Real Media, 24/7 Media Tie The Knot

Weeks of heated speculation draw to a close with the marriage of two players in the troubled online ad serving business, as 24/7 Media and Real Media finalized a $2 million agreement to merge.

As previously reported by InternetNews.com, the combined company includes the media and technology assets of both New York-based players — giving the merged entity sizable footholds in the site representation, ASP-based ad serving and local ad serving businesses.

Together, the company — tentatively called 24/7 Real Media — will market the largest online advertising network, the largest customer roster for software-based ad serving technology, the second-largest ASP customer base and (by most accounts) the largest in-house email marketing database, with 35 million addresses.

Clients of the newly-merged company include: American Express, AT&T, Citibank, The Economist, Forbes, General Motors, IBM, The New York Times Digital, Seagram, Ziff Davis, and INT Media (the parent company of this publication).

By anyone’s account, the move creates an instant behemoth in the space, either surpassing or coming in closely behind industry leader DoubleClick in rival practices.

“This merger has both broadened and deepened our suite of products and service offerings. It makes us the strongest choice for advertisers and publishers in the online marketplace,” said 24/7 Media chief executive David Moore. “Our industry leading solutions, combined with our strong customer base, experienced management team, and a reduced operating cost structure, competitively position us as a formidable long-term player in interactive media.”

Moore continues to hold his current title in the new company, as does 24/7 Media’s chief operating officer, Tony Plesner, and general counsel, Mark Moran. Real Media CEO Walter Annasohn departs, while the company’s chief financial officer, Norman Blashka, stays on in the same role. Christopher Wagner, previously Real Media Europe’s director of technology and strategic projects, assumes the title of European CEO.

Spokespeople also confirmed that Real Media stockholders will receive a total of 8.3 million shares of 24/7 Media stock — worth about $2 million. Real Media’s majority owner, PubliGroupe, also said it would provide the new firm with up to $7.5 million in additional financing.

While the online ad sector continues to be in disarray, executives from the new company said that it would see benefits from cross-selling its services, and from sheer scale. After cost-cutting, the firm should see more than $10 million in annual operational savings.

The news accomplishes several key objectives for the players involved.

24/7 Media again becomes a major force in the industry, after several months of financial uncertainty. Following a $50 million credit deal, the rollout of its Connect as a third-party ad serving ASP, and the exiting of its businesses in Europe, the company potentially could bring to bear sizable weight in media and ad serving — presenting a viable alternative to DoubleClick.

PubliGroupe, which has committed to shareholders that it would reduce its exposure to money-losing online ventures, walks away with a minority share in one of the space’s leaders, rather than a 92 percent stake in just Real Media.

Real Media, stands to gain from cross-selling with other services, such as site representation.

Nevertheless, the company has its work cut out for it, not the least of which is operating on a shoestring budget. During a conference call with investors Tuesday evening, Plesner said 24/7 Real Media has about $8.9 million in cash and marketable securities — which he said would be enough to get it to profitability, now slated for fourth quarter of 2002.

One of the first tasks the company’s management will have ahead of it is reducing redundant costs. Plesner promised $10 million in annualized savings, which are likely to come from combining office locations and central business functions like finance, human resources and marketing.

There’s also duplication in 24/7 Media’s and Real Media’s ad network serving operations, as well as in the administration of each player’s low-cost “reach” network. That latter business is likely to see cost reductions, as it’s expected that the firms will focus in the near term on representing higher-traffic, “branded” sites that can fetch higher CPMs.

At any rate, simply getting to this point has been an arduous process for almost everyone involved. In a statement, Annasohn characterized the merger as “a testament to the character and commitment of our people,” and sources say that couldn’t be truer.

Just weeks ago, PubliGroupe, eager to sell its online unit, had been close to a deal with DoubleClick — an agreement that went south when the industry leader acquired L90’s technology in a surprise announcement. Sources say the L90 deal prompted PubliGroupe to rethink its offer, ultimately raising its asking price for Real Media. Talks fell through shortly thereafter, with insiders at each company blaming the other’s unwillingness to compromise.

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