24/7 Real Media - TFSM - on search (4Q04 conf call quotes)

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24/7 Real Media (ticker: TFSM) discussed its acquisition of Decide Interactive, a provider of  bid management tools for keyword ads placed on search results, on its Q4 results conference call. Here are the comments, including excerpts from the Q&A:

In addition to expanding our geographic reach, our acquisition of Decide Interactive significantly enhanced our search capabilities. The search market is the fastest growing segment in online advertising and the acquisition of Decide significantly enhanced our stature in this market. Indeed, Decide's search platform, Decide DNA, has already been cited as a most advanced bid management tool in the recent Jupiter Research SEM search engine marketing constellation study.

We're happy to report that the integration of Decide was completed in fourth quarter and we have transitioned all of our existing search clients onto the Decide DNA platform.

Certainly search is a very important component of our overall strategy in 2005 building upon our leading search technology platform, Decide DNA. We expect search revenues to more than double going into 2005. We are certainly experiencing good volumes even as we enter 2005 thus far.

J. Maxa: Great. On the search business you have various components of your search business and the agency business being the fastest growing but the lowest margin, if that's correct. How do you see that? I know you indicated your search margins would maintain 35% throughout the year. How do you offset the faster growing part of the lower margin with your other products?

J. Hsu: Certainly. Our two main components of search revenue are both growing very quickly. You're correct that the search SEM business does have the potential for explosive growth.

We continue to work very closely with the longstanding partnership with Overture, Yahoo! where we provide them a trusted feed and as you know that is high margin business. Additionally, because of the robustness and leading position of our search technology platform, we see many opportunities to license that search technology to other shops who don't have that proprietary technology.

J. Maxa: So that'll help the margins. Then there's been some talk about the pricing of paid search. I want to get your take on it as you see it in the first quarter so far in '05.

D. Moore: We have not seen any significant declines in pricing; however, if you look at what our goal is for the advertisers with whom we work, it's to achieve the greatest return on investment that we can which once we have that model in place, it really entices the advertiser to spend more money. So to the extent that there were any pricing declines that would just help us do a better job in terms of enhancing the ROI for the advertiser. To the extent that you can model out a self-liquidating proposition for the advertiser, they'll continue to spend a lot of money against that proposition.

J. Hsu: Also, Joe, it's important to note that because we are growing our search operation so quickly and because of how good our proposition is in the marketplace, we are actually seeing quarter-on-quarter increased search volumes versus Q4 thus far.