Compound

From Wall Street Journal today:


QuinStreet is being tagged as a deal that will at least draw out investors to kick the tires.

The company specializes in vertical marketing, which targets specific audiences, such as home buyers or college enrollees. It is paid for the potential customer leads it generates through Web site clicks, and it builds, buys or teams with Web sites that receive high rankings on search engines. Since mid-2006, it has acquired more than 100 third-party Web site publishing businesses, from ReliableRemodeler.com to Insure.com.

QuinStreet is aiming to raise as much as $190 million on the Nasdaq Stock Market under the listing QNST. Its top and bottom lines have been increasing for years, with the exception of a profit dip in 2008; in the six months ended Dec. 31, net revenue increased 27% to $155 million and net income rose 58% to $8.9 million.

One concern is the low barriers to entry in QuinStreet's business. Web engines like Google Inc. and Yahoo Inc. have their own advertising sales forces, and traditional advertising agencies don't have to stretch far to provide their own vertical Web marketing.

Recently, QuinStreet's largest customer, for-profit education company DeVry Inc., retained an ad agency and reduced its purchase of leads from QuinStreet.

"QuinStreet has an established business and may do well. The longer-term risk is how easy it is for ad agencies and others to do what they doing," said IPOdesktop.com President Francis Gaskins. "The problem they're having with DeVry may be the canary in the coal mine."