TechTarget Still Suffering From Tech Ad Weakness
By: Christiana Sciaudone & Jacob Cohen Donnelly
The tech ad slowdown continues to hit TechTarget.
The company reported sales up 2% to $58.5 million in the third quarter from a year earlier and a net loss of $1.7 million from a profit of $1.7 million in the third quarter of 2023.
“We’ve been in a two year suppressed technology cycle, and we see that it’s not a matter of if, it’s a matter of when that that will rebound,” Michael Cotoia, chief executive officer of TechTarget, said on an earnings call today.
TechTarget said its transaction with Informa is expected to close in the current quarter. Informa said in January it would buy the company and integrate Informa Tech’s digital businesses with TechTarget, whose shareholders are set to vote on the acquisition on November 26.
“We continue to execute on our long-term strategy to create a leading global B2B growth accelerator,” TechTarget said in a statement. “We remain confident that TechTarget’s offering uniquely meets a growing demand for data-driven marketing. Further enhanced and differentiated by the ongoing investments in our platform and our pending combination with Informa Tech’s Digital Businesses, we believe TechTarget will reinforce its position as a leading, comprehensive solution in a growing yet fragmented market, to drive continued performance and value for our shareholders, customers, partners, and employees.”
The near term is expected to continue looking soft, with enterprise technology companies’ marketing investments set to remain subdued as a result of macro factors such as higher interest rates and geopolitical tension. They should, however, continue to focus on and commit to R&D, particularly related to AI, resulting in new products being introduced to the market at some point.
“From what we can see today, we expect the broader tech B2B market landscape to show similar low to mid single digit growth in Q4 and through the early part of 2025,” the company said in a statement.
“We’re seeing a light at the end of the tunnel. For example, we’ve seen two interest rate cuts, that always bodes well for the future for the technology market. We saw a presidential election which we didn’t know how that was going to go or what was going to get contested, seems like it’s come and gone, and we’re moving forward on that,” Cotoia said.
Cotoia expects future growth to come from large enterprise and strategic accounts rather than smaller tech companies that may be facing greater challenges and have less access to capital.
“They may continue to be challenged a little bit, but we still see some opportunities because of the depth and breadth of our product offerings to be able to do a good job with those smaller accounts,” Cotoia said.
AMO’s Take
There are three numbers we look at for TechTarget that give some indication of its strength.
Demographics: TechTarget looks at its legacy global customers—the 10 historically largest on-premises hardware technology companies—and compares that revenue to the rest of its portfolio. Revenue from these ten customers shrunk by 7% in the quarter while the other customers saw revenue grow by 5%. No business wants to be overly reliant on a few customers, so seeing spend grow from other partners is a healthy sign.
Geography of Revenue: This assesses whether the marketing campaigns are targeted to the North American or International markets. As is expected, the North American market is the bulk of the revenue, accounting for 71%, up from 68% last year. International revenue, on the other hand, shrank from 31.9% to 29%. Should the U.S. economy continue to grow faster than the rest of the world, we expect to see the split get even starker.
Contract Length: TechTarget defined a long-term contract as one that is over 270 days. This metric matters because companies look for flexibility when the economy is uncertain; if we start to see more of TechTarget’s customers committing to long-term spend, it is a sign that things are starting to improve. As we can see, short-term contracts continue to incrementally grow.
