Just weeks after losing funding from its New York-based parent, 24/7 Media’s
European division is closing down.
The division’s main company, 24/7 Media Europe N.V., filed for bankruptcy Wednesday and laid off its entire staff. Earlier this week and last, 24/7 Media Europe’s local companies in the Netherlands, Norway, Sweden, Denmark and Germany also filed for bankruptcy.
24/7 Media Europe’s U.K. office is in administrative receivership — similar to bankruptcy protection — and also cut its staff.
Meanwhile, offices in France, Spain, and Italy are beginning to wind down operations and are slated to close within the next week or so, said Gordon Simpson, chief executive of 24/7 Media Europe.
“It really isn’t, in effect, a business any longer,” Simpson told internetnews.com.
But Simpson isn’t pointing to the local ad market as the reason for the company’s closure. In fact, he said that European businesses were funneling increasing amounts of their budgets into interactive marketing. And the ad slowdown actually hastened that process, as clients sought to decrease brand marketing and increase their focus on direct marketing — including online spending.
Instead, the shutdown of one of the major players in online media in Europe comes as a direct result of the turbulent advertising market in the U.S. — from which its Silicon Alley parent derives most of its revenues. Hit hard by the slowdown in domestic advertising spending, 24/7 Media last month opted to pull the plug on its European network, cutting its funding.
Simpson said that the group, which was not profitable, did have a glimmer of hope in the weeks prior to the cutting of funding: local venture capitalists were willing to fund a management buyout of the division and to support most of the company’s non-Scandinavian operations.
“It’s the greatest pity of all,” he said. “A venture capital company prepared to put up money … but the venture capitalist felt we wouldn’t be able to close [the deal] until late September. The U.S. company wasn’t prepared to wait that long.”
Once 24/7 Media opted to cease funding its European division, the VCs backed out, although negotiations continued up until last weekend, Simpson said.
“Only difficulty we faced was operating within a business plan … predicated on the European business becoming profitable next year,” he said. “It was reliant on the cash provided by our U.S. parent. We didn’t have a viable business without that funding. So it wasn’t a case of the market pulling back from us … it was a case of our financial backers pulling back from us for their own reasons, which I fully understand. Their cash resources were stretched.”
The closing represents a conclusion to a firm that had been one of the earliest sellers of online media in Europe. The group had its origins in the highly-regarded Softbank Interactive Marketing division — which the Japanese conglomerate sold to controversial Internet/healthcare/investment firm Zulu-Tek in 1997.
In 1998, Softbank Interactive Marketing’s top employees — including Simpson — resigned to create London-based InterAd, which a newly-formed 24/7 Media snapped up for $4 million during the following year.
“We were victims of circumstance and timing rather than anything else,” Simpson said of recent events. “We sold more advertising in Europe than any of our competitors. We were there, and now we’re not. And now we have to find another opportunity.”