24/7 Media:
Creating a New Media Giant via Mergers and Acquisitions
24/7 Media CEO David Moore created an interactive media giant through mergers
and acquisitions and continues to grow the company with strategic transactions
in the online advertising arena.
Internet advertising is a
hot ticket today, but in 1995 the network model wasn't even a concept and
selling online ad space likened to peddling vacuum cleaners door-to-door. Of
course, none of this intimidated David Moore, president and CEO of 24/7 Media. Moore sold cable airtime
to advertisers back in 1980 and invited the challenge of marketing another
emerging advertising vehicle.
Moore has been involved in a
handful of media startups. After spending time in sales at Turner Broadcasting,
he joined Viacom to help launch the Cable Health Network, a channel that would
eventually merge with Hearst/ABC's Daytime to become Lifetime. During his 10
years with the leading cable network for women, Moore developed and ran two
physician-oriented cable television services. By 1993, he was Net-bound with an
online service for doctors that was acquired by Reuters in 1994. And one year
later, Moore and partner Mark Burchill founded Petry Interactive, a spin-off of
Petry Media Corp., a leading
television ad rep company.
And that's where the real
story begins.
Moore's responsibilities at
Petry Media included evaluating new business models that would leverage the
company's core competencies. So Moore looked at barter-syndication, he looked
at replicating domestic activities on an international scale, and he looked at
the Internet. "I just saw a tremendous opportunity on the Web -- it was
growing very rapidly, the infrastructure was already in place, and I felt this
was a medium that was going to take off in a very short period of time,"
explains Moore.
Moore and Burchill were
passionate about the possibilities of the Net and convinced Petry Media to
allocate start-up funds for an interactive division. By the end of 1995, Petry
Interactive was established, and the duo officially began representing
advertisers online. But their staff of eight was bigger than their client list
in the early days.
"We weren't even
spending full time selling ads on the Internet," admits Moore. But he was
convinced the next industry wave was interactive marketing, and he soon realized
this emerging medium was crying out for a new-sprung model of advertising.
"I would say after only a few months of selling to Web sites on an
individual basis, I was convinced that the network model was the way to
go," recalls Moore.
DoubleClick introduced the network model
in mid-1996. The standard network model is a collection of highly trafficked
and premium-branded venues, as well as smaller niche Web sites -- a combination
that allows advertisers to target viewers based on profiling criteria. Petry
Interactive was right on DoubleClick's heels, introducing their own network in
1997 through a deal with AdForce, an
online ad-management service. Moore says the network grew very rapidly, and it
was clear that there was a huge opportunity for runaway success by early
players in the Internet advertising arena. All he needed was the financial
backup that would help Petry Interactive gain that all-important market share.
The Mergers That Made 24/7 Media
Unfortunately, the parent
company wasn't in a position to put more capital behind the Internet venture.
Moore and Burchill, however, refused to watch a golden opportunity pass them by
and decided to pursue a management buyout of Petry Interactive. "We bought
the division from Petry, and I hit the streets to find money to fund us going
forward," explains Moore. "In that effort, I ran into a couple of
other similar companies that were looking for money, as well, and I ended up merging
the three of them together."
Those similar companies were
Katz Millennium Marketing and Interactive Imaginations, two fast-growth
interactive ad agencies that, when merged with Petry Interactive, formed an
immediate industry giant dubbed 24/7 Media. The marriage was christened with
$10 million in VC funding that Moore secured from Travelers, Prospect Street
and Big Flower Holdings.
Moore's reasoning behind the
mergers was based on a time-tested truth: There's strength in numbers.
"When you look at the Internet, big is better, and scale is
important," says Moore. "The merger gave us the scale in several
critical areas that really catapulted us overnight to the number-two
position." Indeed. 24/7 Media immediately enjoyed a sales force, a
portfolio of Web sites and an audience mass that was nearly three times the
size of each individual company alone.
Since the merger in late
1997, 24/7 Media has been on a mission to provide solutions to advertisers and Web
publishers alike. For the advertiser, 24/7 Media is a one-stop shop, offering
the ability to purchase a campaign across literally thousands of Web sites.
Advertisers save time by getting one report and one invoice. For the Web
publisher, 24/7 Media offers an opportunity to outsource their ad sales to an
experienced global agency. Publishers generate revenues for their sites based
on traffic counts.
With this straightforward
business model, 24/7 Media is today one of the largest Internet media companies,
reaching more than half of all online users in the United States, for a total
of more than 34 million people. In fact, the company is the third largest reach
vehicle on the Internet, trailing only Microsoft
and America Online.
Moore attributes much of the
company's success to an executive management team with more than 100 years of
combined media sales experience and expertise. The merger, however, was
challenging from a human resource perspective because responsibilities had to
be strategically reassigned and delegated among a staff of seasoned veterans.
Moore says it was difficult to put the right people in the right positions in a
manner that would drive the company to success.
"It was important that
we got everybody to leave their ego at the door and look at what it was going
to take to grow the business," explains Moore. "We had to realize who
was best qualified to do what, and we had to move some people around."
Moore says, for the most
part, everybody went along with the plan -- and those who didn't left the
company. The general cultural differences typical of most mergers and
acquisitions took several months to work out, but Moore says it was all worth it
to assemble a crew of top-notch executives to help him take the company to the
next level. Moore is lavish in his praise of his savvy executive staff:
"There's a management
credo I heard many years ago, which I always believed, that says you should
surround yourself with intelligent people who contribute directly to your
success," says Moore. "I definitely would not be running a successful
media company if I didn't have an all-star group of senior managers who were
making this company the great place it is today."
Moore says his more than 20
years in the industry has taught him that the key to creating long-term
relationships with advertisers is understanding what they are looking for:
reach and targetability. From the beginning, 24/7 Media has been working on the
reach aspect, aggregating Web sites of all shapes and sizes, so long as they
don't contain extreme content. As a result, the company enjoys a long list of
marquee brands, like Reuters and GoTo.com, as well as a variety of small- to
mid-sized venues, in its burgeoning network.
In addition to collecting
Web sites, however, Moore continues to look for products and services that can
help the company bond more closely with advertisers and agencies, as well as
their network of publishers. In staying true to the strategy that spawned an
Internet giant, Moore is always looking to buy companies that can help 24/7
Media get bigger quicker, and he has made several highly synergistic
acquisitions during the past two years that have stimulated the growth of the
company. Of special note are Sift, Inc., an
e-mail-based direct-marketing firm, and TechWave (now called ShopNow.com, a leader in e-commerce
solutions.
"When you look at what
advertisers want -- reach and targetability -- e-mail is an important component
of what we do. With the Sift deal alone, we gained 3 million opt-in e-mail addresses,"
explains Moore. "Our salespeople are now selling it in combination with
banner campaigns."
With a 19.8 percent stake in
ShopNow.com, Moore brings an experienced e-commerce enabler to his eclectic
media company. "When you look at the amount of money that's scheduled to
be spent in e-commerce by the year 2003 -- over $100 billion -- we just felt we
had to have an e-commerce play, and this deal with ShopNow gives it to
us."
Then there's 24/7 Media's
entry into the global advertising arena with acquisitions in Europe and Asia.
This year saw Moore claim a 60 percent stake in London-based InterAd Holdings
Ltd. to form 24/7 Media Europe. And a
minority interest in Hong Kong-based China.com Corp. represents 24/7 Media Asia's emergence into the
international scene. While Moore sees these regions as lagging behind the
United States in terms of overall growth, he is looking at the long-term
picture, when these markets will begin feeling the full impact of the Internet.
Moore's growth strategies
have kept most of the competition at bay. DoubleClick and 24/7 Media are the
clear industry leaders. The 24/7 Media network represents about 4 billion
impressions for more than 600 advertisers. Their revenues are steadily
increasing, and their offices have expanded to more than 20 throughout the
world.
"That type of
infrastructure, that type of scale, that type of momentum, is very difficult
for someone to replicate overnight," Moore insists. "At the same
time, we aren't standing still." But Moore says there is plenty of room
for the many second-tier firms that are attempting to compete with the giants.
Indeed, 24/7 Media and DoubleClick have paved the way for others in the space.
In addition to the
all-important network model, Moore says there are several other strategic
programs that make 24/7 Media tick. The first of which is a landmark deal with IntelliQuest Information Group, a
leading provider of data for interactive marketing. 24/7 Media Profilz offers
demographic targeting services to advertisers using a database of 100 million
high-tech households as a foundation. Moore says this deal puts the company on
track to provide targetability better than the competition.
"Our database will
allow us to identify users who are in the IntelliQuest database any time they
come into our network," explains Moore. "So we can go to a company
like Merrill Lynch, for instance, with adults aged 18-49 that make $100,000 a
year but don't have a brokerage account, and schedule their advertising so that
those will be the only folks who see it."
Launched in March, 24/7 Promotions
is an online direct-marketing service designed to generate qualified customer
leads while leveraging multiple branding opportunities. Moore says this program
was developed in direct response to advertisers' demand for category-exclusive
promotions to a pre-qualified audience. Right behind the promotions division
came 24/7 Direct, a service for qualified direct marketers with transactional
marketing objectives, such as user registration, account application or product
sale.
Finally, the Content Zone was created for the
"little guys." The Content Zone is a holding Web site for more than
2,500 smaller venues that want to join the 24/7 Media Network. Moore stresses
that this market should not be ignored. "We are going to get even more
aggressive in pursuing the smaller sites because the smaller sites definitely
add more reach and targetability to the offers that we can make our
advertisers," he explains.
According to Forrester Research, by 2003,
Internet-based advertising will grow to more than $15 billion, and per capita
spending for online ads in the United States will bypass radio and magazine
ads. Faced again with an enormous potential for growth, 24/7 Media filed for an
initial public offering (IPO) in June 1998. DoubleClick had earlier set the
value standard, which made it easier for Moore to take his company to the
public markets.
"DoubleClick was
already out there, and I can argue that being public gives you access to
capital that is necessary to be competitive and do acquisitions," says
Moore. 24/7 Media's IPO performed exceptionally well, selling 3.5 million
shares of common stock at an opening price of $14 dollars per share. By the end
of its first day, 24/7 Media stock was up more than 44 percent and trading at
about $20 per share. Today, the stock has more than doubled to about $43, and
analysts are predicting a target stock price of between $75 and $100 per share.
Moore admits that running a
public company is a challenging task. "You certainly are in a fish bowl --
there are no secrets," he explains. "But overall, in terms of our
pursuit of our business, it hasn't had a dramatic effect on how we think or how
we act."
Future goals of the company
include establishing a presence in Latin America before the year's end. But for
the most part, says Moore, 24/7 Media will continue to do the things that have
made the company successful to date. That's a safe bet, considering Moore's
strategies led the company to $20 million in revenues last year, a number that
is expected to triple for 1999.
Company Snapshot:
Company: 24/7 Media
Founder: David Moore
Industry: Online advertising
Founded: 1997
Location: New York, N.Y.
Employees: 225
Revenue: $20 million (1998)
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