TechTarget Inc (TTGT) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TechTarget First and Second Quarter 2009 Conference Call and Webcast.

My name is Louisa and I'll be your coordinator for today.

At this time, all participants are in listen-only mode.

Following the introductory remarks by Greg Strakosch, TechTarget's CEO, Chairman, and Co-Founder, we will be facilitating a question-and-answer session for today's conference call.

(Operator Instructions)

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Rick Olin, Vice President and General Counsel.

Please proceed, sir.

Thank you, operator.

Before turning the call over to Greg, I want to briefly summarize the new earnings release process that we are using today and plan on using going forward.

As you saw, we issued our press release at 4 p.m.

today and, as we previously announced, in order to provide the usual update on the business ahead of this call and hopefully save you all some time and effort, we have posted on the Investor section of our website and furnished with our 8-K filing today management's prepared remarks.

These remarks are meant to function as the script otherwise would for this call.

On the call today, Greg will provide a brief summary of our financial results for the two most recently completed quarters, and then management will devote the rest of the call to answer your questions.

We have seen some other companies use variations of this format and given that it provides both an opportunity for all of you to read the prepared remarks prior to the call and a more meaningful interchange on any follow-up questions, we've decided to adopt this process.

We hope that you find it helpful and we look forward to your feedback on it.

Additionally, I would like to remind everyone that during the course of this conference call and the Q&A session, TechTarget will make certain statements that may be considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including particularly its guidance as to future financial results.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

These risks include; market acceptance of our products and services; relationship with customers, strategic partners, and our employees; difficulties in integrating acquired businesses; and changes in economic or regulatory conditions or other trends affecting the Internet, Internet advertising, and information technology industries.

For a description of these and other risks, the Company encourages you to read the section entitled Risk Factors in our Annual Report filed on Form 10-K as well as other filings we have made with the Securities and Exchange Commission.

In addition, the forward-looking statements speak only as of the date of this call, and the Company undertakes no obligation to update these forward-looking statements.

Following Greg's introductory remarks, in addition to Greg, the following members of our management team will be available to answer your questions; Don Hawk, President and Co-Founder, and Eric Sockol, Chief Financial Officer and Treasurer.

I will now turn the call over to Greg.

Thank you, Rick.

Welcome to the call.

With the filings of our Q1 and Q2 2009 10-Qs today, we are now current with all required SEC filings.

To reiterate, the restatement involved a change only in the timing of our recognizing revenue.

In regards to the restatement, our total revenue did not change for any specific customer contract and the aggregate revenue shifted between the annual periods reviewed with approximately 1%.

We are glad to have this issue behind us and look forward to focusing on running and growing the business.

We are pleased that during this downturn we've been able to maintain healthy profitability and cash flow, which demonstrates the strength of our business model.

In addition, we've been able to take advantage of the slowdown to improve our offering.

We've also used our financial strength to be an aggressive investor by launching new websites, expanding sales and marketing, and growing internationally.

We believe that we are gaining market share and that our competitive position has never been stronger.

While it's too early to say a recovery is underway, we are cautiously optimistic as the market seems to have stabilized.

We are encouraged that we experienced sequential growth in Q2 '09 versus Q1 '09.

For Q3 '09, we are expecting revenues between $21.7 million and $22.7 million and adjusted EBITDA between $4 million and $4.8 million.

I would like to now open up the call for questions.

Your first question comes from the line of Ross Sandler with RBC Capital Markets.

Please proceed.

Hey, guys.

Just a couple of questions.

First, I think in the prepared remarks you talked about large advertisers still growing about 40% year-over-year.

That's consistent with what we've seen recently.

Can you talk a little bit about what's going on with the smaller advertiser segment?

And then on the 3Q guidance, if I'm doing my math correct, I think the EBITDA margin at the mid-point is about 19.8%.

That's pretty much flat with what you've done in 2Q and in a typical 3Q, historically, you guys would have seen margins drop off.

So is that just kind of the environment getting a little bit betters, cost structure realigned, or is there something else that's going on here to get you to flat margins from 2Q to 3Q?

That's it.

Okay, this is Don.

I'll take the first of those questions.

So with regard to what's going on with the smaller advertisers, it's really what we've commented on previously.

In an economic downturn like the one that we're in here, those advertisers are kind of disproportionately impacted by that.

They tend to have more of their budgets already heading into this downturn tied up in online marketing programs, so as they look to cut the overall marketing budgets, there's less traditional marketing spend to cut there.

What we're seeing with the large advertisers is although their overall marketing budgets are absolutely declining at this point, there's enough traditional marketing vehicles that they're still making use of that they're able to cut those first and the online budgets are not impacted as significantly.

So on the smaller advertiser side of the ledger, those guys have more online marketing to begin with; overall marketing cuts are having a larger impact there.

As we previously commented on that front, we don't see that as being sustainable.

A lot of the advertising spend from these smaller advertisers tend to be focused on lead generation programs.

They're investing less in lead generation in this type of environment because the sales cycles are that much longer for them.

But those types of changes to the marketing expenditures tend to show up two or three quarters down the line, so they can afford, if you will, to cut those lead generation budgets in the short-term, but over the next two or three quarters, they're going to see less and less leads coming into the pipeline.

So for that reason, we don't see that as being a long-term trend and clearly, we see ourselves as being well positioned for when that advertising spend returns.

I'll let Eric comment on the margins question that you were asking there.

Hi, Ross, this is Eric.

Regarding the margin, there's a couple of factors there.

In the cost of sales, we used to have a print business and that print business had a much lower historical margin.

Our percentage of revenue related to online is significantly higher than it's been in the past and that margin on online is in the 70s.

And the other part, when you're speaking about EBITDA margin, is how we've been managing our operating costs.

As you know, we made some cost reductions back last December and we've also been very closely managing costs.

So when you combine those two factors, that allows us to run the business at a very healthy profitability margin of 20%.

Great.

Thanks, guys.

Your next question comes from the line of Jim Friedland with Cowen and Company.

Please proceed.

Thanks.

The first part is a follow-up to the last question on the strong growth in the top 12 advertisers.

If you keep carrying that trend forward, or just call it strong growth, doesn't necessarily need to be 40% and you look at the smaller companies, which have been declining, but it sounds like Q-over-Q it's stabilized, wouldn't we at a point in -- holding all things equal in 2010 where we should see the overall company grow?

And then as a follow-up on that, just looking -- since you guys have been through this before -- '01, '02 -- what are the best leading indicators of a signal that will say B-to-B tech spending is going to pick up again?

Is it an improving IPO market, or is there anything you can point to from your experience?

Thanks.

Yes, so in terms of 2010, obviously a lot had to do with the macroeconomy and what's going on.

But if things kind of stay in this current trajectory, yes, I think we're comfortable believing that growth will return at that point.

I think in terms of the leading indicators for us is going to be two things.

One is when the small guys starts spending again; I think that will be a good sign.

And then the second place where we've seen weakness, it's also been by market.

So the markets that have been strong have been things that are compliance related, just not very economically sensitive.

So that's things like email archiving and backup and disaster recovery and compliance and places that have very compelling ROI that makes sense in any economy.

So, that's things like server virtualization, data center consolidation, power conservation -- those types of technologies.

But there's also other markets that have been very slow, which we consider discretionary markets, which are things like enterprise applications or the network, where what you have is good enough today and you put off that spend.

So I think when we start seeing those markets that have been soft, we see spending start to return there.

I think that would be another positive indicator for us.

I think those two things will be what we'll be looking at.

And secondly, when you look at the --.

You guys have really done a good job on controlling costs and bringing them down in the tough environment, but you're also growing your international websites and you're launching new websites here in the states.

When growth returns, particularly on the COGS line or on the product development line, will some of that spend come back and how might --?

Basically what I'm asking are have you squeezed those costs out permanently, you're going to get a lot of leverage?

Or, when growth returns you'll get leverage, but at the same time you'll also look to reinvest a little bit more?

In terms of --.

We've gone out --.

A lot of the costs that we took out were really related around print and smaller event schedule.

So all the investments we are making now are around online, that carry the very high margins.

So, I think it's safe to assume that we'll continue to have very high incremental margins on new revenue.

Okay, great.

Thank you.

Your next question comes from the line of Mark May with Needham.

Please proceed.

Thank you.

Good to talk to you guys again.

[Same here].

A couple of questions.

First one on -- it looks like if I'm looking at the relationship in Q2 between EBITDA and the changing in cash, because you didn't provide a cash flow statement, it looks like there must have been something kind of non-operational that had a meaningful benefit in positive cash in the second quarter.

I wonder if you could help bridge the gap there, because your cash balance went up quite a bit from Q1 to Q2?

And then kind of going back a little bit to just to the past in terms of revenue change.

A lot of companies in the media category saw the drop-off in Q3 and Q4.

You guys really saw it in Q1.

I'm just wondering if you could reflect a little bit on what was the cause of that meaningful pull-back in spend starting in the first quarter?

And then, what were the areas of strength that you saw in Q2 as business picked up, or is what we're seeing from Q1 to Q2 a little more seasonality than anything else?

First of all, Mark -- this is Eric.

As far as our net cash -- and just so we're clear on this, we're defining net cash; we're including cash, short-term investments, and long-term investments.

So you looked all three of those together when you made your comment?

Yes.

I think I'm showing that your net cash balance went up by like $5 million --.

Right, right.

-- from Q1 to Q2, and that's about twice the sequential growth that you typically see and it seems even greater than what your EBITDA went up.

So, I'm just --.

Yes.

Our net cash, and if you take out bank debt, too, went up about $7.6 million for the first six months, so you can see the business is generating healthy cash.

During the quarter -- during Q2, we were about to collect about $24 million in receivables.

We had a very good collection quarter, as well as we did generate EBITDA of about $3.8 million and we were able to get a refund from the federal and statement government, close to $1 million, so that might have been one of the swing factors.

But basically, the balance sheet has been functioning very well as far as on the working capital and the business is continuing to generate profit --.

Okay.

-- and that's what explains it.

Yes, that does explain it.

Okay.

Thanks.

And just maybe if you could provide a little more color detail around what exactly were driving the drop-off and why you guys didn't see the real impact like other folks did starting in Q3 and what was going on in Q1?

Is it primarily a function of the number of campaigns or did you see a drop-off in sales leads?

Just trying to get a sense of more detail on it.

Well -- this is Don speaking.

I actually think we did start to see that show up in Q3 and it was very much in evidence in Q4.

So for example, in our '08 restated results, you see that we got revenue dropping off from Q3 to Q4, both overall and online.

So that would be extremely unusual for us.

We're always showing sequential growth in -- at least in all the years that I can remember, we've shown sequential growth from Q3 to Q4, so we didn't see that last year.

So, that was really where things really hit.

And what we were seeing at that point in time was a lot of uncertainty in the market as - obviously, as you just pointed out, in every segment within the media landscape.

There's a lot of uncertainty about how bad things were going to get.

So we had a lot of situations in Q4 where we had verbal commitments heading into the quarter across every market segment in which we operate, and those verbals didn't turn into actual orders; people just sat on their cash.

That trend really continued into Q1.

In Q1, we were in a situation where we were going out and talking to people we would normally be doing business with and people's marketing budgets were very much on hold.

So I'd say the big change that we've seen from Q1 to Q2, I wouldn't say it's any particular market segment.

It's that there's a little less uncertainty in the market about exactly where the bottom might be and people are now much more open to having discussions about how marketing dollars could be spent later this year and, in particular, I think heading into 2010.

So, I wouldn't say there's any particular market segment that popped back for us in Q2 that wasn't there in Q1.

It was pretty much across-the-board.

I would say that heading into the latter half of the year, some of the stronger market segments that Greg eluded to -- the ones that had good spending rationales and the ones where they're kind of more recession-resistant, if you will, things like compliance -- those are areas where we're seeing a little bit more strength heading into the second half of the year in terms of actual dollars being spent.

Across all segments, I would say there's much more of a willingness to have discussions about crafting programs and kind of potential levels of spending.

So, does that help?

I think so.

You guys earlier were asked, what are some of the signs -- early signs that things are getting better?

I would think one thing that you guys could see is that on the supply side where you're starting to see more user activity, a pick-up in viewing of webcasts and reading of white papers and opening up of emails and things like that.

Is that an early indicator?

If so, what have been the trends on that side of the house?

Well, fortunately, the trends on that side have been extremely good.

A lot of that has to do with the issues we were eluding to in our prepared comments there where we spent a lot of time overhauling the ways in which we generate leads for our advertisers, how we message to our audience, how we generate new members.

So, we've actually done a lot of work during this downturn to really reinvent a lot of core business processes here, and the results from that have been outstanding.

So it skews that metric a little bit in terms of it being a leading indicator, because we're actually doing a lot to drive success with regard to some of the metrics that you're talking about there, based on some of the things that we've overhauled or reinvented, if you will, during this downturn period.

Okay.

Thanks.

Your next question comes from the line of Doug Anmuth with Barclays Capital.

Please proceed.

Thank you.

A few questions, guys.

First one, if you could comment on the drivers of gross margin expansion just beyond the mix shift in the business, which we obviously get toward the online segment, but it looks like online was up about 300 basis points year-over-year.

So if you could comment on that, and then I have a few follow-ups as well.

Thanks.

Doug, this is Eric.

If you look at the cost of revenues online, there are some costs that are directly related to the delivery of the product, but most of those costs are labor-related that are re-classed up there; meaning, related to the creation of content, editorial, etc.

And when we -- in December, we were right-sizing that with the business and we've been very closely managing those costs.

So most of those cost savings as -- in a higher margin online is labor-related, as well as some better jobs done on some contracts related to the delivery of the online product, too.

So is it reasonable to think that that -- sort of this newer level of gross margins can continue going forward as the revenues come back as well?

Yes.

We've been pretty steady in the mid to high 70s, or mid 70s, depending on the volume in revenue because there's a big tipping point there, too.

Most of the costs are labor, so most of the costs are kind of fixed in nature.

So if we were to generate more online revenue on that cost structure, you will see a higher margin.

Right.

But as far as them being in the 70s, that's pretty consistent.

Okay.

And then in your 3Q guidance, can you give us a breakdown in terms of what's implied between online and event?

And specifically, do you think online can grow in the third quarter?

Well, I think we're targeting event to [NAT] guidance at about $4.5 million.

So the rest would be online, which is basically flat with Q2.

Flat on a Q to Q --.

On online, on a sequential basis, yes.

And historically, Q3 online tends to be a little bit lower than Q2 online.

Okay.

That didn't play out in last year's restated numbers, but last year was somewhat of an anomaly if you go back over the history of the revenue stream and you look at that.

And I think some of that last year it may have had to do with the impact of the acquisition that we had done.

Right, okay.

We're hoping 3Q is just an anomaly for a lot of companies last year.

Going back to the cash levels, $76 million, can you talk a little bit more about uses going forward and what level you're sort of -- the minimum level that you're comfortable with operating with going forward?

Well, I don't think there's a specific amount we have in mind as a minimum amount.

In terms of uses, I think we're looking to do acquisitions that make sense.

It's a very challenging acquisition environment right now because there's a big disconnect with public and private valuations, so that's just a fact of today's market.

But I think we want to have a healthy cash balance so we can continue to invest aggressively and be opportunistic when it comes to acquisitions.

Okay.

All right, that's great.

Thanks, guys.

Your next question comes from the line of Colin Sebastian with Lazard.

Please proceed.

Thanks very much.

I guess first of all, I'm curious how broadly at this point you've rolled out the behavioral targeting programs across your websites?

And then secondly, you called out in the prepared remarks the TechnologyGuide sites and I think those are more consumer-focused, so I'm curious if you B-to-C as a bigger opportunity now?

So on the behavioral targeting programs that we eluded to in the prepared comments, that has been rolled out across all sites in the network.

And saying that it's been rolled out does not say that there's not more upside, if you will, with regard to our use of (inaudibly).

We've had very good results thus far, and continue to take a look at how we're implementing that and what additional changes we can make, and that's keeping us very busy, if you will, and it will be throughout the rest of the year.

But again, great results so far and we see very good up-side with regard to our use of that.

With regard to the TechnologyGuide sites, we have been very pleased with progress we've made with that acquisition.

We're seeing good growth there and it's in the backdrop of a market that is not doing particularly well right now, with all of the traditional players in that space are really struggling and advertising spend in that segment is way down.

So the share that we're taking there really is market share.

We're taking dollars from more traditional venues and companies we'll be advertising in.

I wouldn't mistake that as a change in emphasis for the overall business.

You may recall that we entered into that acquisition thinking that TechnologyGuide was kind of a good bridge vehicle for us, if you will.

It was a good way for us to take down some sales demand that we had against the laptop segment in particular.

A lot of the devices that we have reviews on on those sites are purchased by enterprises, or at least by small to mid-size businesses, so it's really a good kind of crossover market for us that we continue to look and see what the potential revenue stream looks like in that area.

We may move more strongly into some consumer spaces with regard to our coverage within TechnologyGuide, but in terms of the overall business, we still think we have a lot of up-side with regard to enterprise IT specifically.

Okay.

And then just one follow-up on your comments regarding the increase in activity.

I just want to clarify, which segments are you seeing that in and who is becoming more active and in which forms, display or lead gen?

And related to that, are you seeing a corresponding increase in activity in your pipeline as well, or is that just the existing partners?

You're talking about sales activity, right?

Right.

So it is -- on the large advertiser side, it's really both.

Large advertisers tend to spend more on sponsorship-type vehicles that are more branding oriented where they buy those in combination with lead gen programs.

As you move down the food chain, if you will, in terms of spenders, the small to mid-size advertisers tend to spend more money, specifically on lead generation programs.

And we're seeing increased activity, obviously, from the largest advertisers and that's taking the form of the vehicles that they've traditionally used with us.

On the small to mid-size front, as those advertisers do come back to us, it tends to come in as lead generation business.

I don't know if I quite caught the second part of your question there, I think it had to do with pipeline versus existing advertisers?

Right.

Are you talking new advertisers --?

Are you seeing your pipeline start to build as well from new potential vendors in addition to the existing roster?

Yes, we're definitely seeing growth on both sides as we head into the second half of the year.

I think we've eluded to this in previous conversations and calls that we've done in that in this downturn what we're really seeing is not so much a customer retention issue, particularly with regard to our -- kind of the broadest base of our advertisers, this top 100.

Our renewal rates there continue to be very good.

It has more to do with the amount of time in-between campaigns and the amount of spending within individual campaigns.

So I think as things head into an upturn, whenever that's going to occur, what we're going to be seeing is the advertisers that have done business with us in the past increasing their level of spend and diminishing the amount of time in-between individual campaigns they run with us.

And then we're also going to see on the new customer side an increased ability to bring new advertisers into the fold.

So again, we don't want to overplay what we're seeing there.

We're cautiously optimistic.

I think we're seeing good signs on both sides of that equation, but it's certainly very early to be making any kind of final conclusions about that.

And sorry, that leads me to one last question then.

In terms of pricing then, are you -- is that still stable or has that been improving, or how would you characterize the pricing environment?

Yes.

The pricing environment, I would say, is relatively stable.

For sure, there is an increased demand from customers to see what kind of deals they can drive.

This is definitely a buyer's market, not just in the segment that we're in, but really in every segment in business right now, right?

So in our market, the customers are certainly coming to us wondering what we can do for them on a pricing standpoint, and a couple of things to say on that front.

Number one, we've always had that dynamic in play.

We've always been the premium-priced supplier in the market and it has to do with the level of targeting that we provide.

So that level of targeting that we provide, particularly on our lead generation programs, really gives us a good buffer, if you will, against any kind of downward pricing dynamics that might exist.

And the increased targeting capabilities and the increased activity-based capabilities that we talked about I think also give us good protections on the pricing front.

And we have some unique capabilities in the markets that we serve that our customers really have a hard time getting from other suppliers.

And we're really adding value with those capabilities, so we're able to reflect that in terms of our ability to maintain pricing levels.

Okay, good.

Thanks for taking my questions.

Your next question comes from the line of Sameet Sinha with JMP Securities.

Please proceed.

Yes, thank you.

So, on June 23rd you put out a press release saying that you expect about 20% sequential growth in the second quarter.

I think you ended up at close to -- maybe in the 17%, 18% range.

Did something happen in the last seven days that you kind of came slightly below that forecast?

Is visibility the thing that's still an issue?

I have a couple of follow-ups after that.

Sameet, this is Eric.

What had happened was we ended up closing Q1 -- you'll see that we filed our Q1 10-Q and our Q2 10-Q together.

So, we had kept the Q1 quarter open so long that -- in every quarter you typically have a reserve for revenue and that was held open so long that in essence that reserve evaporated.

So as you'll see, the revenue that was recorded in Q2 was a little bit higher than we anticipated and really, that was the reserve coming to fruition, if you will, in Q1 and that amount -- about $200,000 or so came out of Q2 and that's the difference between the 18% growth and the 20% growth.

So it was where we expected to be for the six months, but it's just switched between Q1 and Q2 a little bit.

And it's an unusual situation to be closing out Q1 in August, basically.

Okay, sure.

Okay?

On second thing, can you remind us about your cost structure?

I remember you used to give out a stat about what percentage of the operating cost structure is -- labor versus others.

Is that still -- does that still hold or has that changed?

Yes.

Our cost structure -- and we don't give out the exact amount, but generally speaking, our operating costs are around 75% labor-related.

There is a direct cost related to the Events business, in that as we floor events there are specific costs related to the individual event.

But our largest cost is definitely labor, and then some of the other larger costs are also fixed in nature such as rent, hosting, and some of the other relationships we have.

So, that is what causes the leverage in the business, and as we generate more revenue there's a high incremental EBITDA.

All right.

Now in terms of -- in response to an earlier question, you had mentioned that cost of goods specifically for online, the significant amount of labor there, which is fixed in nature.

How long do you think you'll be able to keep that labor pool of produced content producers fixed and after what level of revenues before you need to add there?

Well, typically when we add new websites we add new people, but it's important to realize that there's a lot of different sources of content that we get.

So, we have the people that are full-time on our payroll.

We have relationships with over 300 outside industry experts that contribute content.

We generate enormous amount of peer-to-peer content or user-generated content; that obviously doesn't cost us money.

The outside experts we don't typically have to pay them.

But then we also have -- we're the leading place for vendor contents.

We're number one in white papers, number one in webcasts, number one in podcasts.

And that vendor content, again, we don't have to pay for it.

So, one of the reasons we have such good operating leverage is because we have so many different sources of content that we can get at little or no cost.

Sure.

Now in terms of the competitive environment, and if you look at the last, let's say, 12 months, how has that changed?

You were one the premium supplier in the industries; you've been impacted.

How about the others out there, were they impacted much worse than you were?

If so, can you give us some more details on that?

Yes.

In terms of our competition, our competition tends to be companies that their legacy business is print advertising.

And so, those -- we have zero print advertising now and those -- the main competitors that we deal with still have a large portion of their revenue is print advertising, which we don't have.

So, those companies have suffered very much in this downturn.

So we've seen multiple rounds of layoffs, across-the-board pay cuts, so it's definitely been a very challenging environment for our competition and all print publishers in general.

You can see what's happening to the newspapers and the magazine publishers.

The print publishers in our market aren't immune to those market forces.

Okay.

Fair enough.

Thank you.

Your next question comes from the line of Sandeep Aggarwal with Collins Stewart.

Please proceed.

Thanks for taking my questions -- a couple of them.

My first question has to do with the pricing.

What other trends in [effective] CPM/RPL -- I know you addressed part of this question earlier, but what are the trends in effective CPM/RPL quarter-over-quarter and where do you see the higher improvement out of these two formats?

I want to make sure I caught the question there.

So was it what trends are we seeing in, was it --?

In the CPM, as well as well as revenue per lead?

Got it.

Again, we've seen pretty much a stable environment for our pricing.

And we do pricing on a market-by-market basis, so there's no some kind of overall operational metric that I can roll that up to for you.

But, we have a pretty good feel for it as we put together proposals for customers and we've seen pretty good stability on that front.

And, what percentage of your revenue comes from lead versus banner -- brand-oriented, (inaudible) or any other format and how does that compare on a year-over-year basis?

We don't break those out specifically and one of the reasons we don't break them out is that we have a lot of programs that cross over those borders.

If I had to characterize it for you high level, we do more lead generation business than we do branding business, and we haven't seen the mix between those two broad categories change much on a year-over-year basis.

Okay.

And Greg, in terms of -- we are hearing from one or two other companies that they are seeing some shift in terms of advertisers moving from lead generation to display advertising.

And since you have a high lead generation exposure, are you seeing some of those kind of trends?

We're not.

We're seeing customers are very -- most of our customers do both.

And so, we really haven't seen the mix change much.

Most of our programs, though, are combination programs and they're integrated where the customer has a specific brand initiative tied with a lead generation goal, and that's what we're really good at is doing integrated programs that meet all of our customers' marketing objectives.

And Eric, one question on guidance.

What percentage -- what type of revenue are you assuming in your Q3 guidance from the sites which have been launched in 2009?

We don't break that out specifically.

But generally, the sites we launched we already have a good head-start on those because they're typically spin-outs of existing sites where there's already content and there's some revenue, so those come up -- those contribute fairly quickly, but there is a gradual growth of those over several quarters.

And just if I may ask this last question on that.

I don't know if you are willing to sign up on anything on a long-term basis in terms of what could be your -- what percentage of your revenue can come internationally 2009 or maybe two years from now?

It's hard to say that.

International is a huge opportunity.

Over half the IT market is outside of the US, so it's a very big opportunity.

Right now, it's a very small revenue stream for us, but it's growing very quickly.

I think over the next few years it can become a very meaningful and material part of our overall revenue stream.

Thank you very much.

Your next question is a follow-up coming from the line of Mark May with Needham.

Please proceed.

Thanks.

Believe it or not, there's actually a follow-up.

Seasonality is the question.

Could you help us remember the typical seasonality that you see in the fourth quarter, both around your Events business -- the events that you have planned, and typically what online ad campaign activity looks like in Q4 versus the other quarters of the year?

Yes.

On the online side we would see a sequential increase from Q3 on the online advertising side in a normal environment.

And on the events side, it's -- I don't know if there's a real normal there.

Late Q3 and early Q4 tend to be good times for us for events.

And I don't have our event numbers right here in front of me as I speak to you, but I believe in previous years you've got to throw out 2008 because it was really the second half of 2008 on the events side where we saw a precipitous -- we started to see a precipitous decline with regard to event revenue.

But if you go back to years beyond that, I think you might see a slight increase from Q3 to Q4 on the events side, but relatively close.

Okay.

But you picked up a company in the last 12 months that does an event, I think, in Q3, right?

I don't know how meaningful that is, but --.

Yes, it wouldn't be that meaningful with regard to the overall event revenue stream.

Okay.

At this time, we have no further questions.

I would like to turn the call back over to Mr.

Greg Strakosch for any closing remarks.

Sir?

Yes.

Well, I'd just like to thank everyone for joining today's call, and we look forward to speaking to you at the next call a quarter from now.

Good night.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Have a good day.