DoubleClick Sees Continued Ad Market Weakness

Internet ad giant DoubleClick continues to feel the sting of sluggish interactive marketing spending, as it reported lingering pressure on its business during third quarter.

While at the high end of prior guidance, revenue for the firm declined to $74.6 million, down 1.4 percent from last quarter, and 19.5 percent from a year ago. That performance, coupled with write-downs of goodwill and real estate, led to a net loss of $62 million, or $0.46 per share. Last quarter,

DoubleClick posted a net profit of $4.1 million, or $0.03 per share.

Rather than dwelling on the swing back to a net loss, executives focused on the fact that the firm looks to be poised to reach pro-forma profitability by the end of the year. Barring one-time charges, DoubleClick earned $6.6 million, or $0.05 per share, wider than analysts’ expectations of a $0.01 per-share pro forma profit, according to First Call/Thomson Financial. Last quarter, pro forma earnings came in at $2.5 million, or $0.02 per share.

“With $0.08 pro forma earnings per share year-to-date, we are on track to deliver on our promise to be profitable on a pro forma basis in 2002,” said DoubleClick Chief Executive Kevin Ryan, who said the firm is on pace for “by far the most successful year of operations in DoubleClick’s history.”

Aside from a one-time gain on the sale of its media business to MaxWorldwide this quarter, DoubleClick said sales at its TechSolutions and Data divisions rose 9.1 percent from last quarter, to $71.9 million, but remained 1 percent below year-ago levels.

The company’s TechSolutions division accounted for sales of $45.1 million, down 7.1 percent from last year on continued weakness in online ad technology spending. Revenue from the division’s DARTmail unit totaled $9.7 million, up 46 percent from a year ago.

“Ad management is still suffering from a general contraction in the market,” Ryan said. “The overall ad market has not picked up — except for paid listings, as we’ve seen from Yahoo!’s results … Third quarter is not a great quarter for e-mail or ad management, but we saw a downturn from last year due to contraction.”

The company’s Data division, chiefly centered on its Abacus database, benefited from its buyout earlier this year of the remainder of Abacus’ U.K. business. The division saw an 11 percent increase in revenue from a year ago, to $26.8 million.

While he continues to predict pro-forma breakeven by the end of the year, Ryan said the company expects only mediocre revenue as clients remain shy to invest heavily in systems to power online media.

As a result, DoubleClick forecasts fourth-quarter revenues of between $62 million and $66 million, and projects pro forma per-share earnings to be between a loss or gain of a penny. TechSolutions is expected to bring in between $41.5 million to $44.5 million in revenue (with about a quarter of that total coming from e-mail), while Data will contribute between $18.5 million and $19.5 million.

“We’re forecasting conservative revenue growth even with an expected fourth quarter seasonal uptick,” Ryan said. “We’re seeing a bottoming-out without a real recovery [in the ad market]. I am not optimistic about pickup there … I don’t see a considerable pickup outside of paid listings.”

That’s a troubling report for the many online publishers and ad sellers hoping to see a rebound in coming quarters. Following Yahoo!’s better-than-expected performance, some industry-watchers had become optimistic that the Web portal’s good fortune indicated an improving climate for media sales.

Instead, Ryan said he sees demand chiefly in other areas, such as marketing automation software and multi-channel marketing products — where DoubleClick happens to have spent considerable effort to improve recently.

Last month, DoubleClick announced its intention to acquire Protagona, a U.K. maker of multi-channel marketing automation software. In August, it unveiled a service for automating e-mail list management.

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