24/7 Confirms Sale Is a Possibility
Online marketing firm 24/7 Real Media last week confirmed earlier reports that it may be for sale.
In releasing financial results for first quarter 2007, the company said it has retained Lehman Brothers to help it in “assessing strategic alternatives.”
Rumors about a possible acquisition of 24/7 by advertising conglomerate WPP Group arose soon after Google announced its intention to buy ad delivery platform DoubleClick in April. It has also been suggested that Microsoft, an early suitor for DoubleClick, might be a bidder for 24/7.
“The acquisition of DoubleClick by Google has served as a catalyst for increased corporate development activity through the digital marketing sector,” 24/7 chairman and CEO David Moore said in a conference call to announce the financial results. He pointed also to the sale of online marketing agency Digitas to Publicis, the acquisition of search marketing firm Reprise Media by Interpublic Group in early April, and Yahoo!’s recent purchase of the 80% interest it did not already own in display-ad auction platform Right Media.
“We believe that our sector is now in a period of both consolidation and increased strategic partnerships, driven by the recognition by traditional media and advertising giants that digital marketing technologies and expertise are necessary strategic assets for any future business model,” Moore said.
The confirmation that 24/7 is considering being acquired solidified at least some of the online-advertising fallout that has arisen in the wake of the Google-DoubleClick announcement. Another persistent consolidation rumor — that Microsoft and Yahoo! are discussing a merger to compete more effectively with Google — persists despite any firm evidence to substantiate it.
Citing unnamed sources, the New York Post reported on May 1 that Microsoft was also interested in pursuing 24/7 Real Media with a buyout offer of $1 billion.
WPP has actively added to speculation that it would like to expand its digital marketing potential and specifically that 24/7 would be a good fit. Earlier this month, WPP CEO Sir Martin Sorrell told a Stanford University media symposium that the move to digital advertising will bring ad companies such as his into more direct competition with Google, Yahoo! and Microsoft, the big powers in online marketing. Even though WPP is Google’s single largest customer for search advertising, Sorrel said the possible acquisition of DoubleClick makes Google a “short-term friend and long-term foe.”
“We’ve noticed a number of our clients are anxious about [the Google-DoubleClick acquisition]”, Sorrel told an audience. “One or two publishers are already looking to realign and maybe do business with 24/7 Real Media.”
24/7 was quick to make marketing hay of the potential for defection by some of DoubleClick’s ad clients following a Google takeover. Within a few days of the mid-April announcement, 24/7 began running an online banner ad that said, “Google to acquire DoubleClick. Good for them. Good for you? Call us.”
For the first quarter of 2007, New York-based 24/7 said total revenue increased 34% to $57.6 million from $42.9 million in the same quarter last year. The company posted a net loss of $100,000 for the quarter, an improvement compared to its loss of $7.5 million in Q1 2006.
The company operates an ad-serving platform that lets marketers target and track ad delivery and a search marketing platform to automate, manage and optimize search advertising. It also runs a global network of affiliated Web sites.
Revenue in 24/7’s search solutions division grew 61% in the quarter, to $28.7 million from $17.8 million in first-quarter 2006. The media solutions division, which comprises the Web publisher network, saw revenue increase 13% to $20.6 million for the quarter, up from $18.2 a year ago. Ad-serving technology revenue increased to $8.3 million, a year-over-year increase of 21%.
