March 18, 1998, 2:40 p.m. PT DoubleClick hot, set to expand
By Suzanne Galante
Staff Writer, CNET NEWS.COM
March 18, 1998, 2:40 p.m. PT
DoubleClick (DCLK) has captured Wall Street's
attention, and now faces the challenge of proving the
value of Internet advertising to mainstream America.
The company went public during a hot period for
tech IPOs and its shares have risen along with those of
other Internet stocks. But it still faces stiff
competition in an unproven market, as well as a
privacy controversy about its product. Like all
Internet stocks, it also is subject to volatility.
The quiet period following the company's offering
ended yesterday, and the three underwriters for the
deal initiated official coverage of the company. BT
Alex. Brown analyst Shaun Andrikopoulos picked up
DoubleClick with a "buy" rating, Goldman Sachs
initiated coverage with a rating of "market
outperform," and Cowen & Co. analyst Jamie Kiggen
initiated coverage with at "strong buy" rating.
DoubleClick shares, which gained 3/4, to 35-3/4, in
morning trading, have jumped more than 110 percent
since their IPO last month, up 18-3/4 from the
$17-per-share price set by underwriters.
"DoubleClick is the dominant Internet advertising
network, and is a proxy for the growth of
advertising, direct marketing, and retailing on the
Internet," Kiggen said in a research report, noting
that he is projecting a 70-percent three-to-five year
earnings-per-share growth rate. He predicted that the
company will become profitable in 2000.
Since the company's public offering, DoubleClick has
rounded out its executive team and has expanded its
efforts to the West Coast. It also has weathered the
controversy that erupted over its use of cookies, small
data files written to hard drives by some Web sites in
order to track Internet usage patterns, according to
company executives.
DoubleClick last week named Jonathan Shapiro as
vice president of business development and Robert
Linsky as vice president of operations. Shapiro joined
the company from McKinsey and Co.'s Interactive
Multimedia Practice. Previously, he managed United
Media's Internet business, which features "The
Dilbert Zone." Linsky previously was vice president
of Internet business development at American
Express.
The chief financial officer position, however, remains
vacant. Company president Kevin Ryan has been
serving as acting CFO, but will move out of the
position once it is filled. DoubleClick said it has some
candidates in mind and hopes to fill the position
within the next month, said chief executive Kevin
O'Connor.
The company also announced plans to expand its
Silicon Valley sales team. David Gwozdz, one of the
founding members of DoubleClick's strategic sales
team, will head up the Bay Area office as regional
VP. Previously, Gwozdz was district sales manager
for CMP Publications.
O'Connor said the company has aggressively moved a
team out to the Valley because of the volume of Web
and technology companies in the area.
"Today the Web is big national-brand advertisers, but
the market is far bigger than that," O'Connor said.
"The Web is the most superior medium for
advertising. We aren't there today, but the
potential.. Where else can you measure purchased
products? That just doesn't exist elsewhere. The
Internet has a real advantage."
O'Connor estimated the value of the worldwide ad
market at $375 billion, including broadcast and print.
DoubleClick's long-term goal is to prove the value of
the Internet to advertisers, and O'Connor said the
company must compete with print and TV in order to
do so.
"The biggest barrier two years ago was that barely
anyone was on the Web, but now companies are on
the Web--their CEOs are on the Web. Today we don't
go in and tell [clients] about the Web. They know it is
big," O'Connor said. "Today the challenge is to
demonstrate that Internet advertising works."
Despite the money to be made, Doubleclick has been
dependent on a small number of advertisers for the
bulk of its revenue.
Revenues from advertisements delivered on the
AltaVista Web site represented about 45 percent of
the company's revenues for the year ended December
31, 1997. Ads delivered on the top four Web
publishers on the DoubleClick Network accounted for
about 61.2 percent of the company's revenues for the
year. The company anticipates that a substantial
portion of its future revenues will be derived from
ads delivered on the Web sites of a limited number of
Web publishers, according to a filing with the
Securities and Exchange Commission.
DoubleClick's sales offices in the United States are
located in New York, Chicago, Boston, Dallas,
Detroit, Los Angeles, and Atlanta. The company has
eight offices internationally.
The biggest piece of the advertising solutions
company is the DoubleClick Network. It currently is
made up of about 60 sites, which include Travelocity,
United Media, Edgar-Online, US News, AltaVista,
and Fast Company.
The relationships with those partners are exclusive, so
in order for businesses to advertise on those sites,
they must go through DoubleClick. As a result, any
revenue generated is shared between the content
provider and DoubleClick.
DART, dynamic advertising reporting and targeting,
is the backbone of the DoubleClick Network. The
system, which allows advertisers to see how well their
banners are performing, is what in the end serves the
ads to all of the Web sites on the network. The
technology also is licensed out to third parties, such as
NBC Interactive, CBS, Wall Street Journal
Interactive, Intuit (INTU), and RealNetworks
(RNWK).
DoubleClick Direct, a division of the larger company,
directs online marketing. It uses a system called
Darwin that "learns" from consumers by recognizing
what ads are being clicked on the most. In turn, it
shows less of the ads that aren't working and follows
the success of individual ads. The system benefits both
the advertiser and DoubleClick because it affects the
amount of revenue that ultimately will be shared.
Finally, the DoubleClick International Network is the
same at the network in the United States, which is
made up of 60 sites. Currently there are eight
international networks.
A number of online advertising companies have
consolidated in recent months. For example, Internet
advertising service firms Focalink and ClickOver
merged, just weeks after Web ad auditor Internet
Profiles [I/Pro] bought its biggest competitor,
NetCount.
DoubleClick was hit with negative press last year
because of its use of cookies, which identify unique
users and their surfing habits, to provide its clients
with accurate numbers of unique visits to their Web
sites. These files contain information the site can use
to: track things like passwords, compile lists of pages
visited, and reveal the date when a certain page was
last viewed.
O'Connor argued that there was misinformation last
year about what a cookie can and can't do, and said
the controversy over the issue now is behind the
company. DoubleClick now outlines its policy on
privacy at its Web site. It also allows users to "opt
out" of having cookies in their machines. At the
company's Web site, users can deny or accept this
feature.
"Now that people know what it can do, this is a
non-issue," he said. "We don't have names, we don't
know who you are, and it isn't important." |
