Phase2Media Files For $57 Million IPO

In a move at once bold and curious, Silicon Alley Internet advertising and
marketing shop Phase2Media Inc.,
has registered with the Securities and
Exchange Commission
to offer up to $57.5 million worth of common

The company did not disclose an offering price range but did say
the stock would be quoted on the Nasdaq market under the symbol PTWO.

Robertson Stephens will serve as lead underwriter, with Chase H&Q, Thomas
Weisel Partners and DLJdirect acting as co-managing underwriters.

The announcement comes about two months after the company closed a third
round of venture funding of $18 million, led by GE Equity. At the time of
the early March announcement, Richy Glassberg, chairman and chief executive officer, said those
funds would enable Phase2Media to double its staff of 120 employees and
boost overseas expansion efforts.

“We have assets and Web sites to sell in Japan, Latin American and European
markets,” Glassberg told at the time. “This financing will
allow us to roll out our sales and marketing teams in those countries.”
Other investors in earlier funding rounds were Vector Capital, Hachette
Filipacchi Media and Starwood Capital Group, whose stakes have helped the
company raise over $30 million since inception.

The move to enter the markets, as Internet plays have become the scourge of
investors, is bold one for the company, which reported $12.9 million cash
in hand as of the end of March. Phase2Media reported pro forma net losses
for the first quarter of $3.3 million (or 54 cents per share) on revenues
of $5.2 million, compared to a loss of $5.8 million (58 cents per share) on
revenues of $4.4 million during the fourth quarter.

But the company’s use of direct sales reps — in an on-line advertising
category increasingly driven by automation — may prove a competitive
advantage as Web sites continue looking for ways to help their advertisers
wring more from their buys.

Compared to ad representatives for Web properties that use a network to
distribute clients’ ads, Phase2Media takes a more hands-on approach with
individual site representation. For example, the company deploys a
dedicated sales staff for Hachette Filipacchi Web properties and Prodigy.
Other clients include the Elle Interactive Network and Maxim Magazine
Online. And in a partnership with BMCMedia of Australia, the company owns
the North American and European rights to sell advertising for the Olympic
Committee’s official Web site.

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