Interpublic’s earnings did not include about $132 million the company received from a private sale in August of about half the stock it held in Facebook. The buyer was not identified.

Interpublic also reiterated its outlook that revenue would grow by 4%-5% for the full year and that the company’s operating margin would be around 9.5%. WPP expects revenue growth for 2011 to be 5% and operating margin to reach 11%, up about 0.7% over 2010..

WPP notes the general state of the ad business this way: “Advertising as a proportion of GDP remains at depressed levels in mature markets post-Lehman and the faster growth markets remain under-branded and under-advertised.” Translated, that means going after markets in Brazil and China and other fast-growing developing economies. The company now expects to get 35%-40% of its revenues from the developing world, up from about 30% currently.

Online and mobile advertising is expected to grow by nearly 10% annually over the next five years. WPP said that it received 29% of its revenue from digital and interactive sources in the first nine months of the year.

That growth comes at the expense of print media, where ad spending continues to fall. Gannett Co. Inc. (NYSE: GCI) said that ad revenue for its newspapers fell -8.5% in the third quarter and The New York Times Co. (NYSE: NYT) reported a print advertising drop of -10% in the third quarter. Even though the Times got a boost from its online subscriber revenue and a boost in its online ad revenues, the percentage growth does not make up for the percentage losses in print advertising because the print chunk is so much larger.

WPP shares are up slightly in the first half-hour of trading this morning, to $55.08, in a 52-week range of $43.98-$69.50. Interpublic shares are up more than 14%, to $10.16, in a 52-week range of $6.73-$13.75.

Paul Ausick

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

The current quarter was put at a new $0.19 to $0.20 pro forma EPS on revenues of $155 to $165 million.  Its new 2007 fiscal guidance is now $0.74 to $0.76 EPS on revenues of $645 to $660 million, lower than prior guidance of $0.79 to $0.81 EPS on revenues of $655 to $665 million.  All in all this isn’t exactly a horrible earnings warning, but it shows a possible crack and could magnify fears that DoubleClicks’s buyout by Google (NASDAQ:GOOG), the 24/7 Real Media buyout by WPP Group (NASDAQ:WPPGY), and the buyout of aQuantive by Microsoft (NASDAQ:AQNT) could all be too much competition for the last of the large independent banner, click, and image online advertiser.

With shares down just over 20% pre-market to $20.50, shares are now closer to the low-end of the $13.65 to $36.70 trading range over the last 52-weeks.  This will adjust its market cap down closer to $2.1 Billion if shares open trading here at the 20% haircut levels.  ValueClick is going to have some upset shareholders on its hands this morning.  It increased its share buyback program from $66 million remaining up to $100 million, but unless it rolls back the clock to Friday’s closing price this is going to fall on deaf ears.

Based on how far shares are off now from highs, it would sure seem that the larger acquisitions that were seen in the online ad sector have now all been completed.  Even if that isn’t the case, there are still a lot of holders that are ‘long and wrong’ that were hoping this one would be acquired too.  Until those holders get flushed out and a new shareholder base is established with a lower entry price, the chances of even a ‘hoped for’ or hypothetical deal coming close to current prices would likely face far more shareholder resistance than support.

Jon C. Ogg
July 30, 2007

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

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.