Marketing pumps up iVillage's 3Q loss

Heavy marketing expenses led to a hefty loss of $28.4 million, or $1.12 a share, for iVillage's (Nasdaq: IVIL) third quarter, the company announced Friday. The loss was narrower than the $1.39 a share predicted by First Call, but far wider than the loss of $17.1 million, or 72 cents a share in the second quarter.

Shares closed at 26 1/2 Thursday, below their 52-week high of 130. Shares have risen slightly since the secondary offering of 2.7 million shares, raising over $75 million in gross proceeds. The women content space has gotten more crowded with competition from the recently public Women.com (Nasdaq: WOMN).

iVillage said revenue was $10.7 million for the third quarter 1999, a 150 percent increase over revenue of $4.3 million for the comparable year-ago quarter. Third quarter revenue was up about 32 percent over revenue of $8.1 million for the second quarter. Commerce revenue in the third quarter was $2.5 million, up 19 percent from the second quarter.

Gross margins also improved, rising to 46 percent from 21 percent in the third quarter of 1998. Margins, however, fell from 48 percent in the second quarter because of a warehouse transition related to its iBaby store.

In the last week of the third quarter, iVillage launched its $28.5 million marketing campaign, which it estimates drove up traffic to the iVillage.com home page increased over 50 percent. The first phase of the campaign also put a dent of about $5 million in the third quarter, resulting in negative EBITDA (earnings before interest, taxes depreciation and smortization.)

Negative EBITDA widened to about $20.1 from the $11.0 million for the year-ago quarter and $13.6 million for the quarter ended June 30, 1999. Excluding charges related to iVillage's promotional agreement with NBC, negative EBITDA for the third quarter of 1999 was $15.5 million, compared to $11.0 million one year ago and $9.2 million for the second quarter.

But "encouraging results from the first phase of the campaign" have provoked iVillage to shift the timing of the marketing spending and extend its campaign beyond the first quarter of 2000 following, the company said.

Membership grew 30 percent sequentially to approximately 2.7 million and iVillage.com's traffic grew 14 percent to 116 million average monthly page views, compared to second quarter page views of 102 million.

iVillage estimates that of the 6 million unique visitors that came to iVillage.com in September 1999, 5 million were domestic and represent an approximate reach of 7.9 percent of combined home and work Internet users in the U.S. Revenue per thousand page views in the third quarter increased 16 percent to $30.90, up from $26.60 in the prior quarter, showing its ability to monetize traffic, iVillage said.

During the third quarter, the Company signed six major sponsorship agreements over $1 million with PlanetRx.com, PNC Bank, Gloss.com, CNA, Beautyscene and Mondera.