DoubleClick CEO throws off Yahoo comparisons

Larry Dignan
3 min read

NEW YORK--DoubleClick CEO Kevin Ryan said that the company is seeing a pullback in the first quarter but "nothing as bad as Yahoo." Analysts chopped their estimates for DoubleClick Thursday, and shares slid 5 percent.

Ryan, speaking Thursday at a Merrill Lynch Internet conference here, the same event that Yahoo pulled out of on Wednesday, said his company's outlook hasn't changed.

In February, DoubleClick (Nasdaq: DCLK) ratcheted down its already lowered estimates for 2001 and gave detailed guidance on its first quarter. The online advertising firm told investors to expect a loss of between 7 cents to 9 cents a share in the first quarter, including a $2.5 million charge related to the development of its e-mail marketing business. Sales will come in between $110 million to $115 million, below the $118.2 million previously projected, Ryan said.

For the year, DoubleClick said sales would improve 6 percent to 12 percent and earnings would be 7 cents to 9 cents a share, including $5 million in charges related to the development of its e-mail business.

Ryan said Thursday that nothing had changed. He expects some slowing in the first quarter, followed by a gradual improvement.

"It isn't as bad as Yahoo said it was," said Ryan.

Worries about DoubleClick were sparked after Yahoo issued a profit warning amid a slowdown in online advertising. Yahoo's trading had been frozen Wednesday after it announced it was pulling out of the conference last minute.

Ryan joked there was a "renewed interest in online advertising after the Yahoo deal," and said "the first 74 people he met," today asked him about it.

Ryan said 20 percent of DoubleClick's revenue is derived from selling adds, with the rest coming from technology and direct marketing.

DoubleClick analysts, however, didn't seem to think that would save the company from the Yahoo effect--that is, being vulnerable due to relying on online advertising. Most lowered their estimates Wednesday.

"A falling tide sinks all boats," wrote William Blair & Co. analyst Troy Mastin, who lowered his estimates on the company because of an "increasingly gloomy outlook" for online ads.

Mastin, who expects DoubleClick's technology and data to perform relatively better, is revising expectations "downward moderately for these divisions due to continued weakness in the overall economy."

Morgan Stanley Dean Witter analyst Michael Russel also chopped DoubleClick's estimates while waiting for more detailed forecasts from the company.

Unlike his colleagues, Merrill Lynch analyst Henry Blodget did not cut estimates. Blodget said his estimates are already well below Wall Street's consensus forecast. The Merrill analyst predicts DoubleClick's advertising and media revenue in the first quarter will fall 28 percent sequentially and 29 percent year-over-year.

But Ryan also said that investors shouldn't confuse the fundamentals of online advertising with the stock market. "Online advertising is still growing, not dying," Ryan said.

In the long run, Ryan said he was confident about online advertising. Two percent of ad spending is online, but 9 percent of time spent on media consumption is online.

"Nowhere in the history of media has there been a gap that big," Ryan said.