Consolidation in the online advertising industry is raising questions about the future of ValueClick Inc. in Westlake Village.

The independent online advertising firm has been the subject of takeover speculation since giant media companies started pursuing similar companies.

Two deals that have made headlines recently are Microsoft's $6 billion takeover of aQuantive and Google's $3.1 billion offer for DoubleClick.

Even though ValueClick's chief executive officer said shortly after he took over in May that the company prefers to stay independent, Wall Street rumors of a possible takeover remain strong.

ValueClick does not comment on rumors, said spokesman John Ardis.

The company has been the one making acquisitions in recent years to help it diversify. ValueClick has four major areas of business: media, which includes online display ads and e-mail campaigns; affiliate marketing; comparison shopping, such as its PriceRunner.com site; and technology for following return on investment and other data collection.

Established in 1998, ValueClick has made 14 acquisitions since 2000 — when it got backing through its initial public offering.

"We believe we are the most diversified online marketing provider in our class," Chief Administrative Officer Sam Paisley said at an investors conference Sept. 19.

ValueClick's projected revenue of $645 million to $660 million this year is 10 times what it was in 2002, he said. The company will announce its third-quarter results Nov. 1.

Rumors of an AOL purchase and a plug from Mad Money's Jim Cramer bounced the stock upward recently as some speculate on an imminent sale and others offer reasons why it won't happen.

"Everyone's for sale at the right price," said Dema Zlotin, founder and vice president for strategic services for search marketing automation software company SEMDirector Inc. in San Diego. "The issue is: What's the value in ValueClick?"

He said the company's diversity could act as a deterrent when it comes to finding a buyer.

Noting that he's not an analyst, Zlotin said ValueClick has some solid businesses, including its advertising network, comparison shopping and affiliate marketing services. But those businesses may be worth more split apart.

"Those properties serve very different purposes, have very different buyers," he said.

Potential FTC problems

Another barrier to acquisition could be the Federal Trade Communications investigation of ValueClick's promotional lead generation business.

The FTC is looking into Web sites that offer a gift of substantial value, and how ValueClick drives traffic to those sites.

The company received a letter from the FTC in May.

In its second-quarter report at the end of July, ValueClick reported lower-than-expected revenue from the promotional lead generation business, which makes up about 20 percent of the company's media business.

Despite those concerns, acquisition rumors continue to crop up, in part because online advertising is the hot place to be.

Internet advertising revenue grew more than 26 percent to about $10 billion in the first six months this year, according to a PricewaterhouseCoopers LLP study.

The market was dominated by keyword ads — such as those used by Google and other search engines — that account for 40 percent of online revenue. Display ads and classifieds followed in generating money.

Changes in online media consumption have driven the recent consolidation, said Kartik Hosanagar, an assistant professor of operations and information management at the Wharton School of Business.

People are using media online in very different ways, such as blogs and social networks, which makes it more difficult to get out an advertising message, he said.

"Online advertising is changing to figure out the right way to get sponsored messages across to consumers in these channels. This is by no means straightforward," he wrote in an e-mail.

Consolidated online companies offer an "entire menu of services to advertisers," he wrote. "The likes of Google, Yahoo, Microsoft, WPP have seen the opportunity here and want to be the platform that provides this integrated media buying experience to advertisers."

But that kind of consolidation also creates "the inherent potential for conflict of interest," ValueClick's Ardis argued.

Possible conflicts of interest

For example, the purchase of aQuantive by Microsoft creates a major online agency that makes media recommendations to clients, but is owned by a major media company. It then tracks the performance, but owns the tracking tool as well.

"This results in a very real concern that the student is not only grading his own test, but he's making up the test as well," Ardis wrote.

ValueClick has grown by bringing together different marketing services, but remains separate from any major media property.

"So the recommendations we make and the strategies we craft for our clients have that sense of impartiality that marketers and their agencies find so important," he wrote.

It will ultimately come down to the market to decide.

There are opportunities for independent firms in the online advertising space, but there are also challenges, Zlotin said.

SEMDirector was founded to give advertisers an independent source of information on how well their ads perform — and how well their money was spent.

"Our strength is that very independence," Zlotin said.

But in the case of ValueClick, he said advertisers will follow the audience and where they get the most return on investment.

Increasingly, that may be with the big companies.

For that reason, Hosanagar said he thinks there's merit in the ValueClick acquisition rumors.

Consolidation creates an environment where it will be difficult for independent firms to compete, he said.

Companies such as Google will have access to information on consumer searches and Web sites visited that they can use to target their ads closely to the consumer.

Hosanagar expects that will draw advertisers and publishers to the big players.

"I think independent firms will struggle to match these consolidated firms in terms of the ability to target ads, quality of the publisher network and ability to provide a fully integrated solution to advertisers," he wrote.

ValueClick continues to grow in its own way.

This summer, the company bought MeziMedia, which helped expand its comparison shopping foothold in the United States, but also helped grow its search engine marketing and search engine optimization capabilities and gave ValueClick a presence in Shanghai and a foot into the Chinese market.

ValueClick spokesman Ardis said the company competes in an increasingly competitive industry with its diversification, expertise across diverse service offerings and the company's impartiality, "which has now become very unique in the marketplace among major companies."

"Finally, we compete with performance," he wrote. "Performance is what marketers and agencies increasingly expect, and what they rely on us for."

On the Net:

www.valueclick.com