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Response to Internet Changes Positive Move for ValueClick

Response to Internet Changes Positive Move for ValueClick By JACQUELINE FOX Staff Reporter Westlake Village-based ValueClick Inc.’s strategy for surviving the fallout of the dot-com bust by diversifying its services is finally paying off. After several quarterly losses in 2001 and 2002, ValueClick announced its fourth consecutive quarter of income growth and has revised its annual earnings projections for its fiscal year 2003. The company’s core business is banner ad placement based on a cost-per-click model, the highly preferred channel by online advertisers because if they don’t get hits, they don’t have to pay. But through a series of acquisitions since 2002, ValueClick has also stockpiled a suite of online ad research and analysis tools, giving it the ability to provide its customers with what’s known as “ad-serving” technology and putting the company back on solid footing within an industry emerging from a devastating two-year slump. ValueClick’s net income for the third quarter ending Sep. 30, 2003 was $2.0 million, or $0.03 per diluted share on revenues of $22.7 million. Those figures exceeded the company’s previously issued guidance for the quarter of $21.5 million and are up from a loss of $0.8 million or ($0.01) per diluted share for the same quarter in 2002 on revenues of $17.3 million. The company’s stock hit a 52-week high of $11.12 and a low of $2.61. It was trading at $9.77 on Jan. 15. ValueClick anticipates total revenues for its fourth quarter of 2003 ending Dec. 31 to be roughly $27 million, up from previously issued guidance of $25 million. And, based on market projections for a continued rebound in online ad spending, the company is anticipating revenues of approximately $90 million for its fiscal year 2003, up from its prior guidance figure of about $87 million. “ValueClick has evolved 100 percent since we began in 1999,” said James R. Zarley, the company’s chairman and chief executive officer. “We have purchased nine companies in the last three years, three in 2003 alone. What we’ve been doing is adding these products so that ValueClick becomes a full-service company for anyone who is trying to gain exposure through online advertising, whether that’s driving business to their sites, e-mail capabilities or through banner ad placement, we can assist them with whatever they want.” Makes acquisition Those acquisitions include the December purchase of Commission Junction, which the company combined with its Be Free affiliate marketing subsidiary for approximately 3.0 million shares of ValueClick common stock and about $26.1 million in cash. Just a little over two years ago Internet ad spending had fallen by roughly 7 percent, sucking nearly $2 billion out of the industry as e-businesses went belly up in droves. The resurgence did not begin until late 2002, and, even so, only by modest increases of about 3 percent. Lessons, however, have been learned since the go-go early days of e-commerce. It takes more than a brand name and certainly more than a banner ad to push a sale, and research, marketing and ongoing analysis of the medium are now playing a key role in how advertisers spend their money. “If all we were today was a click-per-pay advertising agency, we’d be out of business,” said Zarley. “In fact, there’s no way we could have ever become a public company had we not set a goal of diversifying to the degree that we have.” According to Greg Stuart, president and CEO of the Interactive Advertising Bureau (IAB), a New York-based trade association for online advertising and media companies, as of September of 2003 online ad spending had jumped by roughly 10 percent over the previous quarter and is expected to climb by another 18 to 20 percent in 2004 representing about a $5 to $7 billion increase in spending over the previous year. Serious customers “Clearly the Internet is now a solid mass medium,” said Stuart. “We know more, we have better technology available than we did four years ago and we understand better how to track online ad performance, which has brought back serious companies who, for some time, were just not putting that much of a percentage of their ad dollars into online formats.” In addition to expanding core services, companies like ValueClick have also signed on to a voluntary set of industry standards established by the IAB in 2002 that aim to both simplify the ad-placement process, as well as promote confidence in the medium.

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