In an all-stock deal valued at close to $95 million, ad network and
technology company 24/7 Media,
Thursday announced its acquisition of search engine
optimization company Website
Results.
The deal serves to broaden 24/7 Media’s scope of product offerings
by
making Website Results’ ASP-based search-engine optimization
technologies
available to clients.
The Los Angeles-based company differs from typical search engine
optimizers in that it operates its services on an application service
provider model, which provides for increased flexibility and
scalability,
company officials said.
Website results targets direct marketers and Websites directly.
Clients
include some big names, including eBay,
and E*TRADE,
as well as troubled online sport-wear retailer fogdog.com,
.
Another upshot of the deal is that the addition of Website Results’
high
margins and incremental revenue stream should contribute to 24/7’s
earnings,
pushing the company’s estimated date of profitability to 4Q 2001, 24/7
reported in a Thursday morning conference call with analysts.
“Website Results brings another dynamic Internet marketing solution
to
our advertisers and our network of Web sites,” said David J. Moore,
24/7
Media chief executive officer.
“This addition to 24/7 Media’s already comprehensive suite of
marketing
and technology solutions will help our advertisers and our network of
Web
sites generate incremental, highly qualified page views. Financially,
it
adds a high margin, incremental revenue stream, and, most importantly,
the
acquisition is accretive, thereby accelerating our drive to
profitability,”
he added.
Website Results president Douglas Wagner also praised the deal, saying it
would help his company expand its customer base.
“We are excited to become part of the 24/7 Media family,” said Wagner
in a statement.
“With 24/7 Media’s proven leadership in the interactive marketing
and
technology industry and its enormous global reach, we will be able to
offer
our services to a much broader audience overnight.”
In recent weeks, 24/7 has announced a partnership with ad tech
company Unicast to deliver rich media
interstitial
ads across its network, and with chinadotcom,
expanding
the two companies’ partnership in various pan-Asian ad delivery and
technology initiatives.
“We’ve been on the trail looking to expand our products and services
ever
since we’ve been in business,” said 24/7 chief financial officer Andrew
Johns.
“We look for complementary businesses, and Website Results fits
beautifully into our business model. Website Results offers a service
that’s extremely complementary to our
network, e-mail and technology solutions.”
Analysts following the companies agreed, saying that the acquisition
could bode well for 24/7’s future profitability.
Lazard Freres & Co. analyst Dana Serman, who has been following TFSM
for
more than a year, said 24/7 stands to see a return of 40 percent of their
purchase
price in 2001, if the company executes and hit its benchmark
predictions.
“The deal makes a lot of sense if the company can deliver,” Serman
said.
“I like it. It sounds solid; they’ve built their mousetrap and could
have a
bottom line right away. But the question is, can they execute on their
numbers?”
“It’s an easy cross-sell, a no-brainer,” he added.
The deal comes as pricing models for online ad and marketing
products
like banner advertisements have been shifting lately, from
cost-per-impression and cost-per-thou
sand models to more accountable,
quantifiable marketing methods.
“The move fits a general paradigm,” Serman said of the deal. “People
and
the press seem to be calling for a ‘pay-for-performance’-centric
model.”
Investors also liked the deal, boosting shares of 24/7 up 1 1/8 to 14
1/2
at press time.
