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Two analysts and top management from two sector firms examine the consumer sector in this special 19-page Management Consulting & Market Research issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info454.htm

TWST: This leads into Internet marketing. What are the advertising/marketing alternatives that they represent and which are the companies that may benefit from those alternatives?

Mr. Doft: Internet marketing has been much maligned of late. There has been a material slowdown of spending on online ads and the question of efficacy of online ads. But that talk is usually about banner ads, which are the ads that show up on the top of a Web page. That continues to be an area that struggles and evolves. A key part of that statement is that it is evolving and companies are testing new means of advertising on the Internet, and frankly testing different ways in which it impacts consumers. Initially, marketers were just measuring the click-through rate — how many times did someone click on an ad and shoot through to your Website, and that was the only value in it. But the fact is that there is a lot of value in just seeing the ads, just as there is a lot of value in flipping through a magazine and passing an ad in a magazine, or watching a TV commercial.

TWST: Or a billboard.

Mr. Doft: Or a billboard! There is brand recognition, there is recall of that brand, and that is what traditional advertising is all about. So the Internet advertising industry is investing a lot of money in research on what the other impacts of Internet advertising are, besides just driving a response to click through the ad. That’s important. Little by little, they’re making headway with advertisers. Unfortunately this isn’t the sort of environment where you’re going to get advertisers to spend a lot of dollars on testing a new medium like the Internet. The other area, which is the area that is becoming more and more interesting, is e-mail marketing. E-mail marketing is a targeting marketing medium, like direct mailing and telemarketing. It reaches an individual, it is measurable. Usually e-mail marketing is looking to specifically drive a response and sell a product or service, and thus the success of a campaign can be determined campaign by campaign. In an environment where people are concerned about opening mail, we think e-mail, as we mentioned earlier, can be a big beneficiary of a migration of dollars into that industry. We are getting the sense that companies are testing e-mail more and more. E-mail is a more efficient medium than direct mail, because there are no printing or postage costs. The delivery costs (while there are some) are a fraction of direct mail costs, and thus you can send out a lot more e-mails and get a lot smaller response and still have it be a profitable campaign. The biggest issue is that it lacks the reach of postal mail. The biggest beneficiary of that trend, in our minds, would be DoubleClick (Nasdaq:DCLK), which we have Add rated. DoubleClick is also one of the biggest players in other areas of Internet advertising. They have the biggest e-mail business in the industry, and that could be a big driver for them with continued growth in that area. They’ve also been consolidating some of the smaller e-mail players, so the competitive landscape is becoming a bit clearer for them, as some of their smaller competitors run out of funding and go away or, frankly, sell out to DoubleClick, which has a lot of cash in the coffers. DoubleClick is quite an interesting story although a bit contrarian. If you take the opportunity for their e-mail business, combine it with a lot of cost-cutting moves they are making and their strong balance sheet, then you have a company that is clearly the survivor in their industry. They are getting very close to profitability, which we think can come in the next couple of quarters. They are also buying up most of the material competition that is in their way that is still in business.

This special issue includes:

1) Outlook for Marketing & Advertising Services - In an in-depth (5,700 words) Analyst Interview, David B. Doft, Managing Director and Senior Analyst at ABN AMRO, examines the outlook for the sector and shares specific stock recommendations.

2) Management Consulting & Market Research Companies - In an in-depth (3,500 words) Analyst Interview, Alan K. Creech, Vice President, Consumer Information Technology at Emerging Growth Equities, Ltd., examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of two sector firms examine the outlook for their firm and the sector.