ValueClick's Q3 results were largely positive, as the company demonstrated in its earnings release and subsequent investors call on Thursday. But it just goes to show, that managing expectations is more than half the game when it comes to quarterly results.
In part, the results were impacted by the exclusion of revenues from Search123, which was sold at the end of September to Carl White, who ran that unit's European operations. Analysts expressed confidence in ValueClick CEO James Zarley's ability to build on the positive qualities of the U.S. media and affiliate marketing businesses, while improving its owned & operated sites' mix of traffic. But the big bet is on ValueClick's year-long integration of display management tool Dotomi, which it acquired in Aug. 2011 for nearly $300 million.
Dotomi has been seen as an essential part to expanding Commission Junction, ValueClick's affiliate business, thanks to its history in cultivating relationships with retailers. Over the past few months, ValueClick has rolled out its automated version of the Dotomi CRM service to a segment of the Commission Junction customer base. During the earnings call, former Dotomi head and current ValueClick COO John Giuliani said that over a dozen CJ customers are in the process of setting up the new tool.
ValueClick's other big acquisition from early 2011, the mobile ad network Greystripe, has also served to boost investors' confidence in the company. After what he said was a slow start in gearing up Greystripe, Giuliani told analysts the mobile ad net will contribute to a tripling of mobile ad revenues in Q4.
Building up those areas will make ValueClick even stronger, said Piper Jaffray analyst Mark Zgutowicz. "We continue to monitor the trajectory of exchange-based pricing (via RTB) as the possibility for a sustainable uptrend may compromise the spread ValueClick has been capturing the past few quarters via exchange-based impression buys."
Both Giulani and Zarley sought to position ValueClick as a little less reliant on ad agencies. "While [ad agencies are] still a significant [part of our sales]...the majority of our business today is not through ad agencies," Zarley said. "Businesses like Commission Junction, Dotomi, the Owned & Operated businesses and things like that do very little, if any at all, with ad agencies."
For the current quarter's projections, executives said that they expect revenues to come in between $196 million and $200 million. That would be at least a 7 percent gain over Q4 2011's $182 million revenue take. The one dark spot will remain in the O&O business, though even the declines are starting to be reversed.
"For 4Q, guidance assumes a mid-single- digit decrease -- an improvement from down mid-teens previously," said Cantor Fitzgerald analyst Youssef Squali. "Importantly, this business is better positioned and is closer to a growth path starting in 2013."