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quit selling web ads?
That's the thinking, so it can focus on serving biz
By Matthew Schwartz
For a long time, Doubleclick was all but synonymous with internet advertising and its great promise, as both the largest online ad network and parent to the web's leading ad serving technology.
Or so it was before the dot.com bust.
As the ad economy is about to emerge from one of the harshest slumps in memory, the DoubleClick of today is a lot slimmer.
Many think it is about to get slimmer still.
Though the company, which is to release its 2001 earnings tomorrow, denies it, many industry analysts and observers believe DoubleClick will soon quit selling online advertising.
It will do so to concentrate entirely on what it does a lot better--serving those ads to web sites.
"They have valuable tools that can be tweaked in order to service new ad models. They're the strongest in the business, despite the baggage, "says Lynn Bolger, chief executive officer of FastBridge, the interactive division of Initiative Media.
"I’m not so sure how committed they are to the online ad business but they’re committed to the software systems."
Joe Barone, senior vice president and group media director of FCB Worldwide, agrees that DoubleClick’s long-term opportunity lies in its patented DART technology, or Dynamic Advertising Reporting Targeting, which distributes ads via the web.
As for actually selling space, Barone believes the company is less suited to compete for precious online ad dollars with the popular online ad portals, such as Yahoo, MSN and CNN.com.
"Clients want a brand they’re familiar with rather than a network of sites that don’t have any sticking points," he said. "I don’t know if [DoubleClick] could survive on its own and wouldn’t be surprised if it was bought."
The departure of DoubleClick from the business of online ad-selling would one-up ferocious competition for the business from a number of growing ad networks, such as Burst! which represents a network of vertical sites.
Whoever might buy DoubleClick's ad-selling operations would certainly be an instant huge presence.
Although DoubleClick has deep pockets–more than $700 million in the bank heading into 2002–its fortunes continue to slide.
DoubleClick’s 2001 earnings are expected to show weak returns on the media side of the business, and they follow a disappointing third quarter, in which revenues fell 31 percent to $92.7 million, compared to $135 million in 2000.
Trying to be all things to all people can be costly during a recession, particularly when many companies are reevaluating their web expenditures.
Yet amid mounting financial losses and deep job cuts throughout 2001, DoubleClick stuck with its two-pronged business strategy.
Barring an outright sale, DoubleClick could go the route of Avenue A Inc., which last April spun off its ad serving technology into a separate operating unit, called Atlas DMT. Either way that side of the business isn’t expected to go away.
"If DoubleClick were to exit the [ad sales side], it’s not something that would be left dangling," says Paul Benjou, director of client services for Mediaplex, a ValueClick subsidiary.
For the record, DoubleClick contends it is committed to remaining in the ad sales business, but moves by the company suggest otherwise.
Last week the company said it was dropping its Intelligent Targeting Service that tailors the delivery of web ads to users, based on data from participating web sites, both for business-to-consumer and business-to-business.
The company also sold its European media business to Montabaur, the Germany-based unit of AdLINK, while the president of global media, Barry Salzman, resigned and is not to be replaced.
Perhaps most telling is that the company’s recently appointed president, David Rosenblatt, used to run DoubleClick’s Technology, Data & Research divisions, which account for more than 70 percent of revenue.
Denise Garcia, media research director at Gartner Inc., says DoubleClick has overplayed the media side and should now focus on cultivating its core technologies.
"If they expand the DART beyond serving online advertising they can get into wireless, interactive or kiosk," Garcia says.
"Selling online ads is not the market they thought it would be."
January 14, 2002 © 2002 Media Life
-Matthew Schwartz is a New York writer.
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