Internet Sector Roundup

We’ve looked at some Internet sector acquisition prospects last week. Today, we look at more companies, this time in printing and real estate.

An online company that has been faring well with its excellent business model even in the current times is Vistaprint (NASDAQ:VPRT). The manufacturer of personalized products and services for small businesses and the home recently announced impressive full-year results. Many believe that the current retrenchment by large companies has led to growth in small businesses, the segment Vistaprint caters to.

Revenues for the quarter grew 22% over the year to $135.2 million. EPS of $0.43 was also significantly higher than the previous year’s $0.32. The market was looking for revenues of $128 million with EPS of $0.39. Vistaprint added 1.4 million customers with average daily volumes rising 33% over the year and advertising spending having risen 18% to $24.7 million. This was their 28th consecutive quarter of organic growth – a feat not many companies can boast of, especially in the current economic climate.

For the full year, they reported revenues of $515.8 million with EPS at $1.68. A year ago, they earned revenues of $400.7 million with EPS of $1.18. The company ended the year with nearly 8 million unique customers, which was a 29% increase over the year. Average bookings per customer grew from $61 a year ago to $63, and the volume of business expanded 34% to 15 million orders.

They entered into a tie-up with FedEx, through which they have developed a new application for designing, ordering and printing business stationery and marketing materials. Customers can now design and order their products through FedEx offices or FedEx’s website. Vistaprint has entered into similar arrangements with Intuit and Office Depot.

Vistaprint has managed to leverage their scalable infrastructure to launch new products, such as self-inking stamps and personalized bank checks. While business cards remain their key product and contribute 40% of revenues, they are looking at diversifying to other products. For instance, to attract their home users, they are printing personalized tote bags, key chains and similar products.

For small businesses, they recently introduced email marketing as part of their SaaS offering. It is an extension of their electronic marketing services offering which aims to make creating, sending, and tracking the results of a campaign easy for a small business owner. Customers can use the online design tools, embed personalized graphics and logos, create email campaigns and track the campaign’s success.

Geographical diversification is also high on the company’s agenda. In the current year, nearly 60% of their revenues came from the US. They plan to expand into Asia Pacific through their new manufacturing and marketing facility in Australia, which is expected to be fully operational by fiscal 2011. They are also expanding their French, Italian and Dutch product lines and are investing in German-language service capabilities to gain further traction in the European market.

With patented technology and an efficient back-end infrastructure, Vistaprint has gained significant competitive and price advantage over peers. Their experiments with Internet search engines, email campaigns, and traditional catalogs ensure a sustainable low cost customer acquisition model. Analysts estimate their market to be worth $16 billion, and Vistaprint is surely well poised to address this opportunity.

They are projecting revenues of $135 million to $140 million with EPS of $0.32 to $0.35. For the year, they expect revenues of $605 million to $635 million with EPS of $1.83 to $1.95. The outlook met the market’s expected annual EPS of $1.94 on a revenue base of $598 million. However, for Q1, the market was projecting EPS of $0.40.

The stock is trading at $41.27 with a market capitalization of $1.8 billion, and is touching record-high levels. I recently interviewed the company’s CEO, Robert Keane. You can read it here.

Over the long run, I see Vistaprint becoming a significant acquirer of other small business marketing solutions including CRM, email marketing, etc. A partnership with Zoho would also make a lot of sense.

Not all online companies are showing similar growth. With industries around the world delaying recruitment decisions and freezing hiring, the leading online recruiter, Monster Inc (NYSE:MWW), has been bleeding. While the market has begun to show modest signs of recovery, it will take time before recruitment picks up to previous levels and Monster is able to make a complete turnaround.

Q2 revenues of $223 million fell 37% over the year and were marginally short of the market’s expected $224 million. EPS of $0.03 fell significantly over last year’s $0.40 but managed to exceed the market’s expected $0.01. However, Monster suffered an operating loss of $0.01 per share.

Careers revenues fell 40% to $191 million with North America contributing $102 million and registering a 38% decline. International revenues of $89 million fell 43% over the year. Internet Advertising & Fees generated flat revenues of $33 million.

Monster is continuing to invest in product innovation. They recently conducted beta tests on a new employer search product which analyzes, ranks and compares the available information on candidates with reference to their relevant skills, work experience, and qualifications.

Their product range has helped them increase their lead over competitors. With products such as recruitment media products, improved job postings, video, and talent management suite beyond standard job postings they have got bigger business with Microsoft and with Burns & Wilcox, North America’s largest independently owned insurance wholesaler.

Monster’s tie-up with NWS in Australia has helped them become the fastest-growing online recruitment site in that country. Additionally, they are expanding their reach in other regions with particular focus on India, China and the Middle East.

Monster has also expanded their recruitment media offerings through the Career Network, which is an online media network aimed at broadening their capability and reach. The network was ranked in the top 25 advertising networks globally in June with 75 million monthly unique visitors and it has helped grow customer adoption beyond the US to key European markets.

Even though growth rates in the US are stabilizing and the slowdown in Europe has decelerated, Monster expect Q3 revenues to register a sequential fall by low single digits. EBITDA is expected to be slightly below the $35 million reported in the current quarter. It will take some time before Monster can really come back, but with a strong business model, it is a company worth watching.

The stock is currently trading at $15.74 with a market capitalization just shy of $2 billion.

Predictably, the real estate sector isn’t performing well, either. Move (NASDAQ:MOVE) the owner of Realtor.com, the largest online real estate portal in the US, recently announced Q2 results in which revenues fell 11% to $55 million. However, the company managed to expand their margins and reported 24% growth in EBITDA.

During the quarter, they focused on the process of consolidating and integrating Top Producer and Realtor.com sales forces and events teams to expand their reach. They are leveraging their events team to incorporate their Top Producer offering into road shows to deliver a more consultative sales approach.

The company is working on improving their product and continued to release significant fixes and enhancements. For instance, during the quarter they made it simpler for users to get listings of open houses in the area, added the capability to expand a search area from one city or one zip code to surrounding areas and redesigned the featured homes carousel to allow real estate professionals to make their listings more appealing.

They are placing a high priority on improving their website by focusing on search and content. Through better search and stronger agent relationships, Move is developing features that enable consumers to understand home values in detail in relationship to other properties in the town.

Move is far ahead of competitors in all aspects. They averaged 10.8 million unique users per month in the quarter, which is 50% more than their nearest competitor. With 247 million minutes of user engagement per month, they boast of 40% more traffic than the combined traffic of all their major competitors. With more than 300 million page views per month this quarter, they are about six times ahead of any other competitor in their space. Market share is 6.85% among the top 20 real estate web sites, according to Hitwise.

Of course, the real estate market will eventually recover and once it does, a company like Move which is already increasing profits will emerge a stronger player. I hope that Yahoo!, NewsCorp and IAC are paying attention.

The stock is trading at $2.84 with a market capitalization of $440 million.

The other online realtor, ZipRealty (ZIPR), manage to post marginal growth in revenues, reinforcing my belief in their good business model. Q2 revenues of $32.1 million were higher than the previous year’s $30.4 million. But, the loss for the quarter widened from $0.08 to $0.12 per share.

During the quarter ZipRealty saw significant growth in transaction volume and a marginal sequential increase in average revenue per closed transaction. The total value of real estate transactions closed grew to $1.38 billion versus $1.32 billion a year ago. The total number of transactions closed was 6,017, compared to 4,681 last year.

The company is continuing to invest in website improvements, growing their agent force, and gaining market share locally. They see opportunities to improve and leverage their relationships with consumers and local agents. They recently announced a new marketing alliance with Bank of America Home Loans that will enable ZipRealty users to access current mortgage rates and financial calculators while shopping online. By September, the users will be able to research the available types of loans and choose the ones that best fit their needs and even get pre-approved loans or apply for a mortgage online.

For the year, they expect revenues to grow the mid-single to low double digits over 2008 levels, with GAAP net loss projected to be narrower than the 2008 net loss of $14.7 million, excluding legal settlement.

The stock is trading at $3.38 with a market capitalization of nearly $70 million. Once the market recovers, ZipRealty, having expanded their market share, should, like Move, make a comeback. It will just take a while before that happens.