Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Mark Mahaney – Citi.
Mark Mahaney - Citi
Could you give us some detail on the gross margin trends? Typically gross margins have been rising year-over-year consistently for WebMD. They didn’t do that in the December quarter. Is there a comp issue there? How should we think about gross margin trends going forward? If I could also follow-up, how do we think of the linearity of advertising revenue through 2009? What would be the reason why advertising revenue growth could accelerate as we go through the year? The comps seem pretty neutral or even throughout 2008.
Mark Funston
As it relates to your question on the margins, our fourth quarter guidance did anticipate we would be impacted by the effect of lower advertising revenues in our Little Blue Book Publishing business as well as the shift in revenue mix in our private portal lower margin coaching revenue. However, if you do look at our incremental margin sequentially from Q3 to Q4 we did see incremental margins of 60% from Q3 to Q4. As far as the margin expansion in our 2009 guidance it does reflect approximately 50-150 basis points of expansion in 2009.
Operator
The next question comes from Mark May – Needham & Company.
Mark May – Needham & Company
I was also hoping to break the rule and ask two questions. The first one on visibility in your ad and sponsorship revenue, maybe if you could generally give us an idea of how much of your projected ad inventory do you have contractually sold kind of one month out, three months out and six months out? Then I have one follow-up please.
Wayne Gattinella
I think as you know our visibility to the following sequential quarter is pretty good. The following quarter we think is pretty reasonable. Of course the quarters beyond that we still have room to go from a sales standpoint. As we commented, starting in the third quarter we started to see our clients return to longer term contracting as we had seen in prior years as they began to make advanced commitments for 2009 back in the September quarter which certainly bodes well in the long-term as we are building the pipeline and ultimately the backlog of longer term strategic sponsorship.
From an ad inventory standpoint we really try to stay at least one year ahead of market needs. So just from a page view inventory point of view our goal is to try to always stay at least one year ahead of where we believe business needs to be so we aren’t bouncing up against the ceiling if you will.
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