Digital River to begin acting more like a marketing agency? See article below from CBS Marketwatch:

Digital River rises Also, will Shanda swallow all of Sina?
SAN FRANCISCO (MarketWatch) -- Digital River's recent foray into the rapidly growing paid-search business may be a competitive long shot for this e-commerce fulfillment firm. In the meantime, the company is enjoying the healthy demand for tax and antivirus software.

Digital River, which fulfills orders for software firms and retailers on the Web, raised its outlook in the first quarter. Its shares rose 15 percent to $34.53 in early afternoon trading Thursday.

The company said it now sees earnings of 33 cents a share, up from 30 cents, and sales of $53.5 million, up from $48.5 million.

"The quarter was driven by continued strength in both antivirus sales and OK sales out of H&R Block," said Steve Jue, an analyst at RBC Capital Markets.

Digital River handles the fulfillment for online orders H&R Block receives on its Web site for tax software, as well as the fulfillment process for Symantec's Norton antivirus utilities. It currently competes with GSI Commerce and Amazon.com, to some extent, to handle hosting of retail sites and transaction fulfillment from Web orders.

Even though Digital River is well below the $40-plus range it traded at earlier this year, Thursday's stock pop may be partly driven by short covering. Marquis Investment Research indicated that 15 percent of Digital River's float was held in short interest.
In addition, the company faces certain risks.

Tax downloads are seasonally strong in the first quarter, and Microsoft is expected to enter the business of antivirus software later this year, according to Jue. This begs the question, what happens after first quarter?

Digital River hopes to tap into the fast-growing and in-demand services of Web analytics, or advertising tools. If Digital River already hosts the retail sites and fulfills the orders, Jue said, it would make sense to expand its services to include marketing and analysis of the customers.

To this end, Digital River will begin looking like a marketing agency, like Aquantive or ValueClick. But whether it can be both the deliver of goods and savvy marketer will be interesting to watch.

Posted by Reid

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