To judge by recent events, local content could be a box-office smash for
After the April Internet stock implosion, Wall Street's sell-side analysts haven't exactly been tripping over themselves to back consumer-focused dot-coms. But since the beginning of June, four brokerage houses --
Salomon Smith Barney
CIBC World Markets
-- have launched favorable coverage of the company, which operates a network of online city guides, a Web-based ticketing service and an online personals service. Add those Wall Street firms to
Friedman Billings Ramsey
, which initiated coverage in early March, and you've got five new analysts following the company, none of whom works for firms that have done banking for Ticketmaster.
At a time when numerous Internet companies are struggling for attention from analysts outside the firms that brought them public, that's a good-sized bandwagon -- especially considering the stock, up 15/16 to close at 21 on Friday, is a lot closer to its 52-week low of 13 7/8 than it is to its high of 47 3/8. At some 75% below its all-time high, this isn't an immediately apparent mo-mo wonder.
The new coverage appears to be a vote of confidence in the prospects for localized Internet content, a trend Ticketmaster stands to benefit from. This confidence hinges partly on the promise of the wireless data market, where localized content and commerce are expected to be popular applications.
Statistics make the company optimistic. About 14% of online advertising -- variously estimated at $3.6 billion to more than $4 billion annually -- is local, rather than national, by one estimate. But in traditional media, 53% of advertising is local. "There's enormous opportunity for growth," says Chairman Charles Conn. More stats will come out after the market closes Tuesday, when Ticketmaster is slated to release financial results for the second quarter.
That's the Ticket
It's not necessarily true, though, that advertisers will place local advertising on locally oriented sites. After all, companies like Internet advertising firm
offer marketers the opportunity to target ads to Internet surfers from specific geographical areas, no matter what type of site they're visiting on the Web.
But Conn, interviewed at the
Local Online Commerce 2000
conference, argues that online marketers, increasingly focused on results and skeptical about the effectiveness of online advertising in general, will want their ads to appear in an appropriate context. You can't get that by placing a local ad on a nonlocal site, he says, and you can't even get it from putting an ad on a local newspaper site that's not oriented toward e-commerce. "If you're principally there
on a newspaper site to read about a dog run over on Main Street," he asks, "how is it an advertiser associated with that is in a context for action?"
Conn also contends that the firm is insulated from the recent dot-com advertising pullback. In fact, 75% of the firm's revenue comes from transactions driven by its
site and subscription revenue from online personals built around its
operation. No more than 5% of its revenue comes from dot-coms, Conn says. "And that number's probably extravagant," he says.
Stay With the Flock
Analysts are evidently picking up on this story. Of course, brokerages can have a variety of reasons for picking up coverage of a firm, including thinking wishfully that they might eventually be retained to do investment banking for it. But that seems unlikely. Barry Diller's
, which holds about half of Ticketmaster's stock and a majority of its shareholder votes, did say in late June that as part of a reorganization, it was contemplating a larger stake in Ticketmaster and an IPO of a new division including its Ticketmaster stake and other assets. But all the new coverage, except for CIBC World Markets', began before that announcement.
Mandana Hormozi, senior analyst at Lazard Freres, initiated coverage in early June. "I like the product a lot," she says. "I use it quite a bit."
More important than how Ticketmaster works on the Web will be how it works in a wireless networked environment, she says. Localized information and transactions make the Web product a "very powerful" application for the growing wireless market, says Hormozi.
The Wireless Angle
In fact, earlier this month, Ticketmaster announced an agreement with wireless phone operator
to provide information about events and ticketing services to cell phone subscribers. Ticketmaster and Verizon, which has more than 25 million mobile voice and data subscribers in the U.S., didn't disclose terms of the deal.
Hormozi says the biggest risk for the stock -- though she doesn't think it's a major one -- is market perception of near-term losses for the company, which she doesn't expect to be profitable before autumn 2001. "Investors' impressions of Internet companies right now are not favorable for ones that are not profitable," she says. Hormozi has a price target of 35 on the stock and ranks it a buy, her firm's highest rating.
Conn says he's pleased with all the new coverage, but he's unsure what its effect on the company's fortunes will be. There's a big difference in stock performance between companies that are covered and those that aren't, he says. "But does it help to go from four
analysts to nine? I don't know."