iVillage CFO Focuses on Ad Revenue

Scott Levine helped iVillage complete its IPO. Now it's his job to help the firm survive the industry shakeout.
Joseph RadiganJanuary 5, 2001

Scott Levine’s employer already survived the first half of the dot-com shakeout. Now it’s his job to steer his company through the shakeout’s second half.

On Wednesday, iVillage named Levine as its CFO. He joined the firm two years ago and had already been the interim CFO as well as its senior vice president of finance and chief accounting officer.

According to a company statement, he had been heavily involved in the firm’s initial public offering and secondary stock offering, both of which took place in 1999. But that was then, when the IPO market was sizzling, and this is now, and the market for new stock offerings is barely registering a pulse.

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Since the halcyon days of yesteryear, Levine has had to devote himself to more mundane tasks, such as integrating acquisitions, cutting costs, implementing a new accounting software system and reorganizing the company’s accounting department.

But according to Levine, it’s not so much that iVillage has changed. It’s more that the company is simply reacting to the turbulent environment it’s immersed in.

“As a core, our business model hasn’t changed all that drastically,” he says. “We added things around the edge, such as Ibaby,” an E- Commerce site. “But we have mostly stayed the course.”

The ill-fated venture into retail E-Commerce led the company back to its media roots.

“We’re an advertising company,” Levine says. “We’re going to survive on it, although we’re going to supplement it with other revenue streams.”

The focus on the company’s strengths is a healthy, albeit necessary change.

Kathleen Heaney, an analyst with BlueStone Capital Partners, a New York brokerage firm, says that Wall Street wants to see the Web survivors demonstrate that they not only have a viable business model but can succeed at it. To that end, the Web firms in the advertising space have to show not only that the top line is rising at a healthy pace, but that a growing proportion of the ad revenue is coming from Old Economy firms.

Industry wide, such a trend is emerging. According to AdRelevance, a subsidiary of Jupiter Media Metrix, the proportion of Web ad dollars coming from dot-coms peaked at 70 percent in the third quarter. In October and November, the figure slipped to 60 percent as traditional advertisers made up 40 percent of the Web market.

Levine says it’s difficult to make broad generalizations about the current state of Web advertising. What he noticed is that in early 2000, every Old Economy firm under the sun felt it had to be involved in E-Commerce and ramped up its Web advertising budget. That trend came to a screeching halt by the middle of the year. The Old Economy companies left on the Web are the ones that understand the market and will be willing to pay higher CPMs for the targeted audience served by sites like iVillage.

“Everyone is getting smarter,” Levine says. The problem is that education is an expensive commodity. The short run shakeout in the advertising market is hurting every media segment. Levine says, “I’ve talked to friends in television, and the same thing is happening to them.”

“Come the latter part of the year, things will clear up,” he says. “It’s definitely much fuzzier now than we’d like it to be.”

Levine expects iVillage to emerge with a positive cash flow by the end of the third quarter. Thanks to a huge write-off of the goodwill on its balance sheet, the company’s amortization costs have been slashed, and Levine believes a positive net income figure will be close on the heels of the positive cash flow.

As of Sept. 30, 2000, the most recent figures available, the firm had $67.1 million in cash on its balance sheet. It burned through $10.7 million in the third quarter, but Levine says with the cash flow picture improving, iVillage’s management believes it will not need to return to the capital markets.

Shortly after he was hired, Levine was also responsible for an overhaul of the company’s accounting department and the installation of a new software system.

Prior to joining the firm, he led iVillage’s auditors from Coopers & Lybrand. In that role, he had recommended that the company install the Dynamics accounting system from Great Plains Software. But after he joined the firm, he learned the accounting department had not fully implemented the package, which has since been renamed E-Enterprise.

“It was only being used as accounts payable,” he says. “Now we use for it budgeting, accounts receivable, and general ledger.” In all, there are 11 users of the system.