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ValueClick Tops BNET's Network Efficiency Ranking; Interpublic Comes Last

Of 13 publicly held advertising companies, only four -- ValueClick, Alloy Media + Marketing, Havas and Valassis -- are winning the battle to keep operating costs in line with their falling revenues, an analysis of their finances shows.

The others saw the return on their operating expenses either stay flat or decline.

A look at finance filings after Q1 2009 shows that ValueClick, which was dead last in BNET's ranking last quarter after writing off a $327 million goodwill impairment charge, vaulted to No. 1.

Networks are ranked according to the number of dollars in revenue they earn for every dollar spent on operating expenses. ValueClick's result is astonishing -- in Q1 2009 every dollar spent on staff salaries and operating costs doubled its money in revenues returned.

The result is even more surprising because ValueClick's revenue fell 20 percent in Q1. The lesson here may be that it is easier and cheaper to turn around a web-based ad operation than it is turn a hulking tanker like WPP.

At the bottom of the table is Interpublic, which made a loss on its operating expenses of 6 cents for every dollar invested. IPG is bleeding cash on every aspect of its financial statements.

Alloy Media + Marketing saw a notable gain in productivity (it was at $1.55 in Q4 but earned $1.87 for the year), once again proving that owning the media in which you place your clients is an effective way to increase your margins.

The other notable performer was Valassis, which like ValueClick, has seen a precipitous decline in its business and has responded by aggressively cutting staff. Its gains come despite the fact that its legal bills consistently chew up its profits (the company is in a fight to the death with Rupert Murdoch's News America Marketing).

  • Company, Yield, Trend
  • 1. ValueClick, 2.00, up
  • 2. Alloy, 1.87, up
  • 3. Aegis, 1.32, flat
  • 4. Alliance Data, 1.27, down
  • 5. Publicis, 1.23, flat
  • 6. Havas, 1.14, up
  • 7. WPP, 1.13, down
  • 8. Omnicom, 1.11, down
  • 9. InVentive, 1.08, down
  • 10. Valassis, 1.07, up
  • 11. MDC Partners, 1.02, flat
  • 12. Lamar, 1.02, down
  • 13. Interpublic, 94 cents, down
Methodology: The BNET ranking is calculated by dividing revenues by total operating expenses. At most agency networks, the majority of operating expenses are salaries. The resulting yield tells you roughly how good the staff are at generating revenues for their company.

The ranking is, of course, flawed. An online business like ValueClick is very different from a billboard provider like Lamar Advertising, which may have high real estate costs. The "yield" thus gives you a good idea of which type of ad businesses are strong and which are struggling.

Also, numbers of European companies such as WPP, Publicis, Havas, and Aegis are full-year yields because European companies do not break out quarterly results. This gives them a slight advantage in the ranking. Alloy is on a different financial schedule than the other networks and its full-year 2008 numbers were used.

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