It’s hard to get reliable insights into the inner workings of networks so I was interested to see TradeDoubler’s recent presentation of financial results. While trying to put a positive spin on things, the quote that sticks in the mind is, “The comparison with the first quarter last year is especially bleak.” In examining the figures, that seems a little too pessimistic, but who am I to argue with their own CFO? The fact is that TradeDoubler has lower revenues, higher costs and dramatically reduced earnings (EBIT).

The CFO, Erik Skansberg, explains that TradeDoubler, like so many networks, is suffering from a lower advertiser prepayments, higher accounts receivables and increased costs as they invest in new technology, reorganized internal systems and a strengthened salesforce.

TradeDoubler Chart 1


Net sales for 2012-Q1 were 640 million Kroner ($93 million approx.), down 1.8% from 2011, but the real problem is with cashflow. It changed from positive SEK37.4 million in 2011-Q1 to a negative SEK21.5 million in 2012-Q1. That’s the kind of cashflow swing that can make investors very nervous.

TradeDoulbler Chart 2

TradeDoubler Chart 3

TradeDoubler is clearly not in trouble. It’s still a great network – one of our favorites – but it is struggling to come up with a persuasive growth strategy that works in the middle of a recession. They have invested a lot into technology, and in fact that’s the division showing the greatest growth right now, but maybe what they should be doing is hunkering down? Nobody knows what’s going to happen to the Euro and what the impact of political developments might be on TradeDoubler’s business. In that kind of volatile business environment, one has to think that depleting the company’s cash reserves in search of unattainable growth may not be the wisest approach.

See the whole presentation here.