Despite posting a 12 percent year-over-year increase in revenue, DoubleClick announced first quarter losses of $917,000 or one cent per share, on Thursday--which fell short of analysts' predictions of a 2-cent profit. Last year's first quarter earnings came to $7.7 million, or 5 cents a share. The earnings report was issued as rumors swirled that San Francisco investment firm Hellman & Friedman was poised to pay $1.2 billion for DoubleClick, which has a market capitalization of $926 million. In a conference call with analysts, DoubleClick executives declined to address news of the deal, which was first reported Thursday in the New York Post. Last October, DoubleClick announced at had hired Lazard Freres & Co. to "explore strategic options." Total revenue for the quarter was $76.3 million, up about from $68 million last year, but expenses also increased by $13.8 million, from $42.9 million last year to $56.7 million this first quarter. DoubleClick's efforts to find a buyer accounted for at least a portion of the additional expenses; the company stated that net income was "negatively impacted by the accrual of retention payments and professional fees associated with the company's ongoing review of its strategic options." The company also spent money on personnel, increasing its headcount to 1,540 as of March 31, from 1,275 in March 2004. The extra employees resulted from acquiring Performics last June and SmartPath last March, as well as from hiring for ad management, Abacus, and data management solutions businesses. DoubleClick additionally incurred expenses in anticipation of a deal announced earlier this month to serve ads on America Online properties, said Bruce Dalziel, DoubleClick's chief financial officer, in a conference call Thursday. Chief Executive Officer Kevin Ryan said that DoubleClick likely won't see revenue from the AOL deal until it's fully implemented--likely, in the fourth quarter. Collectively, payments associated with the ongoing review, combined with investment in Performics and SmartPath and the costs of gearing up for the AOL deal, reduced first quarter earnings by 4 cents, Dalziel said. Ad serving revenue declined to $31.7 million, from $33.3 million in the first quarter of 2004. DoubleClick attributed the fall-off to a drop in pricing that outweighed an increase in volume. Industry observers said that ad-serving prices have dropped significantly in the last several years. "The pricing in that business is going through the floor," said Jim Nail, principal analyst at Forrester Research. In the last two years, prices are believed to have fallen from 30 cents per thousand impressions to between 3 cents and 11 cents. DoubleClick also served about one billion rich media impressions in the first quarter--more than in all of 2004--Ryan said during the conference call. While some of those ads were banners with built-in flash--for which advertisers don't usually pay premiums--others likely included streaming video, or other features that marketers will pay extra for, said Nail. If DoubleClick is sold to Hellman & Friedman, one possible result is that the company will be broken up and sold off piecemeal, say industry observers. Currently, DoubleClick is a collection of disparate businesses. About half of the company's revenue comes from serving online ads, but DoubleClick also does e-mail marketing and analyzes catalog purchases--the latter a result of DoubleClick's 1999 acquisition of direct mail company Abacus. When DoubleClick purchased Abacus in a stock transaction then valued at $1.7 billion, DoubleClick planned to merge Abacus's database of 90 million consumer names with DoubleClick's online database. But objections from privacy advocates led the company to abandon those plans. Not everyone thinks DoubleClick will be broken up and sold right away. Ken Marlin, managing partner of Marlin & Associates, a New York investment bank, said his firm was "not convinced that that is the immediate plan." In the past, Hellman & Friedman has invested in other advertising companies, including Young & Rubicam and Digitas. General Atlantic LLC of Greenwich, Conn., and Cerberus Capital Management of New York, are reportedly considering issuing a joint bid for the company.
Google announced record revenue of $1.265 billion for the first quarter on Thursday--22 percent increase over the fourth quarter of 2004, and a 93 percent over the first quarter of 2004. Net income for the quarter topped $369 million, or $1.29 per share, compared to 24 cents per share last year. Profit, excluding stock-based compensation costs, was $1.46 a share--significantly higher than analysts' average estimate of 92 cents a share. "We were very busy this quarter, launching dozens of new products and features," said Google co-founder Larry Page. "At the same time we released all of these new products and features, we remained focused on our core effort: Search." Google said revenues from its own sites increased year-over-year by 116 percent to $657 million, or 52 percent of total revenues. AdSense contributed $584 million to revenues, or 47 percent of the total, which represented a 75 percent increase from last year. U.S. revenue from paid search, the chief source of Google's income, grew 72 percent from last year's first quarter, according to eMarketer's lead analyst, David Hallerman. "Seventy-two percent growth is super-healthy for any business," he said. "They've been the dominant company in paid search." According to Neilson//Netratings data, Google claims 47 percent of Internet searches, more than its top two rivals combined, with Yahoo! grabbing 21 percent and MSN collecting 14 percent. Google Chief Financial Officer George Reyes attributed the increase in earnings to "increased traffic and the ability to monetize that traffic." Another factor in the company's growth, Reyes said, was its growth into European markets and a full quarter of its partnership with AOL Europe. "We are very focused on the non-U.S. portions of our business," Reyes said. This week, Google announced the launch of Google Local in the United Kingdom, and Google CEO Eric Schmidt said that the company expects growth to continue in key markets in the U.S. and abroad. "We continue to see broad growth across the U.S. and international markets," said Schmidt. "We're just at the beginning of the penetration of this kind of technology. We're not seeing saturation in key markets." Hallerman agreed that the international growth has been key to their success. "Their overseas market is doing even better than their U.S," he said. According to Hallerman, Google's growth will likely hold on in the short- and mid-term, but in the long term, the company must expand beyond paid search as their chief revenue stream. "They can continue this for a number of years, but it's not a permanent solution for a company," he said. "They need to still expand beyond paid search in the long term. In the short and even the mid term, though, this is just going to remain healthy." Page discussed briefly possible plans for branded advertising or more graphics-intensive ads on Google, but was tight-lipped about future plans. "We have a number of efforts going on along those lines to get our advertising to be more graphical and so on," he said. "You'll see us roll those out in much greater force over our content network in order to give the user basically a good experience."
Yahoo! enlisted personalization technology platform provider ChoiceStream to provide the personalization platform technology to create Yahoo! Shopping Gift Finder, the company announced Thursday. ChoiceStream sorts and displays products based on user profiles and aggregated demographic data. The deal marks the first time Yahoo! Shopping is licensing ChoiceStream's technology, but Yahoo! already uses ChoiceStream to provide recommendations for My Yahoo! Movies, according to Rob Solomon, general manager and vice president of Yahoo! Shopping. The beta, which went live Wednesday night, is intended to make retailer's entire inventory available for purchase online. The technology is also meant to expand gift options beyond the typical flowers and chocolate fare to include, say, a $40 Nike Yoga Kit (if a consumer happens to be shopping for a graduation gift for their 18- 24-year-old fitness fanatic niece.) "Before our collaboration with ChoiceStream our gift lists were editorially handpicked, which was clearly an insufficient way to make millions of indexed products accessible," Solomon said. "This dramatically increased the depth and breadth of users' searches." Yahoo! Shopping's platform currently encompasses 60 million products from over 200,000 merchants, according to Steve Johnson, CEO of ChoiceStream. "The best way for retailers to take advantage of this multi-billion dollar market is to build intelligence into their sites that automatically surfaces great, personalized gift choices from their inventory," Johnson said in a statement. Yahoo! Shopping Thursday also launched product-related RSS feeds in beta, so users can choose to be alerted to the latest release from a particular music group or the availability of a certain laptop computer. There are currently 22 categories from which users can choose, and, Solomon said, in the future, shoppers will able to create their own categories. Users can opt to have their RSS feeds directed to any RSS aggregator they choose. Separately, Yahoo! on Thursday announced a partnership with Target Corporation that will allow consumers to pick up their digital Yahoo! Photos prints at Target stores by this fall. The site for Target Yahoo Photos went live Wednesday night. The site gives consumers unlimited photo storage and tools to optimize the entire Yahoo! network to share their pictures.