EW Scripps posted Q2 earnings and the results for Shopzilla (and uSwitch) are anything but overwhelming.
Almost down 10%, Scripps' interactive unit generated $59mm in revenue vs. $65mm during Q2 2006. Profit for the division declined about 60% to $6.8mm from $16.5mm a year ago.
The Scripps press release reveals what could be a squeeze on the PPC advertising side. "The competition for bidding on keywords in the
search engine marketplace continued to be vigorous, having a direct
impact on Shopzilla's results."
Some bits from the conference call:
- online comparison shopping business isn't as smooth growing as we'd like -- an untested marketplace; growing pains evident
- gets increasingly difficult to sustain double-digit growth as we near a billion in revenue
- common thread connecting businesses is getting in front of trends in media marketplace
- internet advertising accounting for expanding share of newspaper revenues
- Shopzilla growing by "leaps and bounds in france, UK..."
- soundness of our strategy is evident by returns we've delivered
- Q2: results are "mixed"
- working through issues in other business segments, including lower referral fee revenue in comparison shopping biz in US, UK
- broad strategy: move online businesses beyond just extensions of network and create communities online
- referral fee revenue lower; due to changing market conditions
- sharp decline in natural gas prices = lower revenue for switching (uSwitch), but more than double revenue a year ago; leading CSE for utilities in UK
- shopzilla: focusing on improving online search / CSE experience; comScore led in May, June for unique visitors
- shopzilla: competition for KWs resulted in "modestly lower" referral fee revenue -- deploying new KW marketing methods (didn't specify)
- strong revenue growth in European markets for shopzilla
Q&A Session:
Morgan Stanley -- on interactive, Joe, can you give color on rev trends; how should we think about seasonality -- $30-$40mm seems aggressive for year
Rich: the biz is obviously backloaded and we're in slowest period of year right now. At this point we still feel good about guidance, relative to last year.
Shopzilla has been picking up and accelerating.
Joe: (read the release!)
Is Shopzilla expected to see rev growth in Q4? Yes.
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Fred from JP Morgan -- how do we think of margin contribution from the interactive side? What are your thoughts on bringing uSwitch to the US?
Joe: interactive, on a top-line basis, is 6% of ad revenue -- goal to grow over time to be more material. Will be nearing $100mm mark on interactive revenue on a $900mm ad revenue goal. 25-35% growth depending on Q going fwd. Becoming material includes pulling in Yahoo! talent (increasing UGC, social networks, growing user-centric business around core brands as we extend connection to linear networks). Working on exciting ideas to grow interactive biz. Grow by acquisition, as well.
Rich: uSwitch & Shopzilla -- Shopzilla is expanding across Europe and numbers are very good over there. uSwitch categories outside of core energy are weak, but very focused on a strong European market with both Shopzilla and uSwitch.
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John Janedis from Wachovia -- mentioned challenges in interactive biz for a while now -- are you expecting any kind of moderation as it relates to KW competition bidding and is European mkt much different from US in terms of KWs?
Rich: don't think there will be any moderation for competition in PPC; doing an excellent job of driving paid and free traffic. If you look at Shopzilla's numbers in May/June you see that. PPC will continue to be competitive. Problem is driving the revenue to make up for costs.
European market more free traffic; drive more traffic through traditional means. Search engine marketing hasn't hit there as big yet.
Free traffic: strong when compared to paid side.
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Next up: are rising PPC costs real -- and are they affecting earnings elsewhere?
If you've got any insight / thoughts on this, email me at scott.hurff AT channeladvisor
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