• by Paul Gough , February 13, 2004

Strong organic growth and results from acquisitions pushed ValueClick's revenues sharply higher in the fourth quarter, exceeding even the company's own projections.

Revenues rose from $18.7 million in the fourth quarter of 2002 to $30.2 million in the same period in 2003. That's a 61 percent increase; ValueClick said its revenues excluding the impact of acquisitions grew 46 percent. Net income jumped to $5.3 million/7 cents a share, compared to $1.8 million/2 cents a share, in the fourth quarter of 2002.

The results included three months of Be Free and Search 123 (both acquired last May) and a month of Commission Junction (acquired in December). Another December acquisition, email marketing firm Hi-Speed Media, isn't included in ValueClick's 2003 revenues. Commission Junction, for example, contributed about $3 million in revenues in December.

Reviewing results with Wall Street analysts Thursday afternoon, Chief Executive Officer James Zarley said all the pieces were in place for ValueClick to continue to do well in Web and search marketing, permission- based email, affiliate marketing, and ad serving, among other businesses.

With the addition of Be Free and Commission Junction, affiliate marketing is now 40 percent of the company's revenues. ValueClick went from 250 active affiliate marketing clients to 1,500 with the acquisitions. Its acquisition of Hi-Speed Media is also paying off, with 47 million opt-in email profiles between ValueClick and Hi-Speed Media. And in search marketing, Zarley said ValueClick is adding what was needed to go after the 100,000 advertisers who participate in search marketing.

ValueClick's existing media division saw revenues soar 60 percent, due to both Web-based and search marketing. Zarley said ValueClick benefited from more brand-name companies making larger commitments, among other reasons for the increase. Media buyers also have gained additional experience, becoming more willing to place campaigns where they are able to point to results, Zarley said.

ValueClick said it was seeing some pricing pressures in ad serving. There isn't as much pressure on pricing on the affiliate side or email.

Zarley and Sam Paisley, the chief financial officer, were upbeat about ValueClick's projections for 2004. Based on its better-than-expected fourth quarter, ValueClick raised its predictions to between $145 million and $148 million in revenues for full-year 2004 from the $142 million to $146 million it had earlier projected. ValueClick expected first-quarter revenues to land between $32 million and $33 million, which would be up 67 percent from the first quarter of 2003.

"ValueClick is now in a strong position to capitalize on the opportunities in the digital marketplace," Zarley said.

He said ValueClick was on the lookout for further acquisitions, with enough cash on hand to make "prudent" buys. Future deals would be larger than previous deals and wouldn't involve stock, he said. ValueClick has completed nine acquisitions to date.

But Zarley acknowledged that the market had tightened, with ValueClick having to make a harder sale to potential acquisitions. Zarley said that every one of its acquisitions did better in ValueClick's fold than on their own, which is a powerful persuader.

"We're going to be working very hard on it," Zarley said. "I think you'll see us making some acquisitions, but I think it'll be tougher."