WPP Snaps Up 24/7 Real Media for $650 Million

Doubles Holding Company's Global Search Business; Will Help It Build Ad-Serving Tools

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NEW YORK (AdAge.com) -- WPP has acquired 24/7 Real Media, the publicly traded company whose collection of assets include a publisher ad-serving platform, a display-advertising network and a search-marketing firm with a concentration in Asia.

Of the acquisition, Martin Sorrell said: 'We think there's a third dimension to our business in addition to creativity and media. It's not high science, it's the application of science to our business and we think this is an increasingly important part of our business.'

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The price tag -- $650 million -- is far lower than the rumored price of $1 billion that was floating around 24/7's head when other companies, including Microsoft, were expected to be involved. The price tag values shares of 24/7 at $11.75 each, a premium of 30% over the average closing price of 24/7 Real Media's shares for the last 60 trading days.

Technology assets
WPP touted the value of the technology assets of 24/7, both the search-marketing and ad-serving and -targeting businesses.

"We think there's a third dimension to our business in addition to creativity and media," Martin Sorrell, chief executive of WPP, said in a conference call addressing the move. "It's not high science, it's the application of science to our business and we think this is an increasingly important part of our business."

2006 revenue for 24/7 was $200.2 million, and it is forecasting $265 million to $275 million in 2007. About half of its revenue comes from search, a sector of the company that grew 61% year-over-year in first quarter 2007. The acquisition doubles the size of WPP's search business. 24/7 has a strong search marketing concentration in Asia, thanks to a relationship with Dentsu.

Publisher ad-serving unit
In addition to search marketing, 14% of 24/7's revenue comes from its publisher ad-serving tools -- 24/7 claims a 25% share of the global publisher ad-serving market. The remaining 36% of the company's business comes from its online ad network.

WPP said that "advertisers will gain access to emerging technologies designed to more effectively segment, target and reach customers through digital media such as search marketing and display advertising. Publishers will benefit from expansive relationships with the world's largest advertisers and an acceleration of sophisticated ad- management tools." The holding company said it sees 24/7's technology serving as a campaign management platform across the group, in its networks and media-planning and -buying business.

Google's acquisition of DoubleClick was the catalyst for the deal although the companies have been working together for over a year.

"Life has speeded up considerably rightly or wrongly in the last few months," Mr. Sorrell said, "either in deals you've already seen or deals you'll see shortly that will alter the landscape quite dramatically."

aQuantive envy
He noted that consumers are spending 20% of their time online already and that the activity had spurred competitive marketplace and pricing in the digital area. The move may have also been spurred on by a bit of aQuantive envy, whose fast-growing assets include media buying, ad serving and an online ad network.

The executives on the call said they were not worried about a conflict of interest in a holding company owning an ad network, and didn't expect to see a dropoff in spending from advertisers at competitive agencies -- WPP's media division Group M, they pointed out, is still buying DrivePM from aQuantive.

David Moore, chairman of 24/7, said the Google-DoubleClick acquisition "has created a groundswell of competitive activity to that particular transaction. We think this combination will be much better accepted in the marketplace."

The deal is expected to close in third quarter 2007.
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