When Global Networks Inc (GNNU) talks about a possible buyout down the road, these are the deals being made now that need be considered.
New Kid on the Online Advertising Block: CMGI's Engage
January 21, 2000 By Gavin McCormick
Engage Technogies Inc. (Nasdaq: ENGA), the largest marketing company in the stable of Andover, Mass., Internet holding firm CMGI Inc. (Nasdaq: CMGI), bought two other CMGI advertising firms Thursday, uniting complementary services and creating a third major competitor in the furious battle for online ad revenues.
In a stock deal worth about $2.5 billion, Andover-based Engage, which tracks websites visited by users and sends them targeted ads, bought two advertising networks that sell to different market sectors: Adsmart Network of Andover, which sells ad space for about 400 high-traffic websites, and Flycast Communications Corp. of San Francisco, which has more than 2,000 smaller websites in its network.
Engage is issuing 32 million new shares to CMGI, boosting the holding company's share of Engage from 80 percent to 87 percent. The sale price is based on Engage's Wednesday closing price of $77 a share. The transaction is expected to be completed in the spring.
Engage will integrate the Adsmart and Flycast businesses, with its president and CEO, Paul Schaut, overseeing daily operations. Flycast CEO George Garrick and Adsmart CEO John Federman will take executive positions beneath Schaut.
The move means Engage will reach more than half of all Net users, who each month visit sites for which Adsmart and Flycast sell ads. While the two networks will continue to operate with some autonomy, the company will have a united sales force of more than 200.
That gives Engage a formidable network to compete against online advertising's major players, DoubleClick Inc. (Nasdaq: DCLK) and 24/7 Media Inc. (Nasdaq: TFSM), both of New York. The sale announcement referred directly to Engage's desire to catch the market leader, DoubleClick.
Traders loved the deal, sending Engage stock soaring up more than $20 on Thursday, when it closed up 27 percent at $97.56. After trading higher most of the day, CMGI closed down 1.5 percent at $120.56.
Despite posting smaller than expected fourth-quarter losses, DoubleClick closed down 5 percent at $120.38. 24/7 Media, which has enjoyed a share price boost since last week, when it bought a tracking company of its own (Sabela Media) and a partner to help it deliver online video ads (IMAKE Software), closed up 11 percent at $54.50.
A CMGI deal of some type had been expected since September, when, amid a flurry of online ad company shopping, CMGI announced plans to buy Flycast for $725 million. That deal was completed earlier this month. Also last fall, CMGI bought the AdForce Inc. network for $515 million.
"When we announced the acquisition of Flycast, we highlighted the complementary nature of these businesses," said CMGI CEO and chairman David Wetherell, who will continue to serve as Engage's chairman. "Today we have begun to fulfill our larger vision for a single, highly integrated Internet marketing company,"
Adsmart had been the Number 3 ad network since early last year, when CMGI bought 2Can Media Inc. for a bit under $100 million and integrated the two firms' operations. While Adsmart CEO Federman, who came on board in October 1998, had added significant website clients and bolstered the network's number of monthly hits to 4 billion, the firm still distantly trailed DoubleClick and 24/7.
Flycast, meanwhile, has focused on building a niche among thousands of small and mid-sized websites typically ignored by larger networks. While its roster of companies is more than five times Adsmart's, its number of monthly page impressions is lower since those sites are visited less often.
The united sales force will help Engage sell nationwide, and a larger network allows it more creativity to package ads thatcan be displayed on multiple sites. In addition, network clients will be able to use Engage's system for tracking Net users' histories, then pushing ads toward likely buyers.
Schaut said, "Online marketing means more than just running a golf banner ad on a golf site -- it means identifying prospects and turning them into repeat customers. We're providing marketers with the services and technologies to do that."
CMGI announced that the deal pushed its public holdings over the $11 billion mark, up eight times over last January, when they were worth $1.4 billion. In addition to its own stable of 60 firms, including Lycos, NaviSite, Chemdex, Critical Path and AltaVista, CMGI holds shares in 20 other tech firms, including Akamai and Yahoo. |
