aQuantive (Nasdaq: AQNT) is what you might call a New Age advertising agency. Through an aggressive acquisitions strategy, the company now has a comprehensive suite of services, such as Web design, search advertising, search optimization, and media planning. aQuantive takes a hybrid approach, providing a combination of high-end consulting and sophisticated Web services technologies -- and it's getting results.
In the third quarter, aQuantive posted a 69% increase in revenues, to $78.8 million. Still, during this period, net income slipped from $24.1 million, or $0.34 per diluted share, to $9.4 million, or $0.13 per diluted share. This was mostly due to the company's reversal of a valuation allowance for deferred tax assets -- earnings would have come in at $3.5 million during the same period last year, excluding the tax benefit.
As for the fourth quarter, the company expects revenues to range from $78 million to $82 million, with net income of $0.11 to $0.14 per diluted share.
However, aQuantive is pumping its growth not only through acquisitions, but also by continuing to innovate with its products. For example, it recently introduced Atlas Version 2.0, which allows for the creation of rich-media advertisements. Atlas uses Macromedia's (Nasdaq: MACR) Flash technology and comes with a dedicated portal, as well as ad templates that conform to the requirements of major hubs like AOL, Microsoft MSN (Nasdaq: MSFT), and Yahoo! (Nasdaq: YHOO). Atlas also includes sophisticated analytical tools to give companies highly specific information about how users interact with their online ads.
aQuantive is fairly unique in its industry because of the breadth of its service offerings. To stay afloat during the dot-com bust, aQuantive underwent an "extreme makeover." It realized that digital media would be a big force, and that companies would need high-end consulting help and technologies. The company could have built these organically, but instead, it wanted to get to market faster. It was great timing, as the company was able to pick up assets and talent at good valuations and has had time to integrate everything. Now, it has a fairly unique platform of high-end consulting and technologies that companies want.
And if anything, the digital future is getting much more diverse, as seen with such innovations as podcasting and Apple's (Nasdaq: AAPL) iPod Video. The challenge is to effectively target consumers in these new categories -- and so far, this is something aQuantive understands.
Fool contributor Tom Taulli does not own shares mentioned in this article.
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