CMGI Deal Takes Aim at DoubleClick Business Model

Engage Technologies, Inc. plans to compete with No. 1 rival ad network DoubleClick by taking the opposite approach and becoming a performance-based ad-buying and placement firm, executives said last week.

The marketing company announced last week it signed an agreement to acquire ad network Adsmart, Andover, MA, and ad placement firm Flycast Communications Corp., San Francisco, from its own majority stakeholder CMGI Inc, for $2.46 billion in stock. Under the deal, Engage will issue about 32 million shares to CMGI, raising CMGI’s stake in Engage from 80 percent to 87 percent.

“We think that by integrating these companies, we can get out ahead of everybody and create a company that primarily serves marketers,” said Betsy Zikakis, vice president of marketing at Engage, Andover, MA.

The two acquisitions will form a division called Engage Media, which will primarily represent ad buyers – the difference being that networks such as DoubleClick primarily represent Web publishers and, as a result, try to sell premium space and keep rates up.

“We believe there is an inherent conflict of interest between representing sites and representing marketers,” said Zikakis. “This [representing buyers] is a big differentiator.”

However, Adsmart brings with it contracts with about 400 sites. Engage over the next year plans to let most of Adsmart’s contracts run out. But some were signed as late as a day before the acquisition announcement.

“We’re not going to leave these sites high and dry,” said Zikakis.

Another key to this deal is the Engage Knowledge database, which became commercially available in October through a collection of Web sites dubbed AudienceNet. Engage claims its Knowledge database comprises anonymous profiles of the surfing behavior of 42 million Internet users.

Operating under the philosophy that privacy-conscious Net users will never be comfortable giving up personally identifying data online, Engage places cookies (tracking technology) in users’ computer hard drives. Engage monitors Web surfers’ clicking behavior and scores their interests in 800 marketing categories-like autos and golf-on recency, frequency and duration (RFD) basis. The idea is, as someone gets closer to buying a car, for instance, they’ll visit auto-related sites more frequently and the visits will last longer.

Once the consumer buys the car, their behavior will change and their auto-related score in the Engage Knowledge database will drop accordingly. As a result, rather than buying premium content-related inventory on, say, a golf site to reach BMW buyers, an advertiser can reach them through less expensive inventory on any Engage enabled Web site.

All of Adsmart’s 400 sites are Engage-Knowledge enabled, the company claims. Also, Flycast does business with about 1,700 sites, which the company claims it will Engage-Knowledge enable over the course of the next year.

Another important piece of the puzzle, CMGI majority-owned search site AltaVista, remains a separate property because of contractual obligations to DoubleClick. Engage, however, will be able to deliver profile based ads to the site. The site will also contribute to Engage Knowledge database.

Also in the picture is an e-mail services division. Flycast formed a division called eDispatch in August that lets businesses run ads on e-mail newsletters.

Engage Media will be able place profile-driven ads in the newsletters without compromising consumers’ privacy, Zikakis said.

“We can drive profile based ads into an e-mail in a way that we do not have to know who the recipient is,” said Zikakis.

Paul Schaut will remain Engage president/CEO. George Garrick, chairman/CEO of Flycast and John Federman president/CEO of Adsmart will report to Schaut.

Engage has 1,400 clients. DoubleClick, New York, and ad network 24/7 Media Inc., New York, both declined comment.

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