The Facts
Let's get started. ValueClick (NASDAQ: VCLK) acquired BeFree in March 2002 for $128 million in an all stock deal, however, BeFree had about $110 million in the bank, and so ValueClick bought BeFree for next to nothing. Then, in 2003, ValueClick bought CJ for $58 million in cash and stock. ValueClick has combined these two affiliate networks into one network powerhouse. So, in aggregate, ValueClick paid around $60 million for their affiliate marketing business.

The Business Risks ValueClick has Regarding CJ
CJ has a number of business risks, but to me, two stand out and might keep Jim Zarley - CEO of ValueClick - and Tom Vadnais - President General Manager Commission Junction and Mediaplex - up at night.

First, eBay (NASDAQ: EBAY) has outgrown its partnership with CJ, and it is clearly time for eBay to become less dependant on CJ. eBay’s recent move to set up their own affiliate infrastructure unmistakably indicates eBay’s longer term plans to wean itself over time from CJ’s steep fees.

Second, industry watchers have privately wondered if the ValueClick leadership understands affiliate marketing. In fact, at times it does seem that CJ is the black sheep of the ValueClick family. Lets be honest, affiliate marketing is pretty unique and you either get this industry or you don’t – and many smart people don’t. The challenge for ValueClick is understanding and managing the myriad of consistencies and stakeholders CJ must satisfy in order to drive its affiliate business forward: affiliates, advertisers, staff and industry influencers all must be courted since affiliate marketing is first and foremost about relationships. The recent major miscalculation by CJ with the Link Management Initiative coupled with the recent mass exodus of staff from CJ – people are leaving in droves – demonstrates a problem. So, while CJ is a major profit center for ValueClick, these are pretty serious indicators that ValueClick does not understanding the core drivers of the affiliate marketing business. And no one feels comfortable running a business that they don't understand.

What Might be ValueClick's Play
For the sake of argument, let’s take those assumptions to be true and Zarley and Vadnais are thinking about selling CJ. The problem they have is what company to replace CJ with that would satisfy investors on Wall Street.

Now, as you might remember, back in May, ValueClick and aQuantive (NASDAQ: AQNT) had merger talks that fizzed out, but this demonstrates that the aQuantive model is very attractive to ValueClick -- just as a note, aQuantive is AvenueA/Razorfish (Agency), Atlas (ad serving technology), and DrivePM (ad network).

Now, let’s pull these ideas together. ValueClick basically paid about $60 million for its affiliate marketing business. ValueClick’s affiliate marketing revenue last year was $78 million and for 2006, I would expect revenue to be about $100 million given their growth trajectory this year so far. Now let’s say that CJ is sold for 6x revenue which would be $600 million. That is a 10x profit for ValueClick from affiliate marketing in three years.

If ValueClick sells CJ, this would give Zarley and Vadnais the cash to buy agency and create another aQuantive type player in the space while getting ValueClick out of the affiliate biz. It would also give them more of an opportunity to scale their behavioral marketing technology into a massive network. And it seems ValueClick is more interested in a behavioral marketing play than running CJ. As for the value to advertisers that CJ currently provides for ValueClick, Zarley and Vadnais might think they could bolster two of their other properties, Hi Speed Media and WebClients, to replace it.

If this is the case, ValueClick then just needs to buy an agency with the revenue and margin close to CJ’s to keep the Wall Street happy. And if they make this move, it would help ValueClick avoid the looming problem of eBay deemphasizing their CJ partnership.

By selling CJ, ValueClick just solved a big problem and morphs the ValueClick business into one that the leadership understands better and is sexier than affiliate marketing.

Of course, this is speculation, so who knows if I’m on target at all. However, if CJ is for sale, the next question is who would buy it? Here are two ideas.

Who Might Buy CJ
Advertising.com, acquired by AOL in 2004, has been attempting to set up an affiliate network for years and has never managed to get traction for various reasons. If it buys CJ, then this gives them a huge footprint in the affiliate marketing space. Also, the CJ network should fit in nicely in properties that form Advertising.com.

As for my other thought, first let me emphasis, this is all speculation and I have no inside information from anyone, so what I’m about to say is just some thinking aloud. Experian Interactive is building an online lead gen powerhouse, and CJ, with it's strong anchor in lead gen, fits nicely in its portfolio of companies. And they get affiliate marketing, after all, LowerMyBills.com and ClassesUSA are just affiliates that set up a sale side and then grew into giants.

And I'm sure their would be many other suitors that would buy CJ too. It seems to me, ValueClick is at a crossroads when it comes to CJ; this will be interesting to watch.