An increasingly noisy cadre of tech investors say Omniture--perhaps the best-known of the so-called Web analytics companies that help customers track and analyze traffic on their sites--could be a prime candidate for an initial public offering next year.
At stake, potentially, is an IPO that one major Omniture backer believes could be worth $500 million. That may not sound like much when compared to the public offering that raised $1.7 billion for Google last year, but it's plenty for a market that's seen few tech companies of note go public in recent years.
"An Omniture IPO would be enormous," said Farmhouse Equity analyst Gregg Speicher.
Some Wall Street watchers see Web analytics company Omniture as a prime candidate for a lucrative initial public offering in 2006.
The hype around Omniture is yet another sign that Web analytics firms have come a long way since the dot-com bust, when the value of the basic site traffic data they provided was as sharply questioned as dot-com business models.
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That is, if Omniture's board of directors really wants to take the 300-employee company public next year or anytime soon. Omniture CEO Josh James, for his part, offered little information about his company's IPO plans in a telephone interview with CNET News.com last week. "The likelihood is that an IPO will happen sometime in the future," James said. "But we don't give guidance on when that will be."
"The topic never came up at Omniture's last board meeting two weeks ago," said Mark Gorenberg, a partner at Hummer Winblad Venture Partners and an Omniture board member. He added, however, that he had a suspicion about why people are guessing an IPO may be in the near future: Omniture executives have been rubbing elbows more frequently at industry events with investment bankers.
"Clearly, they haven't been shy about meeting with the investment community," Gorenberg acknowledged.
Clearly, his venture partners would like to see a public offering. John Hummer, co-founder of Hummer Winblad, which recently participated in a $55 million investment in Omniture, last March told the online publication Private Equity Week that the company is "easily going to be a $500 million IPO." When will that be? He didn't say.
Winks and nods toward Wall Street aside, there are plenty of factors that lend credence to the idea that an Omniture IPO could be successful.
The Web analytics industry has grown at about 25 percent per year for the last several years, according to analysts. The category is enjoying a wave of attention, culminating with Google's launch of a competing analytics service last month.
Looking to a rival's example
Omniture executives say their company has doubled revenue in each of the past five years, though they won't disclose actual numbers. It also has an enviable customer roster. Four of the Fortune 500's top five, including Wal-Mart, Ford Motor and General Motors, are Omniture clients. Other high-profile customers include Hewlett-Packard, AOL, and CNN. (Omniture also counts CNET News.com among its customers.)
One indicator of how Omniture might be received on Wall Street is the performance of rival WebSideStory, a Web analytics firm that went public in September 2004. At the end of trading Monday, shares of WebSideStory were $19.46, about 130 percent above their $8.50 IPO price.
WebSideStory is trading at 10 times its annual revenue, a heady valuation for a company with sales less than $40 million per year, said Speicher. Obviously, he said, the market anticipates "more growth coming."
One thing that San Diego-based WebSideStory has that Omniture lacks is profits. Omniture's James says his company was at one point profitable, but execs put profitability on hold while they invested in "building up resources." That could cool IPO prospects in the short term, because investors may be leery of a company without a track record of profitability.
"Omniture's service really dropped jaws here. We saw our traffic in much greater detail."
--Marc Koif, senior interactive analyst, JetBlue
That said, Web analytics companies like Omniture, WebSideStory, Coremetrics, and WebTrends have come a long way since the dot-com bust, when the value of the basic site traffic data they provided was as sharply questioned as dot-com business models. The analytics companies often supplied information that was unsophisticated or too hard to understand, said Holly MacDonald-Korth, a vice president for Web site marketing at online retailer Overstock.com.
"It was Neanderthal click tracking," MacDonald-Korth said. "At that time, it wasn't much more than homegrown software."
Now Web analytics companies are supplying timely information that can be understood by non-statisticians, say customers. For example, managers at JetBlue Airways, which hired Omniture last year, need only pull up a Web page full of charts and graphics to see how their sites are faring.
When it came to understanding how customers were behaving on its Web site or what they wanted, JetBlue was "flying blind" before they started working with Omniture, according to Marc Koif, senior interactive analyst at the discount carrier.
"It was like turning on a switch," Koif said. "Omniture's service really dropped jaws here. We saw our traffic in much greater detail."
So what might be giving Omniture pause about going public?
Besides profitability, one reason may be Google. Though Google's new analytics service shines a light on the whole sector, the search giant could disrupt the economics of the business because its offering is free--though not yet as sophisticated as those from smaller rivals.
"We have high-end, Fortune 500 companies making inquiries as well as advertisers and Web publishers new to the Net...we're not leaving anyone behind," said Richard Holden, director of product management at Google Analytics.
All that will certainly weigh on any decision by executives at Omniture to test the IPO waters next year. But James, who co-founded Omniture in 1996, argued that the companies that survive toughening competition are the ones who can help their customers stay ahead of a rapidly changing advertising market.
"It's competitive because of the size of the opportunity," James said. "It's not about collecting information. It's about getting the right information to the right person at the right time."