Hearst creates new digital marketing services business unit with iCrossing acquisition
Hearst Corp.'s acquisition of digital marketing agency iCrossing provides a huge boost to the media company's efforts to diversify its digital investments and offer new online capabilities to clients.
Hearst acquired iCrossing June 3 for a reported $325 million. The agency, which will operate independently and retain its name, provides the foundation of a new business unit called Hearst Marketing Services. So far, it is the only component of the unit, but add-ons are expected to follow.
“I would think there would be other deals,” said Don Scales,” president-CEO of iCrossing, whose clients include Epson America and Toyota of America. “Big companies need big numbers. By adding a few more into the mix, we'll have a larger material impact on Hearst.”
Matthew Petersen, senior VP-Hearst Magazines, who is overseeing Hearst Marketing Services, said: “We are committed to support and fuel iCrossing's continued growth independently, and it is extremely important for a company like iCrossing to make appropriate investments, which may include acquisitions, to stay ahead of the market.”
Petersen joined Hearst in March from Meredith Corp., where he was senior VP of Meredith Integrated Marketing. During his tenure at Meredith, he oversaw the integration of several marketing agencies acquired by the publisher, including New Media Strategies and Big Communications.
Hearst's acquisition of iCrossing underscores the growing appetite of traditional publishers for digital marketing companies, as clients cut back their advertising schedules and increase their online investments.
Interactive marketing spending in the U.S. is expected to reach nearly $30 billion this year, according to Forrester Research. “Digital marketing and advertising is a burgeoning market that has become very complex, so media companies need interactive marketing services, such as the ones provided by iCrossing, to holistically service brands or advertisers,” said Wilma Jordan, CEO of media investment bank Jordan, Edmiston Group, which represented Hearst in the transaction. She added that she sees transactions such as the iCrossing acquisition becoming more common.
Petersen said iCrossing's ability to integrate search into its digital marketing services was at the heart of the deal. iCrossing is the largest U.S. search agency, with search revenue accounting for nearly 70% of its $121 million total revenue in 2009, according to Advertising Age,
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“We needed something that had the size and the capacity to help achieve a number of the revenue synergies we think exist throughout the whole of Hearst,” Petersen said. M