The “Fab Five” still lead the direct marketing service supplier sector in the public markets, even as the category turned in a lackluster performance overall.
Those five companies – CMGI Inc., Marketing Services Group, MessageMedia Inc., BroadVision Inc. and DoubleClick Inc. – all recorded double-digit percentage increases in their stock prices for the fiscal year ended June 30.
Meanwhile, more than half of the service providers tracked by Gruppo, Levey & Co.’s DM Index experienced a decrease in share value during the same 12-month period. Overall, while the prices of the sector’s 34 issues were up 63.2% on average during the 12 months, the median price per share actually went down 0.5% in the period.
The distinction between haves and have-nots is most apparent in the average and median price increase (or decrease) in each of the four supplier segments – marketing services, interactive, telemarketing and printing.
In marketing services, while the average price per share jumped 174.6%, the median price rose only 6%. Interactive stocks’ average increase was 49.4%, a median of only 18.4%.
Both the telemarketing and printing segments showed a significantly smaller deviation in the difference between average change in price per share (-8.6% and -18%, respectively) and median change in price per share (-15.6% and -21.3%, respectively), reflecting the generally weak performance of almost all the stocks in the category.
In essence, the difference between the performance of the haves and the have-nots comes down to the Internet.
Each of the Fab Five companies conduct all or a significant percentage of their activities in the electronic space. And while the market has cooled slightly on companies that sell products over the Net, the supplier segment to the industry has heated up.
As such, a company like CMGI – which owns majority interests in more than a dozen firms that offer B-to-B customer profiling, targeted advertising and other specialized Internet marketing services – found significant favor, while Snyder Communications, with its plethora of marketing services businesses that offer superior quality but in an off-line environment, dropped 27.2% in price in the 12-month period.
But as market watchers know, the Street runs in cycles. So while the advent of Web marketing has significantly changed the direct industry and Wall Street’s view of marketing services, the downturn for traditional DM services companies may actually represent a buying opportunity.
This is particularly so for the astute observer who can discern which suppliers are adapting their businesses to capitalize on at least a portion of the growth in Internet services.
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