January 30, 2009

TradeDoubler Q4: gross profit up, costs up even more, search *must* improve

As a former employee of and holder of 100 shares, worth a whopping 3090 SEK by end of business Wedensday, in TradeDoubler, I checked out the company's full year 2008 report.

Two quick thoughts:

* Overall gross profit (more or less revenue less payments to publishers) was up to 195 MSEK from 188 MSEK for Q4 and 747 MSEK from 636 MSEK for the year. I.e. underlying business is holding up pretty welll. Costs grew much faster, leading to a steep fall in all margins. TradeDoubler let 6 % of its staff go in Q4, but as management seems to be expecting relatively slow growth in 2009 it seems likely there will be additional cuts (either as additional cost-savings or by attrition).

* The acquisition and integration of IMW/Search Works has been a failure. It seems quite likely that TradeDoubler will have to take a very significant impairment charge on the goodwill from the acquisition, which likely would force the company to raise additional capital as equity could be wiped out. That is unless there is a heroic effort to cross-sell search/PPC services in Germany, France, Spain, Italy and Sweden, as it will be very hard to motivate 600 MSEK of goodwill even if EBITDA triples to 30-40 MSEK (as public Internet companies are valued at 8-20x net profit in this environment).

I hope TradeDoubler executes well in 2009 and that the postives (being performance-oriented) outweigh negatives (large share of revenue/gross profit in industries like consumer electronics, travel, finance).


Anonymous said...

my guess is that the biggest affiliates at td is working with sem, so if td is going to take that business themselves they are going to lose a lot of their affiliate turnover. since td can't really do the kind of shady sem as their affiliates do (which they know about, but rather than act against it they are looking away) they will lose on it in the short-run.

Anonymous said...

Im also a former tradedoubler employee. 8 years there. I also own a whopping 6000 SEK in share value :)
For me it is a shame to see the company I have so loved and cared for going down like this.
Buying the search works was perceived as a late-coming patch for many of us and definitely a bad move.
Still I am proud to have been part of a project that has definitely shaped the european e-commerce as it is today.
Many of the best european marketing managers and also SEM specialists have grown reading the recommendations and consultancy given by TradeDoubler.
Back in 2000 nobody put any trust in performance-based marketing and affiliation marketing in particular. TradeDoubler was already there preaching about its benefits. Now in 2009 performance-based marketing is the main mover&shaker in online advertising.

Maybe TD is going down, but the legacy is one to be proud of.