November 8, 2001 3:05 PM PST

Top DoubleClick exec steps down

The head of DoubleClick's media unit has resigned, CNET News.com has learned, raising new doubts about the future of a business that it pioneered and that helps fund hundreds of small Web publishers.

Barry Salzman said he announced his resignation internally two weeks ago and plans to leave the company officially Dec. 1. He said that for now it's business as usual, and he will continue to work on special projects for the company after his departure. Jeffrey Silverman, general manager for U.S. Media, was named his replacement, according to a DoubleClick representative.

The company declined to comment on speculation that it may depart the media business.

The departure of DoubleClick's president of Global Media comes amid speculation that the company plans to exit its media business, which has been blamed for steep losses in recent quarters. The rumors have contributed to a run-up in the company's stock price, according to a note published Thursday by Lanny Baker, a Salomon Smith Barney financial analyst. By selling the unit or partnering with a rival network such as ValueClick, L90 or 24/7 Real Media, the company could cut its losses by two-thirds, Baker said.

"It's a small source of gross profits. Structurally, it's a lower-margin business than technology and data; it is significantly more cyclical than the rest of DoubleClick; and it's currently a loss-maker, accounting for half to two-thirds of losses at the company," Baker said in an interview.

Salzman said he could not comment on whether the company plans to exit the media business.

"I just decided that after five incredible years, I was ready for a new challenge," he said in a phone interview from his home.

DoubleClick board member Don Peppers, when asked whether the company plans to drop the media business after his resignation, said there are "many ways to interpret" such an event and "it is a simplistic notion" that the company would shut the unit down.

"DoubleClick is a strong network. Hypothetically, who would replace that?" asked Peppers, who is a partner of management-consulting firm Peppers and Rogers Group.

Finding a focus
Reporting directly to DoubleClick CEO Kevin Ryan, Salzman ran DoubleClick's two advertising efforts: the audience network and brand network. He also headed its international ad networks and e-mail list services. According to DoubleClick's site, the company has more than 1,100 small Web sites in its audience network. Its brand network comprises more well-known Web sites such as Dilbert.com and Kelly's Blue Book.

Besides the media unit, the company has two other divisions: data and technology. But media has been hardest hit in the last year as the Net ad market tanked. In the second quarter, the company's TechSolutions unit boosted revenue 6.4 percent year over year to $51.8 million. Revenue in DoubleClick's data business also rose--22 percent to $19.3 million--but its media unit's revenue fell 64 percent to $33.8 million.

Meanwhile, the company has made overt moves to diversify its business. It has become one of the largest e-mail marketing services companies through acquisitions of interactive e-mail marketers FloNetworks and MessageMedia. It has grown its technology business by acquiring NetGravity, Sabela from rival 24/7 Media, and some technology assets of L90.

see special report: DoubleClick doubles down In addition, the company has made a foray into research services through its acquisition of @Plan and by introducing a division called Diameter to compete with Internet measurement companies such as Nielsen/NetRatings.

By contrast, Ryan has said in earnings calls that the company has stopped investing in its media business. The media unit has borne the brunt of recent layoffs at the company, according to sources, who said most of its product management team and some sales staff were let go.

DoubleClick laid off more than 150 employees, or about 7 percent of its staff, in 2000 and another 200, or about a 10 percent-cut, in 2001.

A giant in the industry
New York-based DoubleClick jump-started its online media business in 1996 with a $2 million investment from privately held Bozell, parent company of advertising agency Poppe Tyson. At the time, it hawked ad space on a network of about 30 Web sites, including newcomers Netscape Communications (now owned by AOL Time Warner) and Excite, now of bankrupt Excite@Home.

Later that year, it began to sell its proprietary tracking technology, called DART (Dynamic Advertising Reporting and Targeting), to sites on its network. It also inked one of its first major deals, allowing search engine AltaVista to operate its technology and sell its ad inventory. The network quickly grew to more than 1,000 Web sites, and the company skyrocketed during the go-go days of the Internet, going public in February 1998 and raising about $60 million.

In December 1999, the company traded at more than $200 per share. But since the ad market soured, it has fallen to lows of $5 per share.

If the company were to leave the media business, smaller Web sites that depend upon it could see their meager revenues dry up. Operations that rely on networks often can't afford their own ad sales staff or rely on the benefits of being a part of a "vertical" ad market, such as travel or women-focused sites. Small-time operations also depend on companies such as DoubleClick for sales expertise and contacts in the media-buying industry. Without that support, many sites may be forced out of business in the fiercely competitive and expansive Internet marketplace.

In addition, a move from ad networks may call into question the future of DoubleClick's claim to fame in Net advertising: profiling. The network allows DoubleClick to plant "cookies," or electronic tracers, on Internet consumers visiting its sites to create detailed profiles on their affinities. Advertisers can then target ads based on these preferences. But the tactic landed DoubleClick in hot water with privacy advocates and has drawn less interest from advertisers than originally expected.

Still, Salomon Smith Barney's Baker wrote that the ad networks could be successful, provided they achieve greater scale and reduce competition.

"A combination of DoubleClick's media segment with another media network (or networks) could expand the unit's size, reduce competitive pressures, improve its profitability, and perhaps remove it from DoubleClick's consolidated income statements," he wrote.

 

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