In a counterattack against online advertising competitors CMGI and DoubleClick, 24/7 Media today announced it acquired advertising-technology companies Sabela and Imake, paying about $75 million for each firm.
Until now, 24/7 Media has been using AdForce to deliver advertisements and target consumers. Last September, CMGI announced it was acquiring AdForce. CMGI and DoubleClick both already own technology arms that provide distribution and targeting of online ads.
By buying Imake, 24/7 Media will be able to place advertisements in-house across a wide variety of media, including e-mails, electronic program guides, set-top boxes and wireless devices. Such capabilities will be especially important with the onset of broadband Internet service via cable lines. In addition, the Sabela deal allows 24/7 to continually and instantaneously target ads across a network of sites.
"These acquisitions position us well as convergence begins to occur across all media," says David Moore, CEO of 24/7 Media. Moore adds that he expects Imake to add $15 million to his company's revenues in 2000.
While the move may prepare 24/7 Media for broadband, it serves another purpose as well. Several months ago, DoubleClick was rumored to be in talks to acquire 24/7. No agreement was reached because, according to analysts, 24/7 wanted a higher valuation than DoubleClick was willing to pay.
These acquisitions may help 24/7 close the gap between its current and target valuations. By bringing technology services in-house, the online ad company will rebut criticism that it lacks the technical components of some competitors.
"There has to be consolidation in that area. There are just too many companies out there," suggests Jim Dougherty, advertising analyst for Prudential Securities. "The traditional advertising firms are likely to be the eventual acquirers."
In trading on the Nasdaq market, shares of 24/7 rose 43.75 cents, or about 1 percent, to $48.75.