FloNetwork May Be Only DoubleClick's First Move, Analysts Say

DoubleClick's acquisition of Toronto-based e-mail messaging services provider FloNetwork Inc. is a positive move that will position DoubleClick as a main player in the e-mail market, analysts said. However, they do not believe the FloNetwork deal will be the company's last.

The FloNetwork acquisition not only bolsters DoubleClick's e-mail offerings, but gives the company a quality customer list, they said. The deal allows DoubleClick to substantially increase its market penetration against competitors ClickAction, Digital Impact and 24/7 Media, analysts said.

“FloNetwork's technology will enhance DoubleClick's offering and ability to develop additional e-mail technologies internally,” said Vik Metha, an analyst at Goldman Sachs & Co. “To date, DoubleClick has had difficulties developing an e-mail business internally.”

Metha also said he would not be surprised to see DoubleClick Inc., New York, make additional acquisitions of companies specializing in data and technology services.

FloNetwork will be merged into DoubleClick's Canadian e-mail operations, according to Court Cunningham, DoubleClick's vice president and general manager of DARTmail technology.

The company plans to retain FloNetwork's vice presidents of operations, product management, sales, international and professional services.

Craig Rennick, vice president of sales at FloNetwork, reportedly will run the DARTMail and FloNetwork sales staffs. DoubleClick plans to combine its DARTMail technology with FloNetwork's e-mail service.

The acquisition of FloNetwork is not a replacement for DoubleClick's failed attempt to acquire NetCreations last October, according to analysts.

DoubleClick planned to buy NetCreations in an all-stock transaction then valued at $191 million until NetCreations publicly accepted a third-party merger bid from Italy's SEAT Pagine Gialle for $111 million in cash. DoubleClick received an $8.6 million termination fee from NetCreations as consolation.

But that deal, analysts said, was an attempt to acquire millions of opt-in names. FloNetwork gives DoubleClick the ability to deliver a large volume of e-mail messages on behalf of big corporations such as Procter & Gamble, Continental Airlines and L.L. Bean.

“The acquisition brings immediate scale to DoubleClick's DARTMail product,” noted Vivian Kuan, an analyst at Deutsche Banc Alex. Brown. “The addition of FloNetwork will more than double DoubleClick's e-mail delivery capacity.”

FloNetwork delivered more than 540 million e-mails for more than 125 clients in the fourth quarter of 2000. About 95 percent of its business deals with customer retention.

DoubleClick said it would soon begin delivering more than 500 million personalized e-mails a month.

While FloNetwork is not a large acquisition for DoubleClick, it is a strategic one, according to Dana Serman, an analyst at Lazard Freres LLC. He said DoubleClick's ability to offer services other than just e-mail, such as ad targeting and tracking, bodes well for the company.

The addition of FloNetwork's technology will allow DoubleClick to expand its DARTMail services to include options such as offering triggered e-mail and foreign characters, Kuan said.

“Strategically, we view this deal as a positive as it will bolster DoubleClick's current e-mail offering, which has lagged [behind] the competition in the past but has shown significant progress recently,” she said.

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