• by Gavin O'Malley  @mp_gavin, August 3, 2007

Viacom will exceed its earlier projection of $500 million in digital revenue this year, CEO Philippe Dauman said during an earnings call Thursday.

"The execution of our digital strategy is moving forward at a rapid pace," said Dauman.

Despite the short-term gains, Dauman emphasized the company's focus on the long term: "Our digital strategy is not only about delivering near-term growth, but building a solid, sustainable platform for long-term success. We are a vertical content company with a focus on our key demos and our digital strategy mirrors this."

Viacom's digital strategy has rested on vast syndication of its free content across the Web, along with continued targeting of niche audiences.

"We launched a number of new, narrowly targeted Web sites this past quarter, providing richer experiences for our highly engaged consumers," said Dauman. "This helped drive an average of 85 million unique visitors per month to our branded sites globally--a 68% increase over the second quarter of last year."

Turning to the recent upfront, Dauman said that "many of our sales were convergent sales," adding: "One of our major advertisers that we just closed a deal on--a multimillion-dollar digital deal--we increased their spend by almost double what they spent before. This is a multimillion-dollar upfront pure digital sale."

Nickelodeon's virtual community site, Nicktropolis, presently has 4.5 million registered users. Last month, Dauman noted, Nickelodeon Kids and Family Group pledged to invest $100 million over the next two years to develop and distribute casual gaming sites and platforms.

"We have experienced tremendous growth in the digital area for Nickelodeon," said Dauman. "We have revamped Neopets and are starting to see some growth in greater engagement there and throughout all of our activities."

In addition, nearly 1 million users have registered on one of MTV's virtual worlds, including The Hills and Virtual Laguna Beach. Viacom plans to launch several more virtual worlds before the end of the year.

"We're really just beginning to tap into the revenue streams that virtual worlds offer, with advertisers selling virtual Nikes on The Hill and virtual neo-pet accessories for very real dollars," Dauman said.

Overall, Viacom reported profits were down 0.8% in the second quarter, to $434 million from last year's $437.3 million.

Revenues rose 13% to $3.19 billion from $2.82 billion, while operating income rose 6% to $702 million, including the impact of some $11 million of Media Networks restructuring charges. Media networks' revenue rose 10% to $1.9 billion from $1.7 billion a year earlier.