In a Friday morning research note, RBC Capital Markets analyst Jordan Rohan reduced the stock's target price to $24, citing growing weakness in the incentivized lead generation business. The stock was trading at $27.50 in after-hours trading Friday night.

"Heightened advertiser awareness of aggressive marketing tactics has translated to caution and advertiser attrition for ValueClick's WebClients unit, we believe, for small and large advertisers alike," Rohan wrote. He has been at the forefront of the lead generation coverage and ValueClick's practices in particular, starting with a detailed April 26 note anticipating FTC scrutiny.

"ValueClick's heightened concern on the disclosure of facts relating to their lead-generation practices has culminated in their filing a lawsuit in L.A. County Court against unnamed current and former ValueClick employees alleging damages due to breaches of confidentiality agreements," the note added.

The July 3 lawsuit filed against unnamed current and former employees alleges that the breaches of confidentiality to the public, competitors and financial analysts has led to "lost revenues and profits, damaged relations with prospective customers, decreased ability to raise capital, deflated stock price, decreased ability to engage in merger and acquisition activity, losses of personnel and related costs, and material and continuing loss of value of its trade secrets."

The FTC is conducting an investigation into the entire incentivized lead generation business. Among the advertisers that have pulled marketing budgets from incentivized lead generation since that time, the RBC note states, are BMG Music, Blockbuster Online, Classmates.com, Gevalia Coffee, People PC and others.

"We believe that the driving force behind these decisions is a greater awareness and focus on lead quality versus the prior mindset focusing on lead quantity," Rohan wrote. "The FTC's involvement in the incentivized lead generation space could also be spooking some advertisers, as the advertiser can ultimately be held liable (and penalized) for receiving an economic benefit from a lead generated via unacceptable tactics.

RBC's estimates on Friday called for 18.5% growth in the ValueClick media business, down from 37% and 43% over the past two quarters. It noted these estimates are below consensus.

Meanwhile, federal antitrust regulators have approved ValueClick's acquisition of comparison shopping Web site operator MeziMedia, which was announced July 16. ValueClick said it will pay $100 million in cash for MeziMedia when the deal closes, probably in August, and up to $352 million in additional payments through 2009 if certain revenue and performance targets are met.

The acquisition gives ValueClick comparison shopping scale in the U.S., greater search marketing expertise and a presence in China.

MeziMedia operates such sites as Smarter.com and CouponMountain.com.

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