Tuesday, May 29, 2007

Visual Sciences's (formerly Web Side Story) Hidden Value

Web analytics company Omniture (OMTR) has severely outperformed competitor Visual Sciences (VSCN) (formally known as Web Side Story) over the past year, OMTR gaining over 150% since the IPO while VSCN lagged behind gaining less than 50%.VSCN recently broke out of a range on heavy volume after an impressive quarter, fading risks, and upbeat guidance.

VSCN has endured a rough year of aquisitions, management changes, legal expenses, reorganization of products, and finally the name change to Visual Sciences which they annonced during the 1Q07 conference call last month. However, with all of this behind their shoulders, impressive new product releases, multi-channel market expansion such as mobile, email, etc, broadening distribution channels, and international opportunitites is adding momentum to the company.
At current levels VSCN is trading around 19x 2007E EBITDA while OMTR is trading more than 47x '07 EV/EBITDA. As Visual Site, their high end offering gains momentum, issues with management changes are largely priced in and exaggerated, and a more aggressive marketing approach following their new products and re-branding, valuation is very attractive.
While the space remains competative, especially pricing pressure from Omniture, Visual Sciences has several emerging competative advantages in their new product roll out which should be cost saving, expand market share, and grow existing customers to other channels and to the V/S Platform 5.0.
All in all, companies continue to see huge benefits using web analytics tools to understand customer behavior across multiple channels improving marketing and advertisiting strategy, and the increasing amount of online media advertising dollars spent all bode well for continued growth in this space.

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