On Thursday Claria, formerly Gator, filed with the Securities and Exchange Commission on Thursday to go public – adding to the list of companies such as Advertising.com and Shopping.com, which are benefiting from successful search engine advertising returns. According to a news wire report Claria filed an S-1 document with the SEC, seeking to raise an unspecified sum through an initial public offering. According to its filing, the company said it had a net income of about $35 million on revenue of $90 million in 2003.
A predicted IPO boom is the direct result in positive returns and big spending on online advertising. CNet reports that sales from Web ads surged 38 percent in the fourth quarterof 2003 to $2.2 billion from the comparable period a year earlier, coming after years of declines. Analysts expect the market to rise by 10 percent or more for the full year in 2004, registering more than $8 billion in sales.
Claria also has highly benefitted from the success of Yahoo, which Wednesday night reported ad revenue of $550 million in the first quarter on 2004. Yahoo’s Overture Services helped Claria bring in 31 percent of its revenue in 2003, through a deal to syndicate Overture listings through Claria’s SearchScout software. As Overture grows, Claria should benefit, or should it?
One darkside to Claria and its IPO is the controversy surrounding the Gator Wallet and recent adware legislation. Claria’s business model is based on installing its software on computer desktops and browsers using questionsable methods such as bundling with downloads such as Kazaa. The adware then serves ads, pop up windows, and sponsored search results over targeted web sites and search results, usually over sites which compete with Claria advertisers.
Recent legislation on the state level may hurt such a business model. For example, a recently enacted statute in Utah will, upon coming into effect on May 3, 2004, will prohibit Claria from providing their adware products and services in that state. Now, Utah may not be the most populated state in the Union, but imagine if similar legistation was passed in California or New York.
However, with an everchanging business model, new advertising techniques, and a fatter wallet, Claria probably will contine to benefit greatly from the proven success of search engine advertising.