CMGI Closes Ad-Serving Firm AdForce
CMGI said the slowdown in online ad revenue took its toll on AdForce and that it had "exhausted all of its resources."
AdForce, Cupertino, CA, employed about 250 people. Calls to its offices were not returned.
An e-mail sent to Chip Woerner, vice president of marketing, was returned with an out-of-office reply that stated: "As of Monday, June 11, I will no longer be working at AdForce." The reply also included Woerner's personal e-mail address. Messages sent to that address were not returned.
With the demise of AdForce, CMGI now will concentrate on making a success of Engage Inc. and yesmail.com, its remaining online ad service properties. However, CMGI has indicated it will de-emphasize its ad-serving business in favor of more profitable areas of the market.
CMGI may abandon online advertising altogether, according to Safa Raschty, an analyst at U.S. Bancorp Piper Jaffray.
"The overall ad market remains very difficult, and the company [CMGI] indicated that they will continue to de-emphasize the ad-supported models," he said in a recent report. "We expect the company may shift from advertising all together and focus on Engage as a marketing software solution or as part of CMGion."
CMGion is a company that CMGI is creating. It will focus on developing a network-based platform for enhancing the performance of Internet applications and content delivery. The company is not yet open for business.
While the closing of AdForce may not have come as a complete surprise to many in the industry, one of its largest clients, 24/7 Media Inc., said the quickness of CMGI's decision caught it off guard.
In December, 24/7 Media began transferring its U.S. clients to its own ad-serving platform, Connect.
However, 24/7 Media has been shopping around its European operations and hopes to find either an outright buyer or a joint venture partner. The question for 24/7 Media now is whether it should step up its efforts to switch its European divisions to Connect or wait and see whether it can find a partner with its own ad-serving platform.
Tony Plesner, 24/7 Media's chief operating officer, said the company has had a contingency plan for a while to transfer its European operations to Connect.
"We can switch from AdForce to Connect quickly," Plesner said. "We don't think it's an enormous task. It would be foolhardy to wait and see what happens with a third party."
Plesner pointed out that 24/7 Media originally had planned to make the switch from AdForce to Connect within about six weeks. That timetable can be accelerated if necessary, he said.