Over the past few years, companies have wasted huge sums on Internet
advertising. However, this is not to say that online ads do not work. In
fact, they can be highly effective – because of the targeting.
A company called ValueClick
wants to make things better. The company’s technology is
known as “performance-based banner advertising.” That is, the economic
model is based on cost-per-click-through.
For the most part, ValueClick focuses on small-to-medium sized business. As
individual sites, the revenues are minimal. But when aggregated in a
network, these sites gain added value (the law of Big Numbers). Currently,
there are more than 12,400 Web sites in the advertising network. In all,
ValueClick has a 30% reach of the U.S. Internet population (according to Media
Metrix).
The company uses proprietary tracking management software called VisiTrak.
With it, customers can track real-time marketing data for the effectiveness of
banner campaigns.
The company had its IPO in late March 2000, as the Nasdaq started to
crumble. ValueClick was able raised about $70 million. Goldman Sachs was
the lead underwriter.
In the past quarter, ValueClick has shown strong revenue growth. Revenues
were $11 million, which was up from $2 million for the same period a year
ago. During this time, the network had 5.7 billion impressions and 21.9
million click-throughs. Interestingly enough, ValueClick would have had net
income of 4 cents per share if stock-based compensation expense had been
excluded.
The trend towards performance-based advertising is real. According to
Forrester Research, such advertising models will account for 50% of online
advertising budgets by 2003, which is up from 15% in 1999. Also, the
company is expected to report its earnings on Thursday. You
can see the chart at the internet.com Earnings
Page. In the past quarter, the company exceeded expectations. So long
as ValueClick keeps executing, exceeding expectations may become a habit.
