Click, Click: Gotcha! Here’s That Ad You Were Looking For

As cable, fiber-optic and satellite TV providers talk about “hyper-local” news and content, most people do not extend the concept beyond TV.  But many have had the creepy experience of seeing banner advertising on their computers for merchants or merchandise that is eerily similar to something they just bought.  And that’s the advertising version of hyper-local content — hyper-local to YOU, not to your neighborhood.  They’re ba-ack.

When confronted directly, most people are repulsed by the idea that some gnarly digital gnome somewhere is keeping track of what they buy, what they look at online, and how much time they are spending looking at particular kinds of merchandise.  Here is an article from this morning’s Advertising Age, which is right in the thick of things: http://adage.com/digital/article?article_id=147789.  The interesting statistic is that 67% of people in a new Gallup poll do NOT want advertisers matching their ads to individual interests based on websites they’ve visited or items they have bought.  The advertisers of course point out the extent to which such Big Brother-type watching and selling underwrites the overall cost of big websites and the Internet itself.  Here’s the poll: http://www.gallup.com/poll/145337/Internet-Users-Ready-Limit-Online-Tracking-Ads.aspx.  

QuinStreet smilers from their webpage -- don't they look friendly?

It’s the genie out of the bottle syndrome, or, if you will, the toothpaste out of the tube syndrome.  Difficult to put it back the way it was.   Not gonna happen.

Here is a nonscientific roundup of some of interesting companies you may want to monitor if you think this sneak-attack marketing is an area that investors have not yet fully valued — or possibly if you want to know which companies are watching the kinds of underwear you bought for Christmas (and the kind you just drooled over).  Please do your own diligence; we do not recommend stocks and none of these companies is a client of ours.

Check out Seattle-based Marchex Inc (Nasdaq: MCHX; http://www.marchex.com).  If you look at the descriptions on websites like Yahoo! Finance, you will run into a wall of jargon that seems specifically invented to keep you from understanding what they do.  But oversimplified, what they do is design and provide tools for advertisers to place ads on the Internet, to track people who are interested in specific kinds of goods or services based on Internet searches and visits, and analytical services to make all that useful in soliciting you to spend your money.  In their defense, it’s really just an evolved version of jingles that fixed themselves in your mind in the early days of television: Plop! Plop! Fizz! Fizz! Oh what a relief it is!   If you’re interested, here is a news release from MCHX concerning a white paper on the subject: http://finance.yahoo.com/news/Marchex-White-Paper-Focuses-bw-3417767607.html?x=0&.v=1.  MCHX is trading at $9.99 this morning, vs a 52-week range of $3.63 – $10.03, pretty close to the top.  Average volume is reasonable at over 75,000 shares per day, and the market cap is $350 million vs a revenue run rate of about $100 million based on Q3 results, and a net loss that’s way less than the charge they took for stock options (meaning there is a good chance they are cash-positive if you can sort through it).

Waltham MA-based Constant Contact Inc (Nasdaq: CTCT; http://www.constantcontact.com/)  is another of the watching and baiting services, and although their jargon is a tad less harsh than that at Marchex, their website is in the same genre, today trumpeting The “4 Essentials of ONLINE MARKETING.”  CTCT offers a customer survey option (how many of THOSE have you clicked out of recently?), but you gotta hand it to these folks: they’re growing at 44% year-over-year and their revenues are fairly close to a $200 million run rate with net  income of $0.10 per share in Q3 (and Q4 will be the biggest quarter most likely).  CTCT is trading at $30.72, just off its high of $32.09 and still nearly a double from the low of $16.36.  Volume averages nearly 330,000 shares per day and the market cap is nearly $900 million.  Woo hoo!  With growth like that you could see more appreciation, or a take-out by some big-mama company with a mid-cap valuation.  It could happen.

Calgary-based Rare Method Interactive Corp (CDNX: RAM; http://www.raremethod.com) is another kinda peer, but also kinda older and kinda troubled, founded in 1991 when internet marketing was still more or less conjectural.  They offer all the talents you may need for your own website, as well as all the interactive marketing strategies you might be curious about.  RAM is smaller this year than it was last year, and has an unfortunate current ratio, but it’s a pennystock trading at $0.03, with a total market cap under $1 million, so as they say, it doesn’t take much to make a double.  Trading volume is about 100,000 shares per day. 

Foster City CA-based QuinStreet Inc (Nasdaq: QNST;  http://quinstreet.com/) was one of the most exciting IPOs of the year because evilgenius-celeb Frank Quattrone was backing it.   See this article from thestreet.com for a summary: http://www.thestreet.com/story/10928161/3/techs-top-ipos-of-2010.html.   Whether because of the hype or in spite of it, QNST has made a lot of people a decent pile of money since going public, trading today at $19.26, off its $21+ high, but above its IPO handily.  Market cap is about $872 million, and volume is robust at 275,000 shares per day: this is a stock you can get in and out of easily if the volume holds up.  QNST offers online marketing services including the delivery of leads or paid clicks — they also sell insurance on line, as well as home remodeling at www.ReliableRemodeler.com.  More business-y than some of these companies, and with what looks like about $400 million of revenue run rate and a bottomline profitable operation with a solid balance sheet.  At that rate, its revenue multiple is much much lower than some of its peers. 

That leaves NYC-based InterClick (Nasdq: ICLK; http://www.interclick.com/), about which there has been more excitement than most, but which is still nursing a market cap of only about $120 millon, due possibly in large part to the mind-boggling difficulty of understanding what they do.  But basically they watch you and if you go to a Bergdorf Goodman shoe sale online, you are going to get Bergdorf Goodman shoe banners when you look up topics for your daughter’s term paper on Google.  Or if you buy a mystery novel at Barnes & Noble, you’ll have mysteries flying at you like bats in a vampire movie.  And like the Wizard of Oz, ICLK is behind a curtain where you can’t see them, pulling digital levers.  Very smart people at ICLK, and one assumes they will do lots better.  ICLK is trading this morning at $4.90 vs a 52-week range of $3.25 to $6.48, which may reflect a recent managaement change as founding CEO Mike Mathews departs and new CEO Michael Katz takes the reins .  Volume is hefty at 228,000.

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