Engage Looking to Exit Media Business

With industry watchers predicting few signs of recovery for advertising spending, and facing serious funding woes of its own, online ad network Engage is looking to dump its media business and focus instead on technology revenue.

Engage, one of the earliest players in the ad network space, now aims to find a buyer for all of its media services — its ad network of Web sites, its AdKnowledge research unit, its ad optimization and targeting service, and its Engage Knowledge profiling service.

(The company said its well-known Engage Profile Database, which contains anonymous profiles on some 90 million Internet users, would not be sold, in keeping with its privacy practices.)

Spokespeople said the company is talking with potential buyers, but declined to discuss further. Citing full-disclosure liabilities, the company also declined to discuss how much savings it would see from the unit’s sale or closure, but added that it would provide new financial guidance in mid-September.

As a result of the changes, the company will refocus on sales of its software product — such as AdManager, an in-house version of the technology powering its network ad serving ASP; and new online-offline asset management software.

“Given the continued dramatic downturn in the advertising industry, Engage cannot sustain this media business at the expense of the far more promising software business,” said chief executive Tony Nuzzo. “We believe today’s decisive action will help us unlock the potential of Engage’s software business and establish a singular focus on the high growth opportunities we have identified.”

At any rate, the news isn’t unexpected. Earlier this month, Andover, Mass.-based Engage said its parent, Internet holding company CMGI, was not going to renew its $50 million financial commitment to the firm.

Spokespeople for Engage said the move had little to do with CMGI’s change of heart, and was more of a reflection of a bearish attitude on the online ad market.

“We had to take into account a number of factors … the online ad market, the software market, and our cash position, what we could fund, what we couldn’t fund,” said spokesman Mark Horan. But, “it was a decision based on the condition of the online advertising market, and the need to focus as much as possible on product line that has a promising future.”

Indeed, industry watchers have been anticipating such a move for some time — at least since the company appointed Nuzzo as its CEO last November. Nuzzo, who CMGI chairman David Wetherell tabbed as the man to cut costs at the firm, came to Engage after holding executive-level positions at units of Fidelity Investments, and management and marketing posts at Chemical Bank, American Express and Johnson & Johnson.

Under Nuzzo’s watch, the company shed about 50 percent of its workforce earlier this year, in a bid to streamline operations swollen by a string of earlier acquisitions.

Now, the company will see further layoffs, cutting about 100 positions in the media division. In addition, Engage said it is putting about 125 other employees in the division on warning, since their positions will be eliminated if it cannot find a buyer.

Following either a sale, or a shutdown of its media division, Engage will be reborn as a software company with two chief product areas.

In addition to products like AdManager, Content Server and PromoManager, Engage will be hawking its online-offline asset management tools, a market that the firm entered last June with the acquisition of Acton, Mass.-based MediaBridge.

In late January, Engage began rolling out products incorporating technology it gained from MediaBridge, which made software helping online and offline publishers control their advertising assets and better manage ad trafficking.

Those two product areas will form the crux of Engage’s new phase, spokespeople said.

“We’ll be much more focused on both traditional and online companies, and with a much more significant focus on traditional companies that we do business with … such as L.L. Bean,” Horan said.