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The ailing economy is having a harsh impact on the advertising market. There is even a drop-off in online channels. Yet, for Internet Brands (NASDAQ: INET), which operates many ad-based websites, the impact has hasn't been as bad.
In Q4, revenues increased 8% to $27 million and net income was $3.1 million, or 7 cents per share. Adjusted EBITDA increased 29% to $9.8 million as Internet Brands got a boost from higher margin advertising revenues.
For the most part, the key strategy for the company is to build a diversified online platform. For example, Internet Brands has sites that cover autos, travel, shopping, rentals and so on. As a result, the company has been able to soften the reductions in certain verticals.
Something else: Internet Brands has demonstrated a strong ability to pump up traffic. As of December, the company's sites saw traffic spike from 26.9 million to 43.2 million (over the past 12 months). At the same time, the advertising revenues are focused on performance – not general branding.
To continue its growth ramp, it looks like Internet Brands will focus on aggressive M&A dealmaking. Last year, the company purchased 29 websites. And, as for this year, Internet Brands has acquired two sites.
The good news is that valuations are much lower now – and sellers are motivated to do deals. In other words, Internet Brands is nicely positioned to continue growing in a tough environment.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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