Word-of-mouth shops new hot targets

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The ad industry's next acquisition binge is raring up. The target: those small but increasingly sought-after firms that manage how ordinary people spread endorsements and criticism of brands on blogs and other consumer-created media.

The biggest of three deals in the works is the Dutch market-research giant VNU's attempt to buy Intelliseek, a 9-year-old company well-known for its automated system that allows marketers to track discussions on blogs.

The two other potential deals are focused on companies that execute word-of-mouth programs, according to people familiar with them. WPP Group, the No. 2 ad agency holding company, is holding discussions with a Los Angeles-based company called M80. And Aegis Group, the London-based owner of Carat and itself the subject of intense takeover speculation, is courting a San Francisco-based firm called Ammo Marketing.

Ammo senior partner-CEO Julian Aldridge said that, besides the Aegis interest, he's received a number of calls from holding companies both small and large as well as venture-capital firms since this summer. "Virtually everyone is interested in word-of-mouth and influencer marketing," he said. "But only about one out of every six companies that call genuinely have the budget for it. It's about where interactive was in 1995."

An Aegis spokeswoman didn't return a call for comment. A WPP spokesman and M80 President Jeff Semones declined to comment.

What distinguishes these potential deals from the 1980s and '90s buying sprees that consolidated much of the advertising, direct-marketing and public-relations business at WPP and its top three or four rivals is their size. In contrast to the Madison Ave. goliaths that were gobbled up back then, all of the targets are believed to have annual revenues of less than $10 million and staffs counted in the dozens, not hundreds or thousands.

Consequently, any forthcoming run of deals may be less akin to a binge than a group of fat men nibbling at a large smorgasbord. Intelliseek, based in Cincinnati, posted revenue of $5.6 million in 2004, three-year growth of over 300%, according to a report in Inc. magazine. Intelliseek CMO Pete Blackshaw declined to comment. A VNU spokesman didn't return calls by press time.

Rather than being part of any growth strategies on the part of the buyers, this interest points to the increased credibility of word-of-mouth, a discipline, if it could be called that, that until recently worked on the fringes of a marketing mix dominated largely by TV ads.

Challenging the :30

In recent years, a proliferation of digital-media channels has challenged the 30-second spot's hegemony, opening the door for the rise of interactive advertising and direct marketing, traditional PR and the loosely knit world of viral, buzz, guerrilla and word-of-mouth marketing.

Investment from the advertising and media establishment would not only add credibility, but give these smaller, younger companies that often work with edgy niche or challenger brands access to sprawling geographic reach of the holding companies, in addition to the budgets of major marketers.

"Any small company is always looking for larger, stable, retainer-type clients," Mr. Aldrige said.

Not that they necessarily need the help. BuzzMetrics, a research and planning outfit in which VNU recently took a minority stake, boasts a client list that includes 14 of the top 15 pharmaceutical marketers, according to its Web site. M80 lists Gap, Wal-Mart, and Best Buy and Universal Records. And Ammo's Web site has case studies for Unilever, Volvo and Gateway.

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