iVillage to Buy Promotions.com

Women-focused Web publisher iVillage is snapping up Promotions.com in a bid to improve its marketing services.

The purchase will have New York-based iVillage issuing about $3.5 million in stock (roughly 1.5 million shares, at press time) for all the shares of Promotions.com, also based in New York. Calculated at about $0.87 per share of Promotions.com, which is traded on the over-the-counter bulletin board, the total represents a 25 percent premium over the stock’s 10-day trading average.

Technically, iVillage is also paying about $9.8 million in stock, but that’s roughly the amount that Promotions.com has in the bank. Pending approval by Promotions.com’s shareholders, the transaction is anticipated to close during this quarter.

Once the deal is complete, iVillage will have control of Promotions.com’s online contest practice, which handles everything from contest strategy, offline direct marketing integration, database management, prize fulfillment and legal issues. Promotions.com also owns Webstakes.com, a sweepstakes site that gathers consumer information and opt-in names and addresses for clients.

iVillage also stands to gain Promotions.com’s iDialog survey technology, which targets questions to audience members during the sweepstakes registration process.

The Web publisher said those new capabilities would extend the services it can offer to advertisers. In the past, Promotions.com has worked for General Mills, Kraft Foods, AOL Time Warner, Compaq and Bristol Meyers Squibb.

“This acquisition will enhance iVillage’s ability to provide advertisers with immediate direct marketing and promotion solutions which have provided measurable results for blue-chip companies since 1996,” said iVillage chairman and chief executive Doug McCormick. “By providing companies integrated online and offline marketing strategies for acquiring and retaining customers, we expect to offer an even stronger competitive and complete solution to advertisers.”

The move to expand marketing services follows a path beaten by firms like fellow Alley play Alloy.com, which parlayed its online media business into successful offline cataloging, magazines and custom publishing, promotional events and college-targeted media relations. A good deal of that expansion occurred through to acquisition of smaller direct marketing firms.

While Alloy has led the move from Web publishing to marketing services, other major publishers have followed suit. Yahoo!, for instance, aims to make its corporate marketing services — like Webcasting for corporate communications — into major revenue drivers.

To an extent, iVillage has made strides toward diversifying its media platforms to attract large advertisers — acquiring publisher Lamaze Publishing (for use in producing ad-supported books) and a satellite TV network, the Newborn Channel. The Promotions.com purchase marks its first non-media, marketing-focused acquisition.

While iVillage extends its capabilities, Promotions.com said it would continue its current advertising relationships as a separate brand under iVillage. Potentially, there’s also the possibility of upselling iVillage media as well.

“We believe this combination will create added value for our existing clients, as well as the additional customers we will be able to serve through iVillage’s advertiser relationships,” said Promotions.com chairman and CEO Steven Krein.