CMGI shuts down advertising unit; End of struggle means PCCW deal open for new partner
2001-06-17
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Struggling Internet holding company CMGI has shut down AdForce, an Internet advertising serving technology firm it bought for US$ 500 million last year.
The news comes as no surprise as AdForce, along with three other money-losing CMGI units, has been on the buying block for many months now.
CMGI has an office in Hong Kong with five staff.
Staff from AdForce Asia, based in Hutchison House in Central, could not be reached for comment. A source said the office was closed a week ago.
AdSociety, Pacific Century CyberWorks' (PCCW) majority-owned Internet advertising sales company, in November signed an exclusive deal to use AdForce's advertising serving technology for an undisclosed fee per advertisement.
Patrick Jonathan Wong, chief executive of AdSociety, said the company had not received any official notice from AdForce or AdForce Asia about its closure. However, he had received subtle hints from AdForce that something major might be happening in the company. AdSociety had started several months ago to review options with Engage, DoubleClick and other companies.
The three other CMGI units on the lookout for buyers are Activate, an audio and video broadcasting site, Web-hosting site Navisite and Navipath, a provider of private networks.
In March, CMGI closed free Internet service provider 1stUp
.com, entertainment portal iCAST and e-commerce payment business ExchangePath.
AdForce was partly owned by Sun Microsystems, Compaq and Novell, which had each invested US$ 20 million in the CMGI unit that bought AdForce.
The New York Times reported that the costs from winding down AdForce would be between US$ 15 million and US$ 20 million.
AdForce has played second-fiddle to advertising network and technology firm Engage, which also offers advertising serving products. During a CMGI restructuring in October, AdForce was shunted into CMGion, an online media content delivery firm similar to Akamai.
Both Engage and AdForce had been head-on competitors in Asia. CMGI bought the Hong Kong-based Engage Asia in August to strengthen its regional presence even though AdForce Asia had been set up since 1999. Engage Asia, previously known as Space Asia and started by Colin McIntosh, who still heads the company, has more customers than AdForce Asia.
CMGI never integrated AdForce into Engage even though it could have, said a source familiar with Engage and AdForce.
In 1999, CMGI bought a series of online advertising networks and advertising serving technology firms, including online advertising networks Adsmart, Flycast and Engage, in the hope of integrating them into a single large organisation that would compete with DoubleClick.
However, as a result of the slowdown in global advertising spending, consolidation had proved necessary and CMGI had to keep costs down. In November, Engage cut 54 per cent of its workforce.
CMGI is now struggling to keep its stable of Internet companies and investments afloat on dwindling cash reserves. It reported a net loss of US$ 963.3 million in the quarter to April 30, compared with a loss of US$ 428 million a year earlier.
The company also lowered its revenue outlook for the fourth quarter. It expects business to stay constant rather than the 3 to 5 per cent increase it had forecast.
CMGI has US$ 785 million in cash to date. If the company is unable to sell more units, it expects its cash to decline to US$ 650 million by the end of next month and US$ 350 million a year later.
At the height of the dotcom frenzy, CMGI had bought the rights to splash its name over a professional sports stadium in the United States. Since the bursting of the dotcom bubble, such expenditures have become lavish, especially since the company is facing financial squeeze.
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