Drugstore.com May Teach Walgreen's New Digital Moves

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Walgreen purchased Drugstore.com for $409 million. Walgreen, which operates more than 7,500 drug stores, was founded in 1901; Drugstore.com was launched 11 years ago during the dot-com boom.

While the newly teamed pharmacy brands tout similar product lines, they have had diverging online ad strategies.

According to research firm Kantar, Drugstore.com spent $927,000 on display ads during 2009, when it reported $366.6 million in online sales. Last year, Kantar says, the Bellevue, WA-based e-tailer bought $3.1 million in display ads, while it generated $456 million in Web-based revenue.

Walgreen's, on the other hand, purchased $8.5 million in display ads during 2009 and $5 million in 2010. It marked a 41 percent spend decrease for the Deerfield, IL-based retailer. Walgreen's, a $60-billion-plus annual firm, doesn't typically break out earnings separately for its Web site.

There's little doubt that Walgreen's execs will examine the online advertising practices of its new property, which has made its name as an Internet standalone. Drugstore.com marketers also stand to fine-tune their abilities to drive sales with offline tactics.

And it will be intriguing to see if Walgreen's decides to cross-market the two brands on their separate digital properties. From the Drugstore.com deal, the pharmacy chain also picks up beauty and health products sites Beauty.com, SkinStore.com, and VisionDirect.com. The acquisition will bolster Walgreen's online product selection by some 60,000 items.

"Our acquisition of drugstore.com today significantly accelerates our online strategy to leverage the best community store network in America by becoming the most convenient choice for health and daily living needs whether customers shop online or in our stores," Walgreen's CEO Greg Wasson, said in a prepared statement.

The two brands appear to have only had one minor relationship in recent years. Walgreen's has been using Drugstore.com's inventory information approval system since 2006. That point-of-sale technology allows retailers to accept payment by flexible savings account (FSA) debit cards.

Meanwhile, Drugstore.com has had an agreement with Walgreen's competitors Rite Aid and General Nutrition Center (GNC), where the website has been selling those retailers' branded product lines. It is not known whether or not those relationships will continue.