Digital Impact Plans Search Marketing Service

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E-mail marketing company Digital Impact said this week it would start a search marketing business by the second half of the year.


CEO William Park said the search marketing practice would act as a complement to its e-mail marketing services since search has emerged as the best way to acquire customers while e-mail is ideal for customer retention.


"We believe we're in a good position to enter this space and establish a leadership position very quickly," he said in a conference call with investors. "The Fortune 1000 clients are just beginning to realize the huge opportunities they have in using search as a customer acquisition vehicle."


The landscape is already dotted with hundreds of small search marketing firms, which help companies create and manage campaigns that run on Google, Overture and other search providers.


Digital Impact hired Michael Gorman, a former ESPN executive, to head the search marketing service.


Its planned entry into search comes as Digital Impact saw its business shrink in the past quarter due to new contracts that fell below expectations. Fiscal fourth-quarter revenue announced yesterday declined 5 percent from a year earlier to $10.4 million. Digital Impact lost $884,000, an improvement over the $1.3 million net loss from a year ago. The narrowed loss came through cutting expenses.


Digital Impact warned of a revenue shortfall this month due to long sales cycles, a drop in e-mail volume and new initiatives that have been delayed.


The company said it expected a "modest" increase in revenue in the coming year and net income between breakeven and a 5 cents per share loss. It expects its search practice to begin generating sales in the second half of the fiscal year.


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