With today's announcement that offline ad agency group WPP is acquiring 24/7 Real Media for $649m, or approximately 3x 2006 revenues (net of cash) it is becoming clear that the convergence of online and offline advertising is in full swing. This deal is the latest in a string of acquisitions highlighting several competing trends:
- Offline/online convergence -- It no longer makes sense for an ad agency NOT to have full, credible online capabilities, hence WPP/24-7 and Publicis/Digitas.
- Consolidation in the ad serving technology market -- And then there were only three ad servers: aQuantive (acq Accipiter), DoubleClick (acq Falk eSolutions), AOL (acq Ad-Tech). Except of course the open-source underdog...
- Network scale plays -- This is where the really big bucks are made, by merging search and display ad networks (Google/DoubleClick), and by combining publisher inventory with a liquid market for ads and traffic (Yahoo/RightMedia).
Henry Blodget provides a handy summary of the recent deals in his blog here.
This is good news for many of the technology and services companies that have lived through the lean years and built quality businesses. I'm particularly glad to see a number of European companies among the acquired (Falk, Ad-Tech, Neue Digitale). Because the European market of advertising networks and SEO/SEM firms remains very fragmented (and the US players have comparatively low penetration), expect to see more transatlantic acquisitions in the coming months.