Shares of Marchex — the Seattle mobile advertising company — tumbled more than 40 percent in early-morning trading Thursday after the company announced that it is lowering its revenue outlook for call-driven advertising. The company said the reduction in revenue is coming as a result of “revised commitments” from Allstate, though Marchex noted that other customers such as Time Warner, T-Mobile and Dish Networks are adding new growth.
The stock was trading at $4.26 — down $3.25, or about 43 percent. That gives Marchex a market value of about $182 million.
The company wrote in a SEC filing:
While Marchex’s technology has allowed it to exceed customer set goals and metrics on a pay for call basis, leading to accelerated spending of their planned commitments for the year and indications of increases for the fourth quarter, Allstate has now indicated its desire to move to a fixed fee model going forward. Under this proposed model, Marchex’s economic upside would have been limited, while financial exposure to Marchex would have remained. Marchex does not believe it is in its best long-term interest to work under such an arrangement. Marchex will continue to work with Allstate as an integration partner utilizing its call analytics technology. Marchex expects this will be a relatively small financial contributor.
“This outcome is disappointing, as we believe that a performance-based model is the way most companies are progressing. This is the trend we are seeing with our customer base,” said Russell Horowitz, Chairman and CEO in a statement. “Beyond Allstate, we continue to experience growth in our customer base for call-driven advertising products and believe we are early in the customer adoption phase of mobile and call-driven advertising.”
For the year, Marchex now expects call driven revenue of $170 million to $172 million.