September 5, 2003

Four analysts and top management from thirty four sector firms examine the Telecommunications, Media & Technology (TWST) sectors in this 150-page Kaufman Bros., L.P. 6th Annual Communications, Media & Technology Conference.

TWST: I understand that you just reported your second quarter, which seems to have surprised Wall Street. Could you give us a quick overview of why that is?

Mr. Sordello: Basically, there were three factors that happened in the month of June that caused us to exceed our guidance and Wall Street's estimates. First was the level of traffic; traffic typically declines in the summer and it did drop, but our traffic declined less than we had anticipated.

So traffic held up better than we thought. Second, the percentage of queries that are monetized on Ask.com increased to 16% up from 14% last quarter. The phenomenon that happened in June that we hadn't really experienced before was the traffic that did fall off was the type of traffic that asks more reference-type questions, which makes sense because kids are out of school and people are on vacations. Those types of questions aren't asked in the same proportion, so we had a higher degree of monetizable queries.

TWST: Where do we go from here? What's the strategy now for the next year or two?

Mr. Sordello: Our strategy hasn't changed. There are two key levers to our business. One is growing traffic, which means increased page views and queries on our sites, and we've been growing that very nicely. We had another record quarter this past quarter, in terms of traffic growth. That's really a function of improvements on our site, which include improvements in the technology, in terms of relevance, and improvements in site experience that we've been making over the course of the last couple of years.

The traffic keys for us are to get our users to use us more often and expand the number of users. To build more traffic, we're continuing our efforts to improve the site, differentiate it with features and things of that nature. We're expanding the size of our index, which means we're going to be doubling the amount of the Web we reach. So we think that will have an impact on our relevance, which has an impact on traffic.

And we're going to start to market our property to a higher degree. We've done very little marketing over the last couple of years. There were a couple of reasons for this. One, we were driving first to profitability and we were really managing expenses. But the more important reason is that our site wasn't ready to market, and the last thing we wanted to do was drive traffic to it when the traffic wouldn't stick.

And now we're in a position where the site is ready and it's improving, so we're going to start to market again, more so in the back half of this year. That's our strategy from the traffic perspective. The other side of the equation is monetization. We've done a lot of tuning on our site, in order to maximize user satisfaction and to optimize the yield of our advertising products as well as our third party paid listings.

You can see the improvement in our results, in terms of the query percentage we monetize, which has doubled this past year. Our revenue per thousand page views is how we measure monetization, and it has increased from about $8 to about $11.50. So we're going to continue to optimize how we monetize queries through improvements in technology. Additionally, this market we're in is still in the early days and the advertiser base is growing pretty rapidly.

Source: TWST.com

        

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