Doubts cloud DoubleClick

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Once high-flying DoubleClick Inc., with its core business-to-consumer ad network business crumbling, is on a mission to reinvent itself as an e-mail marketing firm capable of serving b-to-b clients.

Don’t bet on immediate success.

Interviews with DoubleClick executives, partners, industry analysts and e-mail marketing experts reveal several shortcomings that the company must overcome before emerging as a viable choice for b-to-b marketers. Among DoubleClick’s challenges:

•Overcoming a reputation as a business-to-consumer specialist.

•Filling holes in its e-mail marketing suite with robust analytics, CRM and personalization.

•Taking better advantage of the b-to-b expertise of its database unit, Abacus, and integrating the products of recent acquisitions MessageMedia Inc. and FloNetwork Inc.

•Addressing a lack of industry-specific e-mail offerings.

•Expanding its mandate amid mounting financial losses and work-force reductions.

"[DoubleClick CEO] Kevin Ryan has stated that e-mail is the most important strategic initiative for the company," said Court Cunningham, VP-general manager of DoubleClick’s DartMail division. DoubleClick predicts that its e-mail marketing revenues will hit $100 million in 2002, up from nominal amounts this year. While not projecting e-mail revenues for 2001, DoubleClick believes they will account for 10% of earnings.

But DoubleClick is facing deepening financial woes, due to falling revenues in its core ad-serving business. It reported a $37.9 million loss in the second quarter, 71% higher than the year-earlier period, and it cut its workforce by 10% in March, following job cuts in December.

"The question is whether they can remain viable in this space, and the answer is probably not, because they don’t have enough functionalities to be an e-mail marketing suite," said Adam Sarner, research analyst at Gartner Inc.

Especially troubling, he said, is DoubleClick’s lack of Web and customer analytic platforms, as well as personalization and customer relationship management technologies.

Cunningham defended his company’s analytics, personalization and CRM capabilities. But he also acknowledged weaknesses, and said DoubleClick needed partnerships with specialists in some of these categories.

"We definitely do have personalization. We can dynamically compose messages, we have some basic analytics, and are building out more robust reporting, which will allow people to do some light data mining," he said. "With CRM, we want to partner. It’s a combination of building and partnering."

Partnerships in the works

Cunningham revealed the company is in partnership talks with Siebel Systems Inc. regarding call centers and other products, and is also talking with personalization experts BroadVision Inc. and Vignette Corp. He would not comment on these discussions.

Meanwhile, at least one b-to-b client gave an upbeat appraisal of DoubleClick and DartMail.

"In the wake of a lot of other struggling companies, DoubleClick seems like one of the market leaders and will most likely remain," said Jim Dietrich, product manager at Newark, N.J.-based Journal of Commerce, a trade publication using DartMail for e-mail newsletters.

At the same time it bolsters its e-mail suite, DoubleClick must integrate the software and consulting services of its recent ASP and e-mail marketing acquisitions, Message Media and FloNetwork. Message Media’s full-service ASP model doesn’t mesh with FloNetwork’s self-service approach.

DoubleClick claims the FloNetwork brand and technology assimilation is nearly done. "We are 90% integrated, and we’ll have all the clients migrated off of the DartMail platform to Flo’s by mid-October," Cunningham said.

Yet there is a real possibility that FloNetwork and MessageMedia might not provide the e-mail marketing revenues DoubleClick envisions. This is a lesson that DoubleClick competitor CMGI Inc. learned the hard way. Earlier this month, CMGI cut off funding for Engage Inc., its e-mail marketing unit.

"They’ll be looking at the carcass of CMGI in the ditch," said Kent Allen, research director at Aberdeen Group Inc., who thinks DoubleClick executives should view the Engage story as a cautionary tale.

Another sore point is e-mail list management. DoubleClick’s plan to buy NetCreations Inc., which fell apart last December, would have done a great deal to fill this gap. DoubleClick is now building the functionality internally.

DoubleClick claims 30 million consumer and eight million business names. Some DoubleClick competitors offer deeper b-to-b lists. MSGI Direct, for example, has 124 million b-to-b names, and Info USA, 14 million.

While it desires b-to-b revenues, it is becoming increasingly clear that DoubleClick has no intention of shifting away from its consumer legacy. Indeed, last February, DoubleClick licensed Chicago-based B2Bworks Inc., an ad network with a deep b-to-b focus, to resell a version of its DartMail platform to b-to-b customers.

Nor, apparently, does DoubleClick plan to take advantage of what is arguably its greatest b-to-b asset: Broomfield, Colo.-based Abacus, which manages 35.2 million b-to-b names. DoubleClick acquired Abacus in November 1999.

In an interview this past spring with BtoB, Abacus President Brian Rainey said Abacus would be educating DoubleClick on b-to-b.

"We’re going to help DoubleClick move into this space,’’ he said. But in an early August interview, Rainey indicated that scant progress had been made. "At this point, we’re not really sharing any information," he said.

Despite losses and challenges, DoubleClick’s near future may be assured by something its competitors lack: more than $800 million in the bank.

"Their cash levels and the fact that 24/7 Media Inc. and Engage are having real problems gives DoubleClick solid positioning in an otherwise troubled industry," said Jeff Refler, a Bear Stearns & Co. analyst.

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