Westlake Village-based Value Click is aiming to give its online display advertising business a big boost with its latest $42 million acquisition of the financial website Investopedia. The financial website is the online marketing and advertising company’s first site that specifically targets the financial sector. Investopedia will now join ValueClick’s roster of owned and operated sites including comparison shopping websites Pricerunner, Smarter.com and CouponMountain.com, which it uses to drive traffic for digital ad campaigns. “Investopedia gives us a very strong web presence in financial services and there’s a lot of advertising dollars being spent in the financial services advertising vertical,” said Gary Fuges, Vice President of Investor Relations and Corporate Governance at ValueClick. The financial site, based in Canada and founded in 1999, functions as an online library of financial terms, articles, tutorials and investing education tools such as virtual trading simulators and exam preparation materials. Its readership includes a mix of financial business professionals and investors who log on from their personal computers. Acquired from Forbes Media Aug.4, the site attracts 2.2 million unique visitors per month in the U.S alone, according to comStore, a company that tracks and measures digital data. Traffic at the site is organic, meaning the site does not have to pay advertising to attract visitors to Investopedia, which contributes to the site’s high profit margins. Revenue growth Investopedia is expected to grow in the mid teens percentage range by the end of 2010 and generate revenues of approximately $10 million, said ValueClick CEO, Jim Zarley, during the company’s Q2 earnings conference call. “It’s an opportunity to continue to expand in that financial services arena with either potentially new or, in some cases, deeper relationships with financial services advertisers,” he said. “And it allows us to introduce our thousands of clients from other advertising sectors to Investopedia.” Revenue from Investopedia will boost ValueClick’s Owned and Operated segment where sales declined 17.5 percent to $32 million during the second quarter. “[Investopedia’s] revenue is going to grow faster than what we’re doing in Owned and Operated so it’s a good strategic fit. The growth profile of Investopedia is something we were very attracted by as well,” Fuges said. Investopedia marks ValueClick’s first acquisition since July 2007, when it acquired MeziMedia, operator of the Smarter and Coupon Mountain comparison shopping web sites. MeziMedia was later renamed to ValueClick Brands in January 2010. Work for affiliates ValueClick also provides online advertising campaigns and programs for advertisers on sites other than the ones it owns through its affiliate marketing division. As part of a its growth strategy the company has been making enhancements across all of its online advertising platforms. On August 11 the company unveiled a “Platform Services” offering that can better leverage the company’s technology, data and services to execute advertising campaigns on the entirety of an advertisers budget and across the Internet, not only within Value Click’s media network, Fuges said. ValueClick’s online audience network already is one of the largest in the marketplace, with relationships with 8,000 publishers. To date, its real-time bidding and audience targeting systems have operated like other conventional advertising networks, but the new platform services unit will utilize new data, audience targeting and technology components that position it more for the “demand” side of the industry. The company also recently announced its business relationship with Lucid Media, a company that provides contextual targeting technology. This technology essentially helps identify what a website page is about, and in what context the information is presented, so that advertisers can better target the placement of their ads. “The classic example of contextual targeting is you have an article on a web page on Java so, is it Java the programming language? Is it Java the island? Or is it Java Coffee?” said Fuges. “A good contextual engine will be able to figure that out. Lucid’s technology helps categorize that webpage so that we understand what it is and that helps with targeting.” Currently ValueClick is working on developing its own contextual engine, he said. Growth industry These changes are better preparing Value Click in a dynamic industry that is expected to continue to grow rapidly. US Internet users viewed a total of 4.3 trillion display ads from December 2008-November 2009, representing a growth rate of 21 percent from a year earlier, according to the comScore. “There’s still a huge disconnect between the amount of media that is consumed online by people and the amount of ad dollars that are spent online by advertisers,” Fuges said. “Something like 30 percent of all media consumed is online but far less than 30 percent of all ad dollars are spent online in the U.S. so we think over time that’s going to equilibrate and we believe that’s going to be a long-term secular growth driver for the industry.” Although ValueClick’s net income fell 19 percent during the second quarter, the company, which posted Q2 revenue of $99.6 million, with non-GAAP profits of 20 cents a share, beat analysts’ expectations of $96.9 million and 12 cents per share. For Q3, the company expects revenue of $100 million to $104 million and non-GAAP profits of 18-19 cents a share, well ahead of Wall Street predictions. “We feel very good about our competitive position; we need three things in scale to do well for our advertisers: we need to have great technology in terms of targeting ads, great data (we generate our own data to help us better deliver the right ad to the right consumer), and service is a huge component of what we do,” Fuges said. “Growth has gotten a little better from the first quarter to the second quarter and our guidance for the third quarter suggests we’re expecting growth to accelerate a little more, so we feel good about where we are.” ValueClick Inc. • Headquarters: Westlake Village • CEO: James R. Zarley • Employees: 1,086 • Market Cap: $867.14 million • PE (ttm): 12 • EPS (ttm): 0.87 • Closing Price: $11.19 (as of 8/23/10) • Average Closing Price: $10.74 (Last five weeks)
