Update: DoubleClick Buys NetGravity

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No. 1 online ad network DoubleClick Inc. last week signed a definitive $530 million agreement to purchase NetGravity Inc., the leading provider of software for managing online direct marketing and advertising. The move puts DoubleClick in a position to sell software that lets Web sites serve their own advertisements.

NetGravity, San Mateo, CA, makes AdServer software that helps Web sites manage the ads in their pages and handles reporting and analysis. The firm has high-profile clients, including the Associated Press, E*Trade, Ticketmaster, MTV Interactive and USA Today.

After the acquisition, New York-based DoubleClick will be able to offer NetGravity's software in addition to its own Dart ad delivery product. Dart is designed to collect information on Web audiences and use that data to choose the most effective placement of online ads. DoubleClick delivers those ads itself to a virtual network of more than 1,500 Web sites.

In the earliest phases of online advertising, the idea of an ad placement service appealed to Web sites that didn't want to deal with IT headaches or spend a lot of start-up money. Revenue at the online ad networks is still booming, but a growing number of Web destinations -- especially those that want complete control over their customer data -- are considering using server software to place their ads.

"Basically it's about having it in their own drawer or their own database," said Kent Allen, senior analyst at the Aberdeen Group's e-commerce unit. "Whenever you're working with a hosted or a service bureau-type application, there's always a loss of control."

In addition to its outsourced services, DoubleClick now can offer greater control to sites that want to manage their own customer data from start to finish. It's an option likely to buoy DoubleClick if the trend grows, Allen said.

DoubleClick touted the $530 million takeover bid as a generous premium on NetGravity's 30-day average stock price, but it did not mark an especially high valuation on the company's July trading range. The deal worked out to roughly $26.32 a share, and NetGravity fell 2, or 7.27 percent, to 25 _ the day the merger became public. DoubleClick shares rose 2 _, or 2.66 percent, to 96 _.

Simultaneously with the merger announcement, the two firms gave investors an early look at their respective second-quarter revenue figures. DoubleClick's system revenue rose 154 percent to $44 million in the quarter, up from $17.3 million in the same period a year ago. Revenue based on generally accepted accounting principles was $31 million in the most recent quarter, up 40 percent from $22.1 million a year ago.

NetGravity's second-quarter topline hit $5.6 million, a 143 percent increase over the $2.3 million the company pulled in a year before.

Both firms are scheduled to announce full financial results this week. Neither company has been profitable yet, though DoubleClick has said it expects to move into the black before the fourth quarter of 2000.

The NetGravity transaction, expected to close late this year, is subject to regulatory and stockholder approval. The new company will be named DoubleClick and will be based in New York.

DoubleClick has moved aggressively in the online ad space of late. The planned acquisition follows DoubleClick's June announcement that it plans a $1 billion purchase of Abacus Direct Corp., the manager of the largest database of consumer catalog buying habits in the United States. That transaction is slated to close in the third quarter.

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