Media pros say that young people between the ages of 10 and 24 represent a lucrative market. Alloy
In the first quarter, the company's sales increased 4% to $44.8 million. Its net loss was $1.2 million, or $0.10 per share -- a big improvement from the net loss of $16.3 million, or $1.52 per share, in the year-ago period. Excluding expense for stock options, Alloy would have had a net loss of $700,000, or $0.06 per share, in the first quarter. Free cash flow for the first quarter was $400,000, a 58% improvement from last year.
Two of Alloy's three divisions are dragging down the overall performance of the firm. The worst performer is Promotion, which saw a 12% decline in revenues to $17.3 million. The division has clients like Qwest
Alloy's Placement division experienced a 1% drop in revenues, to $14.5 million. Here, Alloy helps Fortune 500 companies target young people by advertising in newspapers for colleges, high schools, and military bases.
The growth engine for Alloy as a whole is the Media division, which had a 44% increase in revenues to $13.1 million. The Media division includes magazines, books, television series, and even motion pictures. Other segments include direct mail and email; web sites (such as www.privatecolleges.com, www.acuinfo.com, and www.careersandcolleges.com); and college and scholarship databases.
But even the Media division has its problems. Alloy has a footprint in media outlets that students are trending away from: magazines, books, and even television. Instead, the younger generation is moving onto the Net, where social phenomena such as News Corp.'s
To remedy this lack, Alloy recently purchased Sconex, a social networking site. However, this site is still fairly small, and it lacks any significant brand recognition. I find it hugely ironic that Alloy, with its huge clients paying the firm big bucks for its advice, missed the boat completely on the beginning of the social-networking phenomenon.
Alloy's working in an undeniably attractive market. It's estimated that roughly 35% of the U.S. population is under 24, and the annual income of those aged eight to 21 is an estimated $233 billion. Savvy companies like MySpace.com seem to understand how to monetize that market, but it appears that Alloy is still trying to figure it out.
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Fool contributor Tom Taulli does not own shares mentioned in this article.