Conversant’s Q2 Tries To Focus On The Future, Not So Much The Present

conversantSince Conversant rebranded from ValueClick and redefined itself from an ad network to an ad tech company, the choppy waters it once rode have calmed.

But last quarter, CEO John Guiliani warned Q2 2014 wouldn’t be as great, particularly due to the possibility of losing – or getting reduced business from – two of its CRM clients.

Conversant’s Q2 2014 revenues came within this guidance, clocking in at $137.4 million, a YoY increase of 7% (that being said, Conversant wasn’t in a great spot financially this time last year). Breaking Conversant down into its two revenue buckets, affiliate marketing revenue from Commission Junction was $40.6 million, (an 11% YoY increase) while its media revenue was $96.7 million (a 6% YoY increase).

The media umbrella includes Conversant’s display business as well as its CRM, mobile, video and cross-channel technologies. The growth rate in media in particular wasn’t as strong as Giuliani hoped. “I’m disappointed this year we don’t have double digits, and I definitely will be next year" if we don’t, he said.

“We’re not there yet,” he added, though he tried to focus on the positive by emphasizing “the things we’ve done to position ourselves for the future, the changing market, and the differentiated products we have.”

Analysts in particular were disappointed with the performance of the company’s media margins, which stagnated between Q2 2013 and Q2 2014. Giuliani said he’s comfortable with Conversant’s focus on adding value via better quality inventory at the expense of gross margins.

Conversant’s vision is to become a “personalization platform” – one that aligns its various tech assets (a demand-side platform from Dotomi, ad serving and tracking technology, tag management, mobile in-app advertising, Commission Junction’s affiliate marketing and the traditional ValueClick media network), all sharing a common data source.

Consequently, Giuliani tried to focus the earnings call on Conversant’s new and upcoming products.

“Video remains an investment focus for us,” he said. “It represented a signficant share of our hiring in Q2 and we anticipate that will remain the case in the future as well.”

Giuliani also said he hopes to trot out a suite of video products using assets it acquired from SET Media, which provides contextual targeting around video.

Conversant has also established an internal private exchange with direct publishers, through which Giuliani said gives clients an option before putting their inventory on the open market.

“It’s a build off our prior publisher relationships, though not exclusively,” Giuliani said. “We’re adding new ones as well.”

He added that for Conversant’s CRM business, which hadn’t previously been plugged in, the private exchange offers a new source of inventory. The private exchange will also help clients get higher-quality inventory, unique reach and overall better performance, Giuliani said.

Currently, the private exchange approaches 20% of Conversant’s inventory, though Giuliani expects that to expand to somewhere from one-third to a half.

Finally, Giuliani spoke of a common identification system to power its cross-device matching solutions. In this system, Conversant matches anonymous profiles to offline names and addresses.

“It’s done through a very intricate process,” Giuliani said. “It matches devices back to a home base. When we see these, we can attach the device back to a permanent ID that starts with a home base of a physical name and address.”

He added Conversant can make connections by triangulating different devices around an ID.

“We tend to get faster and better matches and because of our persistency, we tend to get a more durable ID, so we don’t have the same attrition,” he said. “We typically have a broader audience to address that’s more likely to be persistent, so we can capture more of the value. There’s more to it than that, but my guys are cautioning me not to talk about it too long.”

 

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