Why TechTarget Is Thriving

TechTarget, the media-and-lead-generation company covering the IT space, reported continued momentum in the first quarter of 2022, in what it sees as an extension of favorable conditions last year. The company reported revenue of $69 million for the quarter, an increase of 20% from the prior year. It reported EBITDA of $26.6 million, an increase of 39%.

The company, publicly traded on NASDAQ and based in Newton, Massachusetts, is noted for its use of content to drive a sophisticated lead-development program for marketers, using surges in engagement to predict buying activities and purchase intent.

Because TechTarget is far ahead of most other media companies in the deployment of data for demand generation, its performance can be seen as a validation of the model—which is one many other B2B companies are pursuing.

Still, the market it covers helped, the company candidly acknowledged in a letter to shareholders. “We believe we have benefited from is an overall healthy IT spending environment,” it said. “As our customers’ revenues grow, they also typically increase their sales and marketing budgets.”



TechTarget said it believes it’s benefiting from several trends.

The first is that most IT spending is for digital transformation, which often takes the form of multiyear projects with several phases. Once a company makes the decision to embark on this kind of strategy, it isn’t prone to stops and starts. And because IT marketing spend is motivated by a desire to generate strong ROI and increase competitiveness, continued investment remains likely.

In fact, TechTarget noted, a Gartner forecast of worldwide IT spending released in April predicts software spending growth, among other IT service elements, of 9.8% in 2022 and 11.8% in 2023.

“We’re seeing the impact of this healthy IT spending environment play out with regard to the end-user dynamics of our business, with organic traffic to our websites up significantly on a year over year basis,” the letter said. “We’re also seeing its impact in the expansion of customer programs that incorporate our demand generation and brand offerings, both of which grew the overall spending base by our customers.”

The second trend, the company said, is customers’ own initiatives to modernize their sales and marketing operations. “Our view is that an automated and data-driven ‘go to market’ operation is the ante to being competitive in the enterprise IT market,” it said. "Based on our conversations with customers and prospects, we believe the vast majority have a strategic initiative to modernize. We see firsthand that the companies that are executing well on their automated and data-driven sales strategies are the ones winning and gaining market share.”

Not surprisingly, these have frequently been TechTarget’s best customers. And in a virtuous side effect, companies that don’t have those kinds of modernization initiatives in place have learned that they need to catch up.

A third trend is the growing importance of internet privacy, which TechTarget views as having been beneficial to its business. “Trusted content that serves a permission-based audience and generates proprietary first party data, has and will continue to give us a sustainable, competitive advantage,” the letter said.

The fourth trend is the migration of face-to-face events to online. “Although some believe face-to-face events will return to pre-COVID levels, we do not agree,” the letter stated. “First, the face-to-face events business had been in a long, steady decline before the pandemic. We don’t think there is much argument that an online webinar isn’t vastly more efficient than a face-to-face event, but that’s not the whole story.

"While some customers have told us that their salespeople like attending face-to-face events, which is understandable, our research shows that a growing number of buyers don’t share that sentiment. In fact, a majority of younger buyers prefer to conduct as much of the sales process in 'self-service’ mode as possible.”

TechTarget said a good analogy for the face-to-face events business is the traditional print newspaper business. Newspapers still exist, but they are a fraction of what they once were and are not growing.

In the letter, TechTarget projected Q2 revenue of between $76.0 and $78.0 million, with EBITDA  between $30 million and $31 million. For the full year 2022, it’s increasing its forecast for revenue to be between $314 and $318 million, with EBITDA between $125 million and $130 million.

In addition, TechTarget is expanding its stock buyback efforts from the $14.2 million in the last quarter to a $50 million program going forward. Companies typically do stock buybacks to demonstrate confidence, consolidate ownership and return value to shareholders.

TechTarget stock was trading on Thursday morning at $63.53, a 34.45% year-to-date decline from $96.91 on Jan. 3.

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