24/7 Media Acquires Search Engine Optimizer

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, email 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-thousand 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.

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