WPP Makes an Online Ad Bet
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Global communications conglomerate WPP is betting $649 million that acquiring digital marketing firm 24/7 Real Media can help it claim a slice of the growing global online advertising revenue pie. But that pie is an increasingly popular dish, and WPP isn't the only company looking to get its fingers in it.
WPP today announced it signed a definitive agreement to acquire 100 percent of 24/7 Real Media's shares through a cash tender offer of $11.75 for each share. That puts the transaction at approximately $649 million, according to a statement.
The offer price represents a 30 percent premium over the average closing price of 24/7 Real Media's shares for the last 60 trading days. The boards of directors at both companies voiced their unanimous approval.
During a conference call to announce the acquisition, WPP detailed 24/7's three core businesses: media, search and technology solutions. It reported that 24/7's "Web Alliance" totals 950 "quality" publishers with a reach of over 115 million unique visitors each month. WPP also said 24/7's platform is able to interface with every major search engine in every global search market.
Citing GroupM estimates, WPP projects a compound annual growth rate of 27 percent from 2005 to 2010 in worldwide ad revenue, reaching $63.4 billion in 2010.
Numbers from the Interactive Advertising Bureau support WPP's projection. In March, the IAB said online ad revenues rose by 34 percent in 2006 to $16.8 billion compared to 2005 annual tallies, which was the prior record at 30 percent growth ($12.5 billion) over revenues in 2004.
Figures like that are what make ad networks and ad platforms like 24/7 Real Media so attractive to large communications and media companies trying to stay in the game.
For example, Microsoft, earlier this month was reported to have considered purchasing 24/7 Real Media for around $1 billion. That deal fell through and instead Microsoft reached out for mobile advertising firm ScreenTonic SA.
Only yesterday, TimeWarner company AOL announced it acquired a controlling interest in ADTECH AG, an international online ad-serving company based in Frankfurt, Germany. The day before AOL bought Third Screen Media, a mobile-advertising network and mobile ad-serving and management-platform provider.
All of it followed Yahoo's takeover of the Right Media exchange last month. That deal gave Yahoo the remaining 80 percent of Right Media it didn't already own for approximately $680 million in cash and stock.
You can blame Google for all the urgency. Not only because it announced plans last month to purchase online advertising firm DoubleClick for $3.1 billion in cash, but also because its search-marketing revenues outpace Wall Street expectations nearly every quarter.
WPP said that its tender offer remains subject to certain conditions, including the tender of at least a majority of the fully diluted shares of 24/7 Real Media, clearance under the Hart-Scott-Rodino Act and approval by certain foreign antitrust regulatory authorities.