Online advertising and web development company aQuantive (AQNT) delivered a 'beat and raise' earnings report last night and the stock jumped nearly 22% after hours. EPS came in at 15 cents (analyst estimate was 11 cents), and revenue at $105.6 million (analyst estimate: $100 m). Yearly revenue guidance was raised to $420-430m (analysts had expected $406m) , with EPS guidance raised to 54-58 cents (analysts had expected 49 cents).
From the aQuantive conference call held last night:
Richard Fetyko - Merriman Curhan Ford
Thanks. Hi guys, congrats on the quarter. My question is on the graphical advertising side of the business, we have seen a lot of strength, anecdotal as well as hard core numbers from Yahoo! and others that suggest the graphical advertising inventory is increasing and they see strong pipeline for the second half of the year as well. I was just wondering what segments within your business will be benefiting from that trend?
Also, secondly on the rich media side of the business, I know you have some basic solution from the acquisition of Ads Forever, but when I look at some of the leaders in the space like Point.Roll, EyeBlaster, EyeWonder and others, there's a tremendous amount of demand. The technology has come a long ways, and I feel like you guys have some basic functionality there, but perhaps do you have plans to really invest into that? Is there an acquisition perhaps that you are thinking about to bolster that offering?
And then of course we saw Double Click acquire Click Mart which takes that company into sort of a flash media video advertising space as well, which us another hot area right now, so I am wondering if you plan to address video advertising as well. Thanks.
Brian McAndrews, CEO aQuantive
Sure. Richard, to start at the beginning, on the display or graphical ad side, we certainly do feel we benefit from that, but I would say that our positioning has been that we have a full service solution on the Avenue A ¦ Razorfish side, and we have an integrated technology solution on the Atlas side.
So when dollars shift between, say, search and display media, we may see shifts ourselves but we're positioned to take advantage of wherever the dollars are being spent. So we want to have tools that allow people to do what's right for their business in digital marketing, and if that's search, great. We want to be a leader in search. Display ads, we want to be a leader there. We're certainly well equipped, though, to help support our clients as they do more in display ads.
When we put out our 2006 Digital Media outlook report in Q1, that report did project that for this year, we would see an increase, relative percentage-wise, in display media versus search. We are seeing that in our clients. So that has been coming to fruition so far.
On the rich media front, on the Atlas side, we feel really good about our product. When Ads Forever was in the market, it didn't have a big presence here, but that was largely because it wasn't really supported here. It didn't have a sales force and the like, but it had good technology and it was accepted by all of the major publishers.
So when we launched, we got quick publisher acceptance, we've been enhancing the product, and we have seen significant growth, albeit off a small base. Having started last year and we've seen significant growth. So we feel very good about that and we feel very good about our ability to compete in the rich media market.
I wouldn't, again, never say never in terms of acquisitions and the like, but we certainly don't feel like we need to make any acquisitions to be competitive.
In terms of video, that's something our clients want and we are certainly going to be there, and that could be a build versus buy, too, but again, I don't feel that we need to make an acquisition to be competitive. We have great technology and a lot of our investment over the years has been in the back end analytics and reporting and support, and that's where a huge amount of the investment is and where it's a lot harder for these smaller players to really compete.
So we feel offering an integrated solution with really strong analytics and the ability to serve floating ads, we can serve streaming video, we can serve expandable banners. Being able to do all those basics, that we can be extremely competitive...
Ben Schachter - UBS
Another question separate, are you seeing any impact to your business from the growth of MySpace and YouTube and other sites that have a lot of this user-generated video?
Ben on the MySpace, YouTube, I guess I would answer that on the short-term/long-term way as well. I'd say on the short term, there's not a huge impact on our business, one way or the other. I mean there are new opportunities to advertise and Avenue A ¦ Razorfish certainly looks at all new opportunities, and the more opportunities out there, whether they are user-generated content or different kinds, the better for us, because we act as an agent on our advertiser's behalf to help them figure out where to advertise and measure what works and what doesn't.
I would say long term, I think the user-generated video, particularly the YouTube angle and other sites that no doubt will get more into the video space, I think presents a long-term opportunity for the whole industry. It certainly helps to participate in the growth of video, as we talked about earlier.