I have been involved in the investment industry for almost 29 years. The first 13 I spent with Dean Witter Reynolds (now Morgan Stanley (NYSE: MS)) and the last 16 years as a senior partner with two investment banking-research boutique firms. I have worked with over 150 stock research analysts just on the sell-side and another 200 plus on the buy side. Categorically, the title research analyst does not make an analyst a rocket scientist. There are a few myths that need to be explored and more importantly, explained.

There are two and only two types of analysts in the stock research world. 1) those that "get it" and are ahead of their particular industry and can pretty accurately predict what is "going to happen" within the sector they follow, and 2) analysts that are strictly reporters of the news affecting their sectors and do not think outside the box.

Case in point: Stewart Barry of ThinkEquity Partners (my alma mater) has been absolutely brilliant in the internet services sector. Forward thinking, cutting edge research and the ability to separate the news from the noise. Stewart nailed the strong possibilities of Aquantive (NASDAQ: AQNT) and 24/7 Real Media (NASDAQ: TFSM) being acquired. Both are getting acquired. What Stewart nailed wasn't the rumor mill about these two -- he was dead-right on the fundamental issues affecting Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG) and how AQNT, TFSM, and DoubleClick could fill those needs. Stewart Barry is an all-star analyst because he is ahead of the curve and ahead of his peer group. Stewart has reiterated his buy rating on ValueClick (NASDAQ: VCLK) not because it may be acquired, but because the basic fundamentals are superior and the company's growth rate is accelerating.

Today (around 1 p.m.) ValueClick's (NASDAQ: VCLK) stock is up a healthy 15% to $34.50. Back in January, the stock was trading at about $23.

Of course, the betting is that this online advertising operator will get scooped up like its peers, such as aQuantive (NASDAQ: AQNT), 24/7 Real Media (NASDAQ: TFSM), and DoubleClick. Hey, why not?

The problem is that the mega cap internet players such as Microsoft (NASDAQ: MSFT), Yahoo (NASDAQ: YHOO) and Google (NASDAQ: GOOG) have already made deals in the space. Instead, the suitors that are left can't really muster the premium pricing. These companies include the likes of IAC/InterActieCorp (NASDAQ: IACI) and Time Warner (NYSE: TWX).

While Microsoft or Google may want to bulk up even more, the fact remains that this is pure speculation. In fact, ValueClick is a hodge-podge of different sites and is more a technology play. It's like 24/7 Real Media, which didn't snag a big premium on its deal.

So, as always, investors need to be very careful on this one.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

When I go to NY, I try to meet up with 24/7 Real Media (NASDAQ: TFSM)'s CEO Dave Moore (I did an interview with him back in August for BloggingStocks). He's a pioneer of the online advertising space and started his company back in 1995.

In fact, his company nearly went bust during 2002 but he was able to save everything. Now, he has sold his company to WPP Group PLC (NASDAQ: WPPGY) for a cool $649 million.

To get some insight on the deal, I talked to Tim Vanderhook, the CEO of online advertising company Specific Media. According to him:

"This acquisition shows a continued interest by traditional ad agencies to bring search marketing services into their fold. 24/7 Real Media is best known for its industry-leading search marketing tools, along with its ad-serving technology. Although 24/7 gives WPP the ability to enter the display advertising market, this purchase is primarily driven for the need to bring search engine marketing services under the big agency umbrella. 24/7 purchased Decide Interactive in 2004 and successfully scaled the technology to a very large consumer base. For WPP, this acquisition allows them to push the search marketing technology out to all of the agencies it owns and gives them higher margins in an industry that is struggling to maintain the status quo. The increased margin can only happen if they are able to funnel their current clients' search engine marketing campaigns through 24/7's technology. This will be a very lucrative deal for WPP in the long run if they are able to truly integrate this business into all of the agencies they own. Unique and differentiated technologies will be the key to success in the future as large ad agencies seek to differentiate their service offerings from each other. "

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Microsoft Corp. (NASDAQ: MSFT) is paying an 85% premium to buy online advertising firm aQuantive Inc. (NASDAQ: AQNT). Yes, that's 85%. It is the price for being late to the dance.

After missing out on both DoubleClick and 24/7 Real Media (NASDAQ: TFSM), Microsoft had few options left if it wanted a presence in the internet advertising brokerage business -- the intersection where markets buy ads and place them on websites. The companies in this business have huge amounts of data on internet use patterns.

So, Microsoft will pay about $6 billion for a company that had $143 million in revenue last quarter and an operating profit of $20 million. Doesn't Steve Ballmer keeps saying he won't over pay for anything? Before the DoubleClick deal with Google Inc. (NASDAQ: GOOG), aQuantive sold below $30, so the real premium can actually be viewed as well over 100%.

Being so late, and paying so much is a huge strategic blunder, but it is the price for waiting

Douglas A. McIntyre is a partner at 24/7 Wall St.

MOST NOTEWORTHY: The more noteworthy companies initiated today were ValueClick, Inc (VCLK), Delta Air Lines, Inc (DAL), 24/7 Real Media, Inc (TFSM), Knology, Inc (KNOL) and Allos Therapeutics, Inc (ALTH):

• Banc of America believes ValueClick Inc (NASDAQ: VCLK) is well-positioned for continued strong secular online ad growth and initiated shares with a Buy rating and $35 target.

• Lehman is positive on Delta Air Lines (NYSE: DAL) valuation and earnings growth, starting shares with an Overweight rating and $26.50 target.

• Banc of America believes 24/7 Real Media's (NASDAQ: TFSM) valuation is full at current levels and started shares with a Neutral rating and $12 target.

• RBC believes shares of Knology (NASDAQ: KNOL) are fairly-valued and would wait for a pullback, initiating shares with a Sector Perform rating.

• ThinkEquity started Allos Therapeutics (NASDAQ: ALTH) with a Buy rating and expects significant news flow data on PDX in 2007-2008. In addition, the firm expects to hear an update on enrollment from the PROPEL study, which could be ahead of expectations, and Phase I data in NSCLC in the fall...

OTHER INITIATIONS:

• Goldman resumed coverage with Mylan Laboratories (NYSE: MYL) and Exco Resources, Inc (XCO) with Neutral ratings.

• Merrill Lynch resumed coverage of News Corp (NYSE: NWS) with a Buy rating.

• Lehman started Input/Output, Inc (NYSE: IO) With an Overweight rating and $18 target.

• Needham started Vasco Data Security International, Inc (NASDAQ: VDSI) with a Hold rating.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Ad agency conglomerate WPP Group Plc. (NASDAQ: WPPGY) bought 24/7 Real Media (NASDAQ: TFSM) for $649 million this morning. The price was $11.75, not much of a premium over where the shares are but they have run up on rumors. In early April, the stock was at $.8.30. But, when Google (NASDAQ: GOOG) bought DoubleClick, the market assumed that 24/7, a company in the same industry, would not remain independent.

What is interesting is that an ad agency bought the company, and Yahoo! (NASDAQ: YHOO) or Microsoft (NASDAQ: MSFT) did not end up with the prize. The intersection between serving ads for marketing clients on major websites yields all kinds of rich data about the habits of internet users. Google appeared to get a leg up in that market with its purchase of DoubleClick.

But, ad agencies are in trouble. Auction systems from companies like Google are taking the buying power for everything from the internet to newspapers to radio and putting it in the hands of auction software.

Revenue at large agency companies is under siege. WPP's stock has done as well as the S&P over the last five years, but Wall Streeet's concern is whether it can keep that up if ad-buying moves elsewhere.

Now, WPP may have put some of those fears to rest.

Douglas A. McIntyre is a partner at 24/7 Wall St.

MOST NOTEWORTHY: Dendreon Corp (DNDN), Whole Foods Market, Inc (WFMI), Rio Tinto plc (RTP), El Paso Corp (EP), and Oplink Communications, Inc (OPLK) were today's more notable downgrades:

• Banc of America downgraded shares of Dendreon Corp (NASDAQ: DNDN) to Sell from Neutral following the FDA's request for additional clinical data for Provenge.

• HSBC cut Whole Foods Market (NASDAQ: WFMI) to Underweight from Neutral after the second quarter miss.

• BMO Capital downgraded Rio Tinto plc (NYSE: RTP) to Underperform from Market Perform based on valuation.

• El Paso Corp (NYSE: EP) was cut to Sell from Buy at Matrix after the company's weak operating performance.

• Merriman downgraded shares of Oplink Communications (NASDAQ: OPLK) to Sell from Neutral based on concerns over the OCP acquisitions and inventory...

OTHER DOWNGRADES:

• 24/7 Real Media, Inc (NASDAQ: TFSM) was cut to Hold from Buy at Jefferies.

• Credit Suisse downgraded shares of RadioShack Corp (NYSE: RSH) to Neutral from Outperform.

• Bear Stearns cut Harman International Industries (NYSE: HAR) to Peer Perform from Outperform.

• Piper Jaffray downgraded shares of Cache, Inc (NASDAQ: CACH) to Market Perform from Outperform.

• Restoration Hardware, Inc (NASDAQ: RSTO) was cut at Caris to Average from Above Average.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

24/7 Real Media (NASDAQ: TFSM), a key player in the burgeoning Internet advertising industry, announced yesterday that they have retained the services of Lehman Brothers (NYSE: LEH) to assist them in "assessing strategic alternatives." I read this to mean, "Help us figure out how much we can get for for the company." Last week, rumor had Microsoft (NASDAQ: MSFT) offering as much as $1 billion.

Current performance, as measured by yesterday's quarterly earning report, suggests that 24/7 could use a boost if it is to retain and grow its position in the market. It continues to chase competitors such as ValueClick (NASDAQ: VCLK), which reported revenue three times that of 24/7 and an EPS of $0.18. With Google's (NASDAQ: GOOG) acquisition of DoubleClick, coming up with table stakes to remain in the game is going to require deep pockets.

At the moment, 24/7 is playing with chump change. Yesterday, they reported a 1st quarter loss of $0.1 million. This was, however, a considerable improvement over the $7.5 million they lost in the same quarter of 2006. Revenue was up 34% over last year, to $57.7 million. Half of this revenue came from their Search Solutions segment.

Google purchased DoubleClick for $3.1 billion, estimated at 20 times its earnings of $150 million. 24/7's revised guidance estimates their 2007 revenues at $265-275 million.

The question here seems to be, can 24/7 get DoubleClick-type money? In the current exuberant market for e-advertising, I wouldn't be surprised, especially if other suitors enter the bidding.

Microsoft Corp. (NASDAQ: MSFT) has its own answer to the Yahoo! Inc. (NASDAQ: YHOO) purchase of ad auction business Right Media and Google Inc.'s (NASDAQ: GOOG) acquisition of ad serving giant Doubleclick. The world's largest software company is going after a different platform -- the cell phone.

Microsoft today announced that it is buying ScreenTonic. The Paris-based company places and manages ads on wireless handsets. As the market for placing and brokering ads on the PC-based Internet gets more crowded, Microsoft is probably smart to look to the next platform that could see rapid ad growth.

The software company told Reuters: "The acquisition of ScreenTonic will be part of our long-term strategy to deliver ad experiences that map to the (mobile Internet)," said Steve Berkowitz, senior vice president at Microsoft's online services group.

Microsoft efforts to build a web presence with MSN and a search platform have been an embarrassing failure. MSFT's search share runs around 12%, about half Yahoo!'s. There are still rumors that the company could buy 24/7 RealMedia (NASDAQ: TFSM) to get into the mainstream ad brokerage business.

But with Google owning the search market, and Doubleclick being in second place, at best, it may not suit Microsoft. So it may be on to greener pastures.

Reports today suggest Microsoft (NASDAQ: MSFT) is poised to launch the next salvo in the scramble for vertical integration of the digital marketing industry by purchasing 24/7 Real Media Inc. (NASDAQ: TFSM). 24/7, whose ticker symbol is coincidently the mirror image of Microsoft's, provides e-marketing strategies, analytics, search marketing and campaign management. Its client list includes British Airways, Forbes.com, United, and Playboy.

If it buys 24/7, Microsoft would join Google and Yahoo in positioning themselves to provide advertisers with a one-stop shop for content, ad opportunities appearing on that content, campaign design, management and measurement. For example, Google offers content on, among others, Search and YouTube, while its AdWords and recently acquired DoubleClick manage the sale and placement of ads on its content.

According to the New York Post, the current asking price for 24/7 is $1 billion, no doubt boosted by Google's recent purchase of DoubleClick. Last week, the New York Post reported that advertising giant WPP Group (NASDAQ:WPPGY) was also considering a purchase of the company.

These are fat times for companies in the internet advertising delivery stream. Look for more to cash in while the market exuberance is high.

MAJOR PAPERS:

• Barron Online's (subscription required) "Inside Scoop" column reported that Charles R. Schwab sold 800K shares of Charles Schwab Corporation (NASDAQ: SCHW) for nearly $16M this past Friday.
• The Wall Street Journal (subscription required) reported that the human rights organization Human Rights Watch has released a report alleging that Wal-Mart Stores Inc (NYSE: WMT) spied on unions and violated other federal labor laws.
• The Wall Street Journal reported that Carl Icahn took out a full page ad to get the attention of Motorola Inc (NYSE: MOT) shareholders who will vote on board members at Monday's company annual meeting.
• The Financial Times (subscription required) reported that Sony Corporation (NYSE: SNE) Pictures Entertainment has formed a new division for the production of international films.

OTHER PAPERS:

• According to a New York Post exclusive, Microsoft Corporation (NASDAQ: MSFT) has emerged as a contender to buy Internet ad company 24/7 Real Media Inc (NASDAQ: TFSM), along with ad firm WPP Group (NASDAQ: WPPGY).