24/7 Media Talking Possible Acquisition

As the world’s second-largest online ad network, 24/7 Media is finding itself holding a unique hand. It’s been lagging far behind DoubleClick by nearly every measure, but it thinks it has an ace up its sleeve — a nascent business unit that it thinks will take off.

But, contrary to some industry speculation, Tom Detmer, who last fall stepped up from his post as head of the company’s Technology Solutions unit to become chief operating officer and president, apparently isn’t looking to sell off part of the business to raise much-needed cash. Instead, he may be in talks to sell the whole Alley-based company.

In an exclusive interview with internetnews.com’s Internet Advertising Report, Detmer said that offline marketing and media firms are taking a good look at 24/7’s business, which he believes is attractive to acquirers because of traditional marketers’ increasing interest in online advertising.

Detmer declined to discuss the specific companies 24/7 Media has spoken to, but agreed that the company is “talking” with large media firms and offline marketers.

“Certainly, larger media companies are becoming interested in [online advertising and marketing] products,” he said. “Now that the euphoria is over … it’s a marketplace they understand — PE ratios, business practices. They will feel more comfortable into looking into acquiring businesses.”

Detmer made it clear that he wasn’t willing to elaborate on which, if any, specific companies were looking into purchasing the firm. But he did pick out a number of companies that he at least believes are sniffing around the online marketing space.

“The larger media businesses, like Viacom, and the larger marketing services, like [CRM, research and marketing firms] Equifax and Experian, are part of the same business we’re in,” he said.

“As with many of the [offline] marketing firms … customers are looking for targeted audiences, and we supply data and pathway to get to one of those,” he said. “In terms of the broader media companies, they have properties that provide content, but ultimately, with that content, they provide targeted pathways for marketers to get to audiences.”

Detmer is speaking from a unique vantage point, having had plenty of experience playing the merger and acquisition game. He joined 24/7 Media after selling his previous company, email marketing firm Exactis, to it. Prior to that, he served as president of BehaviorBank/Atlantes, a division of Experian. Detmer founded Atlantes in 1992, which was acquired by Experian in 1997.

“Ultimately, it’s about providing targeting audiences. That’s what media services firms do. We all view the world in a similar way,” he said. “But our set of lenses — the Internet — aren’t the ones they’ve been able to focus through yet. But they’re learning us, and having conversations with us.”

One particular area that Detmer sees as growing in importance is 24/7 Media’s broadband services unit — which it netted when it acquired IMAKE Solutions early last year, and which is doing things quite unlike any other unit at the firm.

For one, 24/7 Media’s Broadband and Professional Services unit (known internally as BPS) focuses on digital entertainment companies, and develops custom software and systems for those firms. The unit’s flagship product, e.merge, handles digital media distribution and subscriber management over broadband networks, as well as video on demand, and digital asset management.

Yet the services — both the e.merge software licensing and the consulting work that goes with installing it — are proving to be advantageous for 24/7 Media. The firm doesn’t list specific revenues for the unit, although Detmer said 24/7 is breaking even on the unit’s work.

And, Detmer said, that work is only going to increase in importance.

“It makes an awful lot of money for us, but it’s still only beginning, and it’s one of the high-growth areas of the business we have right now,” he said. “It is still two to three years away from any kind of large adoption, but we have had an awful lot of excitement around it” from telecom and media outfits.

“I can’t quote you the companies, but all of the large media companies, the top five-ish media companies, are interested in it,” Detmer said. “They know this is going to be one of the media deliveries of the future. And you can assume the top five telecom companies are looking at this product, at the standpoint of adopting it in the next five years.”

Detmer said he anticipates the BPS work growing “by about 20 to 25 percent” during 2001, while businesses like 24/7’s network business remain sluggish. Yet despite BPS’s growing importance, Web media’s softness, and 24/7’s current cash crunch, Detmer waved away suggestions that the company is considering selling off its struggling divisions.

“There are sections of the business that aren’t going well now,” he said. “Obviously, the [ad] network business is not a strong performer now. However, I think that this is the calm before another rise in traditional marketers’ view of the Internet.”

“The recession, if we’re heading into one, is good for us. It makes marketers focused on efficiency, and that is where [online media] will perform. We need to find profitability as quick as we can, but we don’t want to sacrifice our future to do that. We are focused on a strategy that we now feel comfortable with.”

Pamela Parker, managing editor of internetnews.com’s Internet Advertising Report and internet.com’s ChannelSeven.com, contributed to this report.