Cutting to the bone

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As interactive shops weathered a precipitous downturn in business, they turned to a variety of methods to cut costs and survive.

In Advertising Age`s annual Interactive Agency Rankings, the top 100 shops withstood a 31.7% drop in interactive revenue from the up-and-down year of 2000. The report shows only those shops still in business, leaving the shuttered companies out of the picture and therefore offering a more limited view of the damage.

Cost cutting became a necessary strategy to stanch the hemorrhaging cash-burn rate for many, and the employee counts were affected as much as the revenue, with employee ranks falling 34.2%. Offices closed in waves throughout 2001 as companies back-tracked on the aggressive expansion of years past.

Recent mergers of weakened former competitors include Scient and iXL, followed by Lot21 being absorbed into Aegis Group's Carat Interactive. Seneca Investments purchased, Red Sky Interactive and Organic. Many of these were survival moves.

IPOs were once the rage, but those publicly traded companies that have since seen their stock price slide to less than a cup of coffee have had to contend with Nasdaq delisting.

I-shops ensconced under the protective arms of traditional ad agencies with diversified revenue streams fared better. Havas Advertising's Euro RSCG Interaction and Grey Global Group's Grey Digital Marketing are constructs that encompass all interactive services within those networks.

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