Bankrate.com’s stock (RATE) has been clobbered by fears that the mortgage crisis will hurt its advertising revenue. So, what to do? Hold a conference call to reassure investors that everything is a-OK. Unfortunately, Bankrate’s conference call merely confirmed that investors should be worried–not only about Bankrate, but about online advertising in general.
Bankrate CEO Thomas R. Evans got on the phone with clients of RBC Capital Markets this morning and insisted that everything is fine: Sales are up, traffic is up, and advertiser demand is up. Mortgage heavyweight IndyMac is buying more ads. So is troubled mortgage heavyweight Countrywide. This very temporarily reassured some investors, since RATE shares briefly perked up, but they’ve since dropped back down. Perhaps that’s because:
- Even as Evans said business was good, he offered up signs that fundamentals are beginning to deteriorate, and,
- What’s happening NOW is not what investors are worried about–it’s what will happen over the next few months.
• conceded that some advertisers had indeed pulled back on spending (deteriorating trend).
• acknowledged that other advertisers were signing up for shorter-term campaigns, making it harder to project 2008 performance (deteriorating trend).
• said that the problems with the lead-generation industry were indeed affecting Bankrate, but wouldn’t disclose how much business that represented for the company (if it were immaterial, he’d have said so).
Evans sounded genuinely frustrated on the call — he spoke of fielding “15 to 20” calls about a rumour that mortgage firm Amerisave was pulling its ads from Bankrate (which he insists is not true). And his thesis may prove correct — that any pullback from mortgage advertisers will be balanced by an increase in other financial service advertising. But if he is actually to persuade anyone of this, he will have to provide some logic and facts to back it up.
After listening to the Bankrate conference call, our conviction is increasing that the mortgage mess is the canary in the coalmine for a cyclical bust in online advertising. Please see “Running the Numbers: How Bad Could Mortgage Crisis Be For Google, Yahoo, Bankrate, et al,” and “Will the Mortgage Crisis Hit Online Advertising? Sure Looks That Way.”