New York City-based Promotions.com, once the poster child for the migration to online promotions, was acquired last week by women’s portal iVillage.com.
New York City-based iVillage acquired the 25-person operation, which includes sweepstakes operator Webstakes.com, for $3.5 million in stock. To sweeten the deal for Promotions.com shareholders–who saw the value of their investment plummet during last year’s dot-com collapse–iVillage kicked in $9.8 million in cash from Promotion.com’s own reserves, which made the deal worth about 87 cents per share.
The women’s portal will begin using the agency–which dropped the “.com” from its name last fall–to offer advertisers promotional programs in the second quarter. Co-founders Steven Krein and Dan Feldman will remain with the operation.
The shop will move into its new parent’s digs and work primarily, but not exclusively, for iVillage clients, says iVillage ceo Doug McCormick. “I can’t imagine they’ll work for Oxygen,” he says. “But they’ll be building new business.” Promotions.com recently re-signed contracts with clients Kraft Foods, NBC, and CitiGroup.
The quick rise and faster fall of Promotions.com is a microcosm for what happened to many Internet-based companies in the last two years: The shop’s revenues jumped to $26.6 million, its payroll to nearly 200 people, and its stock price to $22 per share in 2000 as the call for Internet-based promotions resounded throughout the industry. Those fortunes turned in fall 2000 as Wall Street abruptly began demanding a return on its Internet investments and marketers began to be more selective with their online programs. Revenues sank to about $11 million in 2001 as the stock price fell below $1 and several rounds of layoffs reduced the staff to about two dozen. Promotions.com should benefit greatly from iVillage’s resources, which include Women.com, Lamaze Publishing, and the Business Women’s Network. “We’re resetting their clock,” says McCormick. “Otherwise, it would have been hard for them to move forward.”
