketing business and we reduced our expenses significantly towards a goal of achieving profitability in the coming quarters," said LifeMinders chairman and chief executive Jonathan Bulkeley. "However, throughout the quarter, our revenue base continued to deteriorate. While we maintain strong core assets -- a large membership base, a scaleable infrastructure and approximately $60 million in cash and cash equivalents -- we have concluded that our prospects for growth and profitability as a stand-alone company are not strong."