Investors have learned the hard way that just because online advertising is a hot business, that doesn’t mean that every company in that market is going to be a winner.
Exhibit A in this case? ValueClick, an online advertising network whose stock had run up sharply this year on hopes that it would be the next takeover target in the rapidly consolidating Internet advertising market.
Shares of ValueClick tumbled 19 percent Monday after the company reported earnings that missed Wall Street’s targets. The company also lowered its revenue and profit outlook for 2007.
ValueClick’s problem is that it is having difficulty in its lead-generation business, i.e., the use of online promotions to drive advertising sales. Revenue has slipped in this business and the Federal Trade Commission is investigating several lead-generation companies, including ValueClick for unfair and deceptive practices.
ValueClick’s woes prove two important things to investors. Not all online advertising is created equal.
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