eUniverse Shows Second Quarter of Profitability

In a sign that not all may be rotten in the state of online media, eUniverse produced another quarter of profitability, though its use of performance-based ad deals and its launch of subscription services.

The Los Angeles, Calif.-based company, which runs a network of advertising-supported entertainment sites and about 20 e-mail newsletters, posted $6.67 million in revenue for its second fiscal quarter, amounting to a net profit of $900,000, or $0.04 per share.

Revenue increased 33 percent from the previous quarter, when it posted approximately $775,000 in earnings. A year ago, the firm saw a loss of $17.2 million, or $0.96 per share, on $4.1 million in revenue.

Next quarter, the company predicts $7.8 million in revenue, and net income of $1.2 million. For the entire year, the company expects net earnings to come in at $0.17 per share.

However, much of the company’s success is attributable to the fact that the majority of its inventory is sold on a pay-for-performance basis, which it says has enabled it to keep its pricing rates “relatively flat.” That’s a radical departure from most of the other top Web publishers, which generally pursue a CPM-based model to attract national brand advertisers.

“So much of [online] advertising is kind of the fluffy sponsorship and ‘brand-y’ deals that Proctor & Gamble might have done on a Yahoo! or an iVillage, and that is certainly starting to dwindle,” said chairman and chief executive Brad Greenspan. “eUniverse never really was tapping into that revenue stream — all of our advertising is performance-based, or the vast majority is.”

Greenspan said another large portion of the company’s revenue comes from using house ads to promote new sites — like CupidJunction, a fee-based dating service — to its 18 million monthly users. CupidJunction brought in $800,000 alone during the quarter, and had been promoted only in-house, he said. (Yahoo! is attempting to do the same thing, recently launching paid add-ons to its Personals section.)

“We’ve decided it’s more productive and profitable for us to take some of our own inventory and invest it in new businesses like this,” Greenspan said. “In doing that, we grew those businesses amazingly … in one quarter from a standing start. As a result … we’re really not seeing the price sensitivity” in advertising.

In some cases, “we’re able to actually raise the prices, because now our own products generate more revenue for us, so we can turn down an offer from an advertiser that wasn’t at a high rate,” Greenspan said. “So it makes a lot of sense to promote CupidJunction than to work at an unfavorable rate.”

eUniverse also said it continued to grow its list of opt-in e-mail subscribers — now reaching more than 40 million who receive newsletters and special offers. The company also says it anticipates to bring in more revenue from direct marketers as a result of the anthrax scare.

“From every indication we’re seeing, [marketers] are definitely going to be forced to … to spend their marketing budgets on the Internet ahead of what they forecasted,” Greenspan said. “They might have looked at the Internet as a luxury, to test and experiment with as they continued their strong direct mail business. I think now all these companies are going to have to radically move onto the Internet and look to partner with companies like eUniverse to get their message across to an audience.”

That expected increase notwithstanding, Greenspan said the firm intended to launch subscription products in the future, but did not elaborate. Much of that growth is expected to be fueled by some of the $5 million given to the company as part of a private equity sale to Sony Corp.’s 550 Digital Media Ventures unit.

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