In a nod to the growing importance of Internet advertising, WPP Group, the world’s second-biggest advertising company, said Thursday that it was buying online ad agency 24/7 Real Media Inc.
The $649-million deal underscores how major agencies are scrambling to take the lead in offering online services. Advertisers are expected to raise their online ad spending by 18% this year, faster than any other ad medium, according to market research firm Outsell Inc.
“There’s a clear shift of ad dollars from radio and publishing to the Internet,” said Clayton Moran, an analyst with Stanford Group. Ads placed online have a global reach, Moore said, which appeals to companies such as WPP that have international clients.
Web advertising companies are valuable because they have honed ways to enhance a brand’s presence online. They bid on where company names will appear in the list of advertisements on search engines, and they determine how to best target the right audience. They also provide a technology platform for putting ads online, said Sameet Sinha, an analyst at Kaufman Bros.
Traditional advertising companies began noticing that they were losing business to these online services, Sinha said, and decided to bring the online ad buying process in house.
Although spending on Internet ads is growing rapidly, there’s a limited supply of knowledge and experience in the field, Moran said. Companies have been racing to snap up firms with the know-how.
The race began in earnest late last year when Publicis Groupe, the world’s fourth-largest ad firm, acquired online marketing company Digitas Inc. for $1.3 billion.
In April, Google Inc. showed its resolve to enhance its online advertising services by purchasing DoubleClick Inc. for $3.1 billion. A few weeks later, competitor Yahoo Inc. snapped up Right Media Inc., an online advertising auction site, paying $680 million for the 80% of the company it didn’t already own.
Other recent purchases include Fox Interactive Media’s purchase of interactive advertising company Strategic Data Corp. and AOL’s acquisition of Adtech.
Los Angeles-based Gorilla Nation, which bills itself as the world’s largest online ad representation firm, plans to announce today that Great Hill Partners, a Boston-based private equity firm, is buying a minority stake in the company for $50 million.
24/7 is one of the smaller publicly traded online ad companies, with $200 million in revenue in 2006, and one of the last to be gobbled up by larger companies. Only a few sizable online advertising companies, including Westlake Village-based Value Click, remain without a suitor, but analysts speculate that these companies will also be acquired.