After a 8% spike on Friday - fuelled by MSFT paying an 85% premium for AQNT - today Valueclick rose an additional 11%. I owned this stock (and others in the space) in the past and sold it when it first doubled from $1o to $20. I saw a strong momentum in digital advertising stocks again, but focused on so-called best of breed players and doubled up on AQNT. This paid off quite well on Friday.
It doesn’t take a genius to figure out, that like TFSM and AQNT, VCLK will benefit from M&A hype. Of course, both TFSM and AQNT did sell eventually. I did not buy TFSM again, having made a nice return in the past, I also did not buy VCLK this time around… and at a $3.3B market cap, I probably won’t.
I might be proven wrong on this (won’t be the first time; DCLK/GOOG), but I don’t see VCLK selling as a slam dunk.
First, there’s the FTC inquiry clouding one third of its business. Then, there’s a little detail about VCLK. Unlike AQNT, I don’t know who really uses VCLK!
Will VCLK sell too?
I don’t know. I don’t know if it would sell, and I don’t know, frankly, who uses VCLK.
A story on TheStreet quotes an analyst on Think Equity as saying “VCLK is attractive because it has technology,” indeed, but I don’t know many publishers or advertisers who use it. Its ad serving platform, Mediaplex, might have been used by 1 out of, what a million potential business users, whereas everyone seemed to use DCLK or AQNT.
Listen, I’m sure many people use VCLK, I can read a financial statement, they make money and all, but unlike DCLK or AQNT, VCLK just never seemed to be the must-have stock in the sector within one’s portfolio, that was AQNT.
In my experience in ad sales, I recall VCLK as being one of those companies that was in the space but you never knew what it did. Here’s a rundown of its solutions. It made a plethora of M&A deals, including one for Commission Junction, and last year alone it saw its stock double largely based on acquisitions’ contributing to the top and bottom line.
Is VCLK complementary to AQNT? Sure, why not. Aren’t most things online? But after paying $6B for AQNT, I hope MSFT does not waste $4-5B (VCLK is now at $3.3B - up 100% since last year!^#$#) on a second/third tier advertising network and focus on what it needs to do which is a traffic boost in general and search queries in particular.
Facebook - who says wants to remain solo - could sell for $5-8B - so instead of paying anything near $5B for VCLK, MSFT might as well just make Mark Zuckerberg an aQuantive-esque offer and get the hottest company around.
[Before you blast me, I don’t think Facebook is worth $5-8B, but since when has value been one and the same as price? Last Fall, using figures on the size of social networking advertising, my analysis put Facebook at $2.35B in 2010, and of course, the recent slate of M&A deals, Facebook’s forays and growth trajectory have made that look so unrealistic and conservativee, since price is in fact what someone will pay for something, and not what yours truly, or any analyst says something is worth].
Then again, there are so many takers for all things digital that I would not be surprised seeing someone walk in and make VCLK an offer they can’t refuse, but before diving in at these prices, note not all stocks end up fetching a market leader premium as AQNT did, when TFSM sold to WPP, it sold for pennies more than what they stock was trading at because it had already run up quite a bit in the weeks and months leading up to it, and with the FTC cloud remaining an issue, this is one stock that is more than fully priced and more risky than the potential reward offers, in our humble opinion.
Disclaimer: of companies mentioned above, I’ve owned them all at one point but currently only own AQNT.
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WatchMojo NewsletterTechCrunch’s Duncan Riley starts off this week in Merger Madness Month with Who Will Buy Facebook?
Today we found out that Facebook will be opening up its platform, though this could be done in fact in two ways.
Frankly, the main assumption that Facebook will sell to someone is faulty. The real question should be Will Facebook IPO or Sell?
Of course, we’ve been proven to be wrong before, when Google bought DCLK. In fact, we were wrong 3,100,000,000 times.
Then again, since it was that deal that kicked in Merger Madness Month - accentuated by MSFT’s $6B AQNT deal last week - I’d say that anything is possible. But, anything includes demand from investors for an IPO like Facebook.
Some facts, arguments, FYIs:
- Riley’s argument that Facebook as a stand alone entity will carry a lot of risk reminds me aplenty of the argument that Google as a stand alone company would bear a lot of risk. Well, indeedio, and with risk comes return. $85, meet $500.
- Previously we wrote that Facebook’s to do list includes an IPO in 2008. Read that here in full, but the main points are:
1. Will the IPO replace the M&A in media?
Of course, Google and MSFT blew that argument into smitheerins to some extent, though my argument had more to do with technology, media and not services and ad networks that yield greater networks effects as part of a bigger deal. Does that sound like backtracking, to some extent, yes. Google/DCLK and MSFT/AQNT were massive deals, after all, pretending like it does not change my outlook to some extent is insulting to you the reader.
2. Facebook has priced itself out of an M&A.
If Viacom and Yahoo!’s $800M to $1.6B offers were not enough last year, why on earth would they be now? Thiel himself came out and said Facebook is worth $8B. That’s salesmanship, but under all statements are a hint of truth - or wishful thinking.
3. MSFT Deal Reality
Early in 2007, CEO Mark Zuckerberg said the advertising contract with Microsoft had been extended until 2011, a deal “reportedly guaranteed to deliver about $200 million in ad revenue through 2008.”
Hmm, 2008, there’s that figure again.
4. $50M in Revenue is the new $100M for IPOs.
But don’t worry as Facebook is on pace to clock in $150M this year.
5. Growth, Maturity and Monetization in Social Networking Advertising
We still don’t think that social networking inventory is all that special, but the fact is that it is less undesirable than it was just a few quarters ago.
Again, if these bullet points seem a bit incomplete read this.
But since we first wrote that, we’ll add a couple more reasons:
6. Facebook Classifieds
This could fizzle or sizzle, but the bottom line is that the in-house projections for these must be enormous. Internally, between the VCs and Zuckerberg’s head, this launch added a few billions to the valuation.
7. The Open Platform
This will be officially announced on Thursday, but the Open Platform is one, maybe two things:
- Open as in open API. This will help fuel innovation and invention of Platform services by outside developers, though doing anything on a company’s API - especially as ambitious as Zuckerberg - will prove foolish.
- It seems that it will also open its site. This is something we thought it should do here. If it means “open” in this definition, then Facebook just became more relevant to large shares of the Internet population that might not have been bothered to sign up etc.
We’ll find out Thursday, I guess.
8. Facebook: The New MySpace?
I never signed up to MySpace, ever. But I did sign up to Facebook, and I don’t sign up to too many things. I did so mainly because I considered Facebook the early leader for candidate for Web Company of 2007 (though AQNT’s homerun deal puts it into play) and trust me, it seems that everyday, everyone is getting on Facebook.
Facebook says its user base has more than doubled to 23 million in the past six months, and it is adding 100,000 new users a day.
9. Google can’t afford Facebook
Google had about $10B in cash, and parted with $3B in the DCLK deal. Sure, it is printing money, but only one company is printing money enough to pay Facebook $5B and more in a deal. And, even though aQuantive is not a real comparable, if it got $6B when the day before it was trading at $2.8B on Nasdaq, how much will it take to buy Facebook. Maybe Thiel wasn’t all that crazy after all.
I doubt Facebook will accept Google stock as currency, and using cash will be hard for Google to do.
10. Only MSFT can buy Facebook
Yes, both founders are Harvard dropouts. Both products play on human psychology etc., but do we see MSFT buying Facebook? Well, right now MSFT owns the ad inventory for text ads, and I doubt those figures are doing too well. But the longer MSFT waits, the more expensive Facebook becomes. Will this happen? I don’t know but I made the case before here.
Any thoughts? Here are plenty from TechMeme.
