Avenue A Inc., the nation's largest independent buyer of online media, has bought Philadelphia interactive agency i-Frontier Inc. in a continuing trend of consolidation in the Internet marketing services arena.
The deal will mesh Seattle-based Avenue A's agency and technology business with i-Frontier's creative and Web site development capabilities. Terms of the all-cash transaction were not disclosed. But the ostensible purpose is to achieve scale.
“I think size definitely plays a role, especially now, when we're pitching business and a lot of the times we're finding that ad consultants are involved in the process because they want to know that the agency they're choosing has the buying leverage to get the best deals,” i-Frontier president Brad Aronson said.
Begun in 1996, i-Frontier focuses on site development and ad creative, e-mail and customer relationship marketing, search engine optimization and media planning and buying. Clients include Novartis, Wyeth, Aventis, AT&T and AstraZeneca. Revenue for this year is projected at $7 million, from $5.4 million last year and $7.4 million in 2000.
Aronson and his 58 employees will keep their jobs. I-Frontier will become an autonomous shop in the Avenue A fold, which includes a namesake agency in Seattle and its Avenue A/NYC counterpart.
The i-Frontier purchase is a departure for Avenue A, which traditionally has relied on organic growth. Now, such acquisitions are expected to play a bigger role, aided by a bank balance of $115 million.
“Avenue A is all about technology and analytics,” said Brian McAndrews, president/CEO of Avenue A. “We don't do creative inhouse, so now we have that capability as part of the overall company.”
The acquisition comes as Avenue A reports a revenue rise for the third quarter ending Sept. 30 of 70 percent over last year. The company posted a loss of $678,000 on revenue of $34 million vs. a loss of $6.6 million on sales of $20.4 million for third-quarter 2001.
Avenue A expects to reach full profitability by year-end. Revenue for the year is projected at $123 million to $126 million.
A specialist in pharmaceutical marketing, Avenue A boasts clients like Microsoft Corp., AT&T Wireless, AstraZeneca, Lancome, Nike and Best Buy Co. The companies use Avenue A's interactive agency services and Atlas DMT suite to deliver and analyze online ad campaigns.
“We'll continue to target Fortune 500 companies,” McAndrews said. “Certainly we have expertise in the pharma category, but we're not exclusively about the pharma category.”
Avenue A knows it still has to look over its shoulder to protect its online media buying business from WPP Group PLC and Omnicom Group. The two agency holding conglomerates outclass Avenue A in size and media buying influence by virtue of the many shops in their fold.
For the moment, however, McAndrews sees potential for independent agencies buying and planning online media.
“We certainly do, for the foreseeable future,” he said. “In the long term, things may get consolidated. But right now we people are doing this.”