Online Advertising Brightens Outlook for Web Companies

July 31 -- Maybe the Internet advertising picture isn’t so bleak after all.

Funding among the once-lush Internet content companies has dried up, thanks to months of stock-market swooning and the recent failure of some high-profile online companies.

And the current earnings season has sparked worries that companies depending on Internet advertising could suffer earnings shortfalls that would drive another Net stock rout.

But big players such as Yahoo! and DoubleClick have posted rock-solid numbers, and even second-tier names such as About.com are spreading good cheer with their results. So perhaps the tide is turning for some of these beaten-down names.

Earning Their Ads

About.com’s CEO Scott Kurnit certainly thinks so. He told investors listening to its second-quarter earnings in late July that About.com expects to report an operating profit by the first quarter next year, thanks to greater revenue from increased advertising spending on the Internet portal site.

That means the company has cut its profitability forecast by a quarter. “Companies that don’t make money are not real businesses, and I’m really excited about becoming one at last,” said Kurnit.

In its most recent earnings report, About.com lost 33 cents a share in the quarter, excluding some noncash charges. That’s narrower than the 39-cent loss forecast quoted by First Call/Thomson Financial. About’s net loss narrowed to $18.9 million, or $1.06 a share. The bullish news helped the company’s stock jump 16 percent in one day.

“The numbers are very good,” says Jeffrey Fieler, a consumer Internet analyst at Bear Stearns in New York. “I believe that the business model to become cash flow positive will work.”

Seeking Targeted Audiences

About.com’s content-specific Web sites offer a wide selection of targeted audiences — an attractive prospect for advertisers, according to Bear Stearns’ Fieler.