FindWhat Acquires Espotting

FindWhat.com announced plans to acquire Espotting Media in a $163 million merger, creating a paid listings company with 40,000 advertisers and operations in the United States and 10 European countries.

The deal calls for privately held Espotting’s shareholders to receive 8.1 million shares of FindWhat and $27 million in cash. Both companies’ boards of directors approved the deal, which is expected to close in the fourth quarter.

“The new company will possess one of the largest global footprints among performance-based marketing companies,” said Craig Pisaris-Henderson, FindWhat’s chairman and chief executive, on a conference call. “We believe joining forces can build a new international leader in performance-based marketing.”

Both companies operate pay-per-click advertising systems, with FindWhat operating in the United States and Espotting based in Europe.

“We knew our strong European base would be a key differentiator in the marketplace,” said Daniel Ishag, Espotting’s chief executive.

Yahoo was widely rumored to be considering the acquisition of Espotting, which competes with Overture Services in Europe.

The combined company will mostly keep the FindWhat.com management team in place, with Pisaris-Henderson retaining his titles and Phillip Thune remaining as chief operating officer and chief financial officer. Daniel Ishag will become vice chairman of the company.

According to Danny Sullivan, editor of Search Engine Watch, the deal is unlikely to change much for either company. (Search Engine Watch is owned by the parent company of this Web site.)

“They don’t necessarily turn themselves into anything they weren’t,” he said. “FindWhat doesn’t make Espotting any stronger in Europe and Espotting doesn’t help FindWhat in the U.S.”

FindWhat has carved out a niche in the second and third tier, while Espotting has battled Overture Services in Europe for distribution deals with larger portals.

Pisaris-Henderson said the company’s strategy remained the same.

“Our strategy is about focusing on good, accretive win-win deals for the company,” he said. “That doesn’t mean we’re going specifically for the tertiary marketplace.”

Recently, Espotting lost a key distribution deal when Ask Jeeves UK dropped it in favor of Google, which handles Ask Jeeves’ paid search in the United States. Likewise, the executives were coy about the future of Espotting’s deal with Yahoo Europe. The companies’ guidance does not assume the month-to-month deal will continue in the fourth quarter.

“I would think Overture is going to dangle a ton of money to get the Yahoo deal,” Sullivan said. “It was difficult for Espotting to match some of the upfront payments. If you’re a smaller company, you might not have that kind of money to put up.”

According to its guidance, the combined company will take in $140 million in combined revenue in 2003, with Espotting accounting for $75 million. FindWhat, however, will account for most of the profits. FindWhat expects $17 million in pre-tax income, while Espotting forecasts $7.5 million. Espotting recently hit profitability for the first time, Ishag said.

Thune said Espotting continued to work with Applied Semantics, which it had expected to lose as a distribution partner due to its acquisition by Google.

“We believe we may have the opportunity to continue to work with Applied Semantics in some form going forward,” he said.