Visual Sciences Gains Momentum Despite a Tough Year

Includes: OMTR, VSCN
by: S.H.

The web analytics company Omniture (OMTR), has severely outperformed competitor Visual Sciences (VSCN) (formally known as Web Side Story) over the past year. OMTR has gained over 150% since the IPO, while VSCN lagged behind gaining less than 50%.

VSCN recently broke out of a range on heavy volume after an impressive quarter, fading risks, and upbeat guidance. It has endured a rough year of acquisitions, management changes, legal expenses, reorganization of products, and finally, the name change to Visual Sciences which it announced during the 1Q07 conference call, last month. However, despite all of this, new momentum is still being added to the company through its release of impressive new products, the undertaking of a multi-channel market expansion including mobile, email, etc., the broadening of its distribution channels, and the increased existence of international opportunities.

At current levels, VSCN is trading around 19x 2007E EBITDA, while OMTR is trading more than 47x 2007 EV/EBITDA. As Visual Site, its high end offering gains momentum, issues with management changes are largely priced in and exaggerated. With a more aggressive marketing approach following its new products, coupled with re-branding, its valuation is very attractive.

While the space remains competitive, especially pricing pressure from Omniture, Visual Sciences has several emerging, competitive advantages in its new product roll-out which should be cost saving, expand market share, attract existing customers to other channels, as well as to the V/S Platform 5.0.

The fact that many companies continue to see huge benefits from using web analytics' tools in order to understand customer behavior across multiple channels, in improving its marketing and advertising strategy, as well as in increasing the amount of online media advertising dollars spent, all bode well for continued growth in this space.

VSCN vs OMTR 1-yr chart
VSCN vs OMTR 1-yr chart