• by Paul Gough , August 27, 2003

Several publicly traded companies involved in interactive advertising showed improved results in the second quarter, providing a picture of an industry that might be recovering from its slippage of recent years.

An analysis of financial data by the MediaDailyNews found that several of the companies - such as 24/7 RealMedia, ValueClick and Aquantive - showed revenue increases related to acquisitions, divestitures and general overall improved business conditions. Two other companies, DoubleClick and Modem Media, reported lower revenues. Modem Media blamed fewer marketing funds available from its largest clients for a 16% drop in revenues in the second quarter.

ValueClick, 24/7 Real Media and Aquantive reported higher revenues. ValueClick's quarterly revenue rose from $14.1 million in the second quarter of 2002 to $20.08 million this year, on the strength of three full months in 2003 of its acquisition of marketing company Be Free and the addition of Search123 beginning in June 2003. It also said revenues increased in its media and technology units. ValueClick expects revenues of $85 million to $86 million for the rest of the year, compared to $62 million in revenue in 2002 and $44 million in 2001.

While 24/7 Real Media continues to report a net loss ($4.8 million in the first half of 2003, compared to $7.9 million in 2002), its revenues rose from $10.58 million in the second quarter 2002 to $12.15 million the same period this year. First-half revenues also increased by 12%. Some sources of 2002 revenue - an email marketing company and its stake in iPromotions - aren't included in the Q2 results and 24/7 said Web analytics firm Insight First Inc., acquired in January, didn't generate significant revenues.

Aquantive Inc., parent company of Avenue A and Atlas DMT, reported Q2 2003 earnings of $51.96 million, compared to $30.39 million a year ago. First-half results were also strong, with $99.5 million this year compared to $53.9 million in 2002. Atlas DMT reached profitability for the first time, the company said. And Avenue A and I-FRONTIER won AstraZeneca's online media business. During the quarter, Avenue A lost big client AT&T Wireless but the company said its impact wouldn't be felt until the third quarter. Aquantive expects third-quarter revenues to be between $53 million and $57 million, and full-year revenues of $200 million and $220 million.

While it was only a sampling of the many agencies, companies and content providers who have a stake in the interactive advertising space, it tracks with recent reports from third-party organizations on the health of the industry. The Interactive Advertising Bureau last week estimated $1.69 billion in Internet advertising in the first quarter of 2003, up 7% from the previous quarter and up 11% from the same period in 2002. The data is calculated by compiling data from the top 15 online ad sellers and then weighted for the full industry. In releasing the data, IAB said it was the first time in two years the industry had two consecutive quarters of growth.

Another recent study, from TNS Media Intelligence/CMR, reported that the Internet advertising category would grow 7.2% in 2003. That's ahead of all other categories with the exception of Spanish-language TV (up 16.9%) and syndicated TV (up 9.6%).

DoubleClick's revenues fell to $63.6 million in the second quarter, compared to $75.7 million a year ago. It said that most of the decline was due to divestitures of DoubleClick Japan and its media and research units.

Yahoo!'s revenues jumped 44% to $219.19 million in the second quarter of 2003 compared to the same period a year ago. First-half revenues also rose, from $289.38 million in 2002 to $409.16 million by the end of June 2003. Yahoo! singled out sponsored global-search services for increasing revenues $45 million in the quarter and $81 million in the first half. That part of the business is part of a deal with Overture that runs through 2005 with options through 2011.

Yahoo! also said that the source of its ad revenues are shifting from Internet companies to more traditional companies, which were beginning to increase their overall interactive ad spending.

That sentiment is being echoed by an executive at Interep Interactive, an Internet rep company that owns Winstar Interactive Media and sells Expedia, Nasdaq.com, AccuWeather.com and other sites. John Durham, chief operating officer of Interep Interactive, said Wednesday afternoon that not only was the sector picking up but the quality of the advertisers was also increasing. He said that it wasn't a matter of merely "testing" interactive anymore but it was becoming a part of many companies' ad spends. Durham said it's a clear trend in the number of renewals.

Some companies, like Modem Media and AOL Time Warner, are having a rougher go. In a filing with the SEC, Modem Media said its decline in revenues were caused by a decrease in total billed hours and a decrease in the demand for its services "due to a continued overall reduction in marketing spending" by some of its biggest clients. Modem Media's clients include Delta Air Lines, IBM, GM, Hewlett-Packard and Kraft. AOL Time Warner said in a separate SEC filing that it expected its AOL online unit would have weak advertising revenues throughout the rest of the year.

A content publisher, iVillage, saw sponsorship and advertising revenue drop from $13.1 million in the second quarter last year to $10.3 million this year. First-half revenues also dropped, from $23.3 million in 2002 to $20.5 million in 2003. The company, which not only owns the iVillage Web sites but also broadcasts The Newborn Channel, said much of the drop in advertising is due to the expiration of long-term contracts. Higher-paying, long-term sponsorships that had been common a few years ago has given way to lesser, short-term advertising, iVillage said.