Omniture: Making it count on Wall Street

An increasingly noisy cadre of tech investors say Omniture--perhaps the best-known of the so-called Web analytics companies that help customers track and analyze traffic on their sites--could be a prime candidate for an initial public offering next year.

At stake, potentially, is an IPO that one major Omniture backer believes could be worth $500 million. That may not sound like much when compared to the public offering that raised $1.7 billion for Google last year, but it's plenty for a market that's seen few tech companies of note go public in recent years.

"An Omniture IPO would be enormous," said Farmhouse Equity analyst Gregg Speicher.

News.context

What's new:
Some Wall Street watchers see Web analytics company Omniture as a prime candidate for a lucrative initial public offering in 2006.

Bottom line:
The hype around Omniture is yet another sign that Web analytics firms have come a long way since the dot-com bust, when the value of the basic site traffic data they provided was as sharply questioned as dot-com business models.

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That is, if Omniture's board of directors really wants to take the 300-employee company public next year or anytime soon. Omniture CEO Josh James, for his part, offered little information about his company's IPO plans in a telephone interview with CNET News.com last week. "The likelihood is that an IPO will happen sometime in the future," James said. "But we don't give guidance on when that will be."

"The topic never came up at Omniture's last board meeting two weeks ago," said Mark Gorenberg, a partner at Hummer Winblad Venture Partners and an Omniture board member. He added, however, that he had a suspicion about why people are guessing an IPO may be in the near future: Omniture executives have been rubbing elbows more frequently at industry events with investment bankers.

"Clearly, they haven't been shy about meeting with the investment community," Gorenberg acknowledged.

Clearly, his venture partners would like to see a public offering. John Hummer, co-founder of Hummer Winblad, which recently participated in a $55 million investment in Omniture, last March told the online publication Private Equity Week that the company is "easily going to be a $500 million IPO." When will that be? He didn't say.

Winks and nods toward Wall Street aside, there are plenty of factors that lend credence to the idea that an Omniture IPO could be successful.

The Web analytics industry has grown at about 25 percent per year for the last several years, according to analysts. The category is enjoying a wave of attention, culminating with Google's launch of a competing analytics service last month.

Looking to a rival's example
Omniture executives say their company has doubled revenue in each of the past five years, though they won't disclose actual numbers. It also has an enviable customer roster. Four of the Fortune 500's top five, including Wal-Mart, Ford Motor and General Motors, are Omniture clients. Other high-profile customers include Hewlett-Packard, AOL, and CNN. (Omniture also counts CNET News.com among its customers.)

One indicator of how Omniture might be received on Wall Street is the performance of rival WebSideStory, a Web analytics firm that went public in September 2004. At the end of trading Monday, shares of WebSideStory were $19.46, about 130 percent above their $8.50 IPO price.

WebSideStory is trading at 10 times its annual revenue, a heady valuation for a company with sales less than $40 million per year, said Speicher. Obviously, he said, the market anticipates "more growth coming."