Jeffrey L. Schwartz, the CEO of Traffix (NASDAQ:TRFX), said last week, "Our mission is to provide valuable content to our users, building premier media communities." Sounds like something a dot-commer might have said back in the 1990s, right?
In fairness, the business is twofold. Traffix develops tools and services to help companies advertise on the Web. It also has its own content sites, such as online dating.
Yes, it's cool once again to be a dot-commer. But it's not just the biggies like Google (NASDAQ:GOOG) and Yahoo! (NASDAQ:YHOO) that are doing well. In fact, much smaller companies like Traffix are getting a piece of the action. In the second quarter, Traffix reported an 82% increase in revenues to $16.6 million. During this time, EBITDA (earnings before interest, taxes, depreciation, and amortization) increased 175% to $1.8 million.
But the growth did not come solely from internal operations. Over the past year, Traffix purchased Send Traffic and Hot Rocket. Such acquisitions accounted for more than half the growth of the second quarter's revenues.
Send Traffic helps companies develop online marketing plans - things like strategies for increasing click traffic, using effective bidding management, ROI tracking, and online media buying. Hot Rocket is effectively an online marketing agency. It helps buy and sell online media for advertisers and content sites. It also offers various consulting services, such as creative development, email list management, and marketing strategies.
With its extensive online marketing expertise, Traffix has also assembled a variety of online community content sites. By far, the most popular site is iMatchup.com, an online dating service.
Interestingly enough, Traffix does not have its roots as an online start-up. When it started in 1993, the company was a traditional direct-marketing firm; it did not initiate an online strategy until the end of 2000.
Acquisitions have been key to the growth of Traffix. With $30 million in the bank, expect more deals from the company to keep the growth moving forward. However, with the interactive marketing industry heating up, Traffix will likely be forced to pay high multiples for these acquisitions, making it harder for the firm to generate growth solely by purchasing other companies.
On the conference call, the CEO said Traffix has an infrastructure that can scale quite nicely. That's true, but the very factors that stand to make Traffix's business successful also apply to a host of other upstart online marketing firms. In a competetive market like this one, that usually means lower returns.
Click through to more online-advertising Foolishness:
At the time of publication, Fool contributor Tom Taulli held no financial position in any company mentioned in this article.
