Online Ad Titan’s Growth Fueled by Actual Dollars

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Online advertising giant ValueClick is on a hiring spree again, but this time it’s different. The company first boomed in the late 1990s before the tech bubble burst. Now there’s real money involved.

Last week, the Westlake Village company announced plans to expand its payroll by 10 percent, or more than 100 employees, in 13 cities across North America. Sales, business development and computer programming will account for nearly all the positions.

Steve Umberger, executive vice president of marketing at ValueClick, said most of the tech jobs will be at the company’s local offices in Westlake Village and Westwood as well as in Santa Barbara. Those locations already house nearly one-quarter of the company’s 1,100 workers.

The ad sales jobs will be in major media centers such as New York, Chicago, San Francisco and Los Angeles, as well as secondary markets such as Atlanta and Minneapolis. ValueClick is going into the secondary markets because about 45 percent of its ad revenue comes directly from company marketing departments, and many such companies are based outside major cities. The remaining 55 percent comes from ad agencies, which tend to be in the major cities.

ValueClick pioneered the pay-per-click model of Internet ads, in which an advertiser only pays when an Internet visitor clicks on the ad. The company launched in 1998 and went public in March 2000, one month before the Internet economy crashed in the dot-com bust.

Umberger said the current industry expansion differs from 1999’s because companies such as ValueClick now have real revenue. He pointed to a report by New York research firm eMarketer that predicts online advertising will grow to $31 billion this year, 20 percent more than in 2010.

“More and more ad dollars are being spent online,” he said. “And we have the technology and team to capitalize on that opportunity.”

However, growth across the industry means ValueClick will face competition in its goal to hire 100 top-notch employees.

Dan Pollock, regional vice president of tech staffing firm Modis in Carlsbad, said salaries are increasing and good programmers and sales people have the luxury of multiple job offers.

“The top talent has been employed all through the downturn and now they have their pick of where they want to work,” Pollock said. “Companies have to compete by sweetening their deals.”

Mike Bourdon owns tech recruiting firm Career Strategies in Woodland Hills and one of his clients is ValueClick. Bourdon said that the job market is vibrant, but not as crazy as it once was.

“Qualified candidates on the Westside of Los Angeles, Santa Monica and other tech hubs are enjoying a robust time for job growth,” he said. “We’re seeing incremental upticks in salaries, but it’s not like back in the 1990s when you could get a 15 to 20 percent raise if you could spell the word ‘computer.’ Those days are long gone.”

Bourdon said most Internet companies alive today are generating consistent revenue. The only exceptions are the few startups that stay afloat with venture-capital backing.

Still clicking

ValueClick had revenue of $431 million in 2010, with about 32 percent coming from its pay-per-click model on banner ads and video ads. Another 32 percent came from websites it owns, and 29 percent came from affiliate marketing, where third parties get commissions for click-through referrals. The final 7 percent came from the sale of ad management technology.

In the announcement of its hiring spree, the company said all divisions are growing. In addition, ValueClick expects future growth from the $70 million acquisition in April of Greystripe, a mobile ad network.

Lorrie Thomas, chief executive of Web Marketing Therapy in Santa Barbara, said ValueClick’s business model is based on diversity, with offerings in different types of advertising, and Web sites in niche markets such as hobbyists and women. The company’s biggest challenge, Thomas noted, is having expertise in all those different areas to effectively serve advertisers.

“Their strength is the ability to cross-pollinate and offer advertisers a variety of solutions,” said Thomas, a former ValueClick executive. “The challenge is to have the right team members and compensate them in a way that maximizes solutions for clients. I’m glad to see them investing in new people.”

In addition to job-seekers, ValueClick’s hiring boom is also a cue for investors.

Carter Malloy, an analyst at Stephens Capital Management in Little Rock, Ark., who follows the company, said the company has beaten Wall Street expectations for four straight quarters, a streak he believes will continue.

“ValueClick has clearly entered a new phase of outperformance relative to estimates and an acceleration into organic double-digit growth,” he wrote in a note to investors issued the same day as the ValueClick job announcement. “We continue to see ValueClick as a leading player and beneficiary of growth within the online advertising space.”

As for the hiring spree, Malloy told the Business Journal “it is clearly indicative of the momentum ValueClick is experiencing in the marketplace and the traction of their products.”

Malloy rates the stock “overweight” with a price target of $19, a premium to its recent price near $17.

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