is an Internet advertising play. But it's still a good investment.
For starters, it isn't as risky an Internet advertising play as you might think. In the third quarter ended Sept. 30, media sales -- that is, revenue from the advertising it sells on behalf of other companies -- constituted the smallest of its three revenue segments. Expect that trend to continue as the company minimizes its exposure to this now-difficult business.
In 2002, more revenue will come from the company's steady but slow-growing catalog data business, and the majority of sales probably will come from the business of enabling other companies to deliver ads and emails. The technology business, in which DoubleClick is emerging as the industry consolidator, spreads the Net-advertising risk beyond the ability of DoubleClick's employees to sell ads.
At heart, though -- danger: nonmathematical argument ahead -- is a gut feeling. DoubleClick reminds me of America Online in its pre-Time Warner days, at times when its success was far from guaranteed. After years of watching AOL, I finally realized that it was going to survive. Yes, it was going to make missteps and get into trouble with attorneys general across the U.S. But it would bounce back.
As DoubleClick has struggled through the past year, contending with bad press over consumer privacy and imploding dot-com revenues, the company has reacted with reasonable intelligence, jettisoning a business plan in the face of public outcry and cutting costs to acknowledge new realities.It has met its trials and -- I'm pretty sure -- overcome them.
Don't take that to mean DoubleClick is going to rise 20,000% or more, as AOL has since inception. But it gives you a sense of who in this still-evolving business will be around a few years from now.
Obviously, there are risks. The revival of Internet advertising may not stick to the second-half-of-2002 deadline that many have set for it. Between anthrax and anthrax-induced higher postage costs, the direct-mail market is at risk. And the stock, which has a 52-week high of $18.31, has nearly doubled in price since its late-September low-water mark.
But don't go overlooking DoubleClick just because of that nasty dot-com suffix. That would be a shame -- and perhaps a lost opportunity, too.