The online ad company cut its 2008 guidance from $730 to $745 million down to $655 to $675 million and cut prior EPS range of $0.81 to $0.83 down to a new lower range of $0.69 to $0.71.

There is a much more important issue than this company itself though, and one which could have ramifications if the company is right.  Tom Vadnais, CEO, said, “Due to increasing macroeconomic uncertainty, we no longer anticipate the seasonal strength in ad spending we typically see in the second half of the year.”  This concern might be analogous to the tail wagging the dog. 

ValueClick is essentially the last man standing on an independent basis in the online ad impression sector.  Its market cap is also only about $1.1 Billion after a drop of 16% to $11.50 this morning (a new 52-week low).  But this may have ramifications elsewhere.  Google (NASDAQ: GOOG) bought DoubleClick. WPP acquired 24/7 Real Media (formerly TFSM).  Microsoft paid a vast sum for aQuantive (formerly AQNT).  And every other major media and content company has been making their online ad spending acquisition plays.

There are two scenarios here and both are as logical as a coin toss.  Either the slowdown in online ad spending is systematic and is going to slow everywhere.  That would be really bad for the giants who spent billions to buy players in this field.  The second possibility is that customers are opting to just bypass ValueClick since they don’t necessarily need an independent online ad placement firm.  With the dominance of Google and others, it is possible that online advertisers are just going direct to the top 4 or 5 online destinations directly as they all have their own departments for this.

We are now in the midst of a full fledged earnings season with literally dozens and dozens of companies competing for headline attention.  This is one of those situations that may get overlooked, but it will be critical for all online ad players and online media companies who live on online ad payments.  We’ll probably get a better handle on this after the close of today when Google and Microsoft report earnings.

Jon C. Ogg
July 17, 2008

We have frequently noted how the short sellers are often motivated by different factors and have a longer-term outlook than Joe Q. Public.  We wanted to look at the few remaining Internet advertisers that hadn’t been acquired, and it’s official: short sellers in these names are either crazy or just stupid.  There were dozens and dozens of reports that the sector was in play after Google gobbled up DoubleClick, so being short those names was just ignorant.  It isn’t like they all went up in shares short, but the degree to which the shorts were still there just seems weird.  Short sellers are a different breed, that’s for sure.  This could have been titled "Online Advertisers: Short Sellers Kicked in the Shorts."

Stock (Ticker)                        MAY       APRIL  CHANGE
aQuantive (AQNT)               9.56M    8.47M    12.9%
24/7 Real Media (TFSM)    6.73M    7.08M    -4.9%
ValueClick (VCLK)              9.66M    9.95M    -2.9%

Jon C. Ogg
May 25, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Depending on what service you use for forward estimates you come up with roughly 77-times forward non-GAAP earnings and about 9-times forward revenues.  These numbers would not have been this high if the bidding for aQuantive wasn’t so high, but Microsoft’s price is the rule-setter.

If you apply the same numbers to TFSM it is pretty sick.  On the forward earnings estimate basis for TFSM you can derive in the vicinity of a theoretical $37.50 price.  On a forward revenue basis you could derive something nuts like a $45.80 price.  The truth is that there is debt and intangibles and all sorts of ‘exceptions’ that would skew these numbers and you would have to be a mad man to believe that TFSM would really sell for a premium like that.  But in a bidding war environment where Google paid up for DoubleClick and where Microsoft goes out this far and this high to buy Aquantive means that management agreeing to a $11.75 buyout price is nearly cowardice.

The basic multiple comparisons are just not as fair because the only two companies that were identical in the models were TFSM and DoubleClick, so trying to use an exact comparison would be flawed.  On May 10, we noted that the starting valuations could put TFSM at a $11.81 starting price and a value that at certain extremes could fetch $19.75.  We noted that somewhere in the middle at say $15.00 or higher could be feasible.  So why is TFSM selling so cheaply?

This leaves ValueClick (VCLK) as the last ‘independent’ man standing, and that is up 11% today.

Jon C. Ogg
May 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

aQuantive Inc. (AQNT-NASDAQ) just recived a huge premium buyout by Microsoft (MSFT-NASDAQ).  This is one that was a 50/50 chance of happening via deductive reasoning after the Google (GOOG-NASDAQ) and after the WPP Group buyout of 24/7 Real Media (TFSM-NASDAQ) and after the Yahoo! (YHOO-NASDAQ) acquisition of a private Right Media.  So this only leaves ValueClick (VCLK-NASDAQ).

What is surprising is the premium: aQuantive is being acquired for roughly $6 Billion, or $66.50 per share.  This stock has never seen a price like that except back at the recombination price at the start of 2001.  Now if you have been a holder of AQNT you are guaranteed a huge profit. 

In all honesty this deal is not a surprise at all, but the price is very surprising since it is nearly a 90% premium.  Microsoft would have been able to have owned this one cheaper if they would have acted sooner.  Shares of ValueClick (VCLK) are trading up 17% pre-market at just under $33.00 as they are the last man standing independently, and that is above the $31.34 year-high.

Jon C. Ogg
May 18, 2007

24/7 Real Media Inc. (TFSM-NASDAQ) is trading up 3.5% this morning on news that it has agreed to be acquired by WPP Group for $11.75 per share.  The deal is being tallied up as a $649 million buyout net of cash received.  It says it is a 30% premium over the 60 trading average, which is irrelevant if you have been following this online advertising segment since before Google (GOOG) acquired DoubleClick.  Both boards have approved the deal but there are no go-shop or break-up fees that were made public.  The stock has recently traded as high as $13.00 because of rumors of another bidder.

We have covered this one since the stock was far lower.  On May 1, there were reports that Microsoft might pay up for it.  They were also noted in "Who’s next?" on April 13.  On May 10 we looked at what the company could fetch and came up with what would likely be an $11.81 starting price and one that could reach $15.00 or higher under the right circumstances.

The other two online ad firms are trading up this morning: ValueClick (VCLK) is trading up 2.5% at $28.00 and aQuantive (AQNT) is trading up 1.5% at $34.95.

This is one that could conceivable end up trading higher than the $11.75 price if the break-up fees or go-shop penalties aren’t insurmountable.  Microsoft (MSFT) and Yahoo! (YHOO) were supposedly in consideration here and you never know if Time Warner’s (TWX) AOL or IAC/Interactive (IACI) would consider jumping in before letting this one entirely go away.

Jon C. Ogg
May 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

The company boosted revenue guidance from a $255 to $265 million range to what is now $265 to $275 million.  This is only a 5% boost but could be just the beginning with its new overseas venture in Japan.  The company only maintained pro forma operating earnings of $0.50 to $0.55 for the year, but the valuation may be cheap with a forward P/E ratio of about 22 and as the “Google Checker” for any of the other online ad firms.  The company also said “we are assessing strategic alternatives” and that it hired Lehman Brothers as its financial advisor.

We had reported about the interest that should come into the name.  WPP Group in London may be interested and Microsoft (MSFT) may be interested.   But beyond this, who would really be able to work this?  There are many firms that could play the land grab here, and these are merely the US-traded names:   Microsoft (MSFT) is a natural fit and they could outbid almost anyone; Time Warner (TWX) could expand its already strong ad interest; Comcast (CMCSA) as it moves into more content; Yahoo! (YHOO) could but they may pass; IAC/Interactive (IACI) could step up its efforts here; aQuantive (AQNT) could decide this would broaden their base; and ValueClick (VCLK) could eat a competitor and strengthen its base.

There is also the angle that advertisers themselves could steal an instant presence in the online ad world and diversify from their traditional businesses: WPP Group (WPPGY) has already been fingered as a potential buyer. Other ad agencies could make the play too: Omnicom (OMC), Publicis Groupe SA (PUB), and Interpublic Group (IPG).  You might even be able to make the argument that Lamar Advertising (LAMR) could jump from the billboards straight into the online world in one swoop here.

So what is the company worth?  Talk was originally putting WPP interest at $600 million and then after the DoubleClick-Google tie up word came that Microsoft or others may pay up to $1 Billion.  The company has only $73 million in total liabilities and most of those are just current liabilities, so there would not be the need to alter the equity figures by much. 

TFSM had a market cap of $569 million based on an $11.20 stock price and shares already went up as high as $13.00 on the higher bid interest.  $600 million would only be a 5.4% premium to the $11.20 price, which would only be an $11.81 implied price.  That might have been enough a year ago or more, but that probably wouldn’t cut it today.  But a $1 Billion price tag would imply a 76% premium to today’s price, so that would imply $19.75.  Based on where the stock has been on its own and based on any recent history at all that number is still probably too high.  The truth lies somewhere in the middle, but you can at least now quantify what some of this would be.  $11.81 might be a “starting bid value” and the halfway mark in between would be just north of $15.00.

If a buyer does not emerge and based on the current prices and our past articles, an implied “no takeover play” valuation on this name is probably now closer to $9.50 to $10.00.  The online ad world is just worth more than it was just a short time ago.  If this truly does get gobbled up then $15.00, or $800 million, does seem feasible and seems a level that shareholders might not be able to fight too much.  It is very possible that since it has just hired Lehman that the review would take some time.  It shouldn’t be expected that this happens overnight, and today’s drop to $10.72 is evidence that Wall Street doesn’t think this will happen immediately.

Jon C. Ogg
May 10, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Stock Tickers: GOOG, AQNT, VCLK, TFSM, MSFT, YHOO, TWX, SLM, NNI, FMD, MEDI,HAL, WHT, MEH, AAI, COT, IPS, PALM, DELL, NFI, BCE, AA, DOW, WYN, NDAQ,GFI, KR, ABN, BNI, DCX

This week was a huge week for the all of the buyout investors and speculators.  There were more ongoing discussions being reported in the media than you could imagine.  In a world of private equity gone wild, its hard to not be a bit cynical on the raw number of these.  This is also after Google (GOOG) announced it would pay $3.1 Billion to acquire the master online advertising company DoubleClick.

Since the Google buyout of DoubleClick you might as well go ahead and throw these three into the hat: aQuantive (AQNT), ValueClick (VCLK), and 24/7 Real Media (TFSM).  We addressed these back pre-market on April 2 when the DoubleClick buyout was starting to surface.  Microsoft (MSFT), Yahoo! (YHOO), and even Time Warner’s (TWX) AOL unit may have to all look after these companies now that they let Google takeover DoubleClick.

Google did after the close announce it was paying $3.1 Billion to acquire DoubleClick (DCLK).  So they are going to trump Microsft (MSFT-NASDAQ) and Yahoo! (YHOO-NASDAQ).  What this does is give Google a much mnore diversified advertising model, and it should grow their internal agency advertising operations. 

We noted a while back when the DoubleClick deal was first surfacing that this should increase the perceived values in DoubleClick’s competitors.  We even titled this "After DoubleClick; Who Could Be the Next Buyout Target?" and made several refences after.

aQuantive (AQNT-NASDAQ), ValueClick (VCLK-NASDAQ) and 24/7 Real Media (TFSM-NASDAQ) are all competitors.  DoubleClick in the hands of Google would potentially make DoubleClick the most valuable and entrenched company in the online ad space arena, but it would potentially increase the relative value of these others.  This was pre-market on April 2, so here are the price comparisons with the APR 2 being the OPEN price listed by NASDAQ on that day:

VCLK: $2.6 Billion market cap; Online advertising and programs for large advertisers and ad agencies in Media, Affiliate Marketing, Comparison Shopping, and Technology. APR 2 $26.46; today $29.50.

AQNT: $2.2 Billion market cap; Online advertising for large direct advertisers and ad agencies: Digital Marketing Services, Digital Marketing Technologies, and Digital Performance Media. APR 2 $28.08; today $28.52.

TFSM: $408 Million market cap; used to be referred to as “the poor man’s DoubleClick” and was the most direct competitor in the past. Banner and online media ads for advertisers and ad agencies. APR 2 $8.08; today $8.58.

Earlier this week, Jim Cramer even went on and said that AQNT and VCLK have 33% and 31% upside based on a DoubleClick being bought after going private.

Microsoft and Yahoo!, and even Time Warner’s (TWX) AOL, may have just been put in the position that they all "have to" look at these competitors. 

Jon C. Ogg
April 13, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.