Breaks Even Before Charges

Pay-for-placement search engine firm had some good news for investors Wednesday: it’s become one of the few dot-coms this year to post a breakeven quarter on a before-charges basis.

The Pasadena, Calif.-based firm, which syndicates its paid-placement search listings to portals and other search engines, said that revenue grew 20 percent from last quarter, to $62.5 million.

While the company overall posted breakeven earnings, it said its core domestic business saw a profit of $1.3 million. (Last quarter, the unit lost about $2 million from operations.)

On a net basis — including one-time charges — the company posted a loss of $2.9 million, or $0.06 per share. Last quarter, the firm posted a loss of $0.13 per share. Wall Street had expected the firm to post a $0.17 per share loss — even before those charges.

Understandably, executives were ecstatic about the results, which were a full two quarters ahead of previous estimates of profitability.

“We’re very pleased that we’ve been able to translate our industry leadership of commercial search into our first profitable quarter in our U.S. search business,” said GoTo’s president and chief executive Ted Meisel. “And we’re even more excited about the future. We expect the search market to grow quickly over the next several years, and we believe the quality of our service, team and execution leaves us well-positioned to capitalize on the opportunities likely to emerge.”

GoTo said much of its success was due to higher prices it’s been able to charge advertisers, which pay on a cost-per-click basis. (The actual amounts are determined by an auction method, with highest-paying advertisers receiving higher billing on search engine results.) The company said it has seen the average cost increase steadily since February, to $0.21 per click, up from $0.16 last quarter.

Also, GoTo increased the number of portals and search engines using its technology in their own search results. During the quarter, GoTo signed, renewed or renegotiated deals with MSN, iWon and others.

The company also said its domestic advertising base grew by about 3,000, to approximately 45,000 clients. Additionally, the firm said that the average spend per advertiser increased to $1,405 in the second quarter 2001, up from $1,277 last quarter — a 10 percent increase.

As a result of the company’s strong second quarter results, GoTo executives also estimated increasing revenues throughout the remainder of the year — $64 million in third quarter and $70 million in fourth quarter — as well as a $0.03 and $0.05 profit in the next two quarters, respectively.

As a result, projected annual earnings will be $0.31 per share, on revenue of about $320 million, executives said during a conference call with investors after the market closed.

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