Three publicly traded interactive specialists in which Omnicom owns big stakes -- Agency.com, Organic and Razorfish -- have seen their share prices tumble along with other technology stocks in recent weeks. But Omnicom is still far ahead on its investments -- and on the prowl for more.
Omnicom, the most aggressive of the leading agency holding companies, with stakes in about two dozen public and private digital marketing ventures, bought interests in two interactive agencies and sold a dot-com unit earlier this month. This week, it will announce an investment in another U.S. interactive professional services venture.
"We are not day traders," said Omnicom Exec VP Bruce Redditt. "We are in this for the long term."
A DOWNWARD SLOPE
Still, there's no denying the recent downward slope of Omnicom's big Net investments, managed by its Communicade unit, which Mr. Redditt heads up. New York interactive services shop Agency.com went public in December at $26 and soared to $98. But it plummeted amid the recent market turmoil before bouncing back somewhat to close last week at $18.50. Omnicom's 45.2% stake in Agency has been worth anywhere from $178.5 million to $1.3 billion over the past five months.
It's a similar story for Organic and Razorfish (see chart on Page 98).
Because it placed bets in the early days of interactive marketing, Omnicom has turned small investments into gains worth hundreds of millions of dollars.
For example, Omnicom paid $11.7 million and $7.1 million, respectively, for its initial stakes in Agency.com and Razorfish in 1996, and invested $10 million in Organic in 1997.
Omnicom presciently unloaded one-fourth of its holdings in Razorfish last month, when the stock was trading at about double last week's close.
One Omnicom holding has had a bumpy public debut. L90, a Web ad services business in which it has less than a 10% stake, trades at less than half its January $15 initial public offering price.
AnswerThink Consulting Group, an Internet professional services venture in which Omnicom has a less than 5% stake, has done better. It closed last week at $21.31, up from its 1998 offering price of $13.
UNDETERRED BY MARKET
Mr. Redditt said Omnicom does keep an eye on the fluctuations. "You can't help notice what's going on with the stock market," he said. But short-term gyrations, he stressed, won't deter Omnicom's long-term interactive strategy. In fact, lower market prices might make some future deals cheaper.
Omnicom has played matchmaker among companies in which it invests: Agency.com absorbed three other Omnicom holdings, while Red Sky Interactive and Nuforia merged last month. Separately, AnswerThink last year bought Think New Ideas, an early Omnicom interactive investment.
Mr. Redditt said the holding company now owns pieces of about two dozen interactive ventures. He declined to say how much Omnicom has paid, but said the current worth "exceeds that number by a great amount." The investments are still small next to Omnicom's huge offline ad business and $15 billion market capitalization.
This month alone, Omnicom bought stakes in New York i-shop Eisnor Interactive and U.K. interactive-services venture Oyster Partners. "Oyster was the first of what we believe will be several investments in the U.K. and the Continent," Mr. Redditt said.
Last week, Omnicom sold CareerMosaic for a 40% stake -- valued at $108 million -- in Headhunter.
net, a rival jobs site that went public last year. Omnicom's Bernard Hodes Group, a recruitment shop, started CareerMosaic six years ago.
This week, Mr. Redditt said, Omnicom will take a stake in a U.S. digital professional services company. "We will continue to [expand]," he said. "We are believers in this space."