Circa 1979, General Mills launched Fruit Corners Fruit Roll-Ups, creating what was supposed to be a more fun and efficient way to deliver children the vitamins naturally found in fruit. The original flavors were launched nationally in 1983. By the mid-1980s Fruit Corners was a $10 million advertising account and children everywhere sang along with this commercial.
Well, we are all singing about roll-ups again, although this time it has more to do with an efficient means of running a search operation than it does with your Star Wars lunchbox. In fact, the roll-up strategy has become topic du jour. From the engine’s battle over who gets YouTube to how search engine marketing firms can achieve economies of scale, it looks like the sector is due some more M&A.
The Jordan, Edmiston Group Inc., an investment bank in New York, reported that the number of transactions in the third quarter of 2006 were 25 percent higher than in 2005. Interestingly, the categories where SEM fits best — online media and marketing and interactive services — represented 50 percent of the total media and information deal activity. There is little to suggest that such activity would decrease in the near future.
With that in mind, here are a few flavors of Search Fruit Roll-Ups I am anxious to see:
· Awesome Agency Apple. There is nothing more basic than an apple. I’m surprised we haven’t seen more agencies aggressively buy the talent and tools to build a proper search offering. I suspect a few are en route, and expect to see this flavor launch soon.
· Strawberry-Flavored SEM. Rumor has it that some of the larger SEMs have been mulling over the acquisition of smaller players in hopes of growing fast and achieving economies of scale. Beware, however, that a roll-up will not revive a stagnant firm or suggest growth when there is none.
· Peachy Private Equity. We sometimes forget who has the largest purse. There has long been talk of a private equity effort to build the better machine. This just might be the next thing. Very juicy.
· Tropical Technology. Leave it to the techies to get wild and crazy. With search serving as a pillar for many businesses, it is likely that some targets be absorbed for purposes other than the obvious.
· Grape Google Gobble Up. Last, but not least, Google clearly has the cash to pick up threats or opportunities. If it’s not Greg Sterling’s GoogTube, I do expect Google to complement its offering with a mega-deal in the near future.
Of course, more than 50 percent of mergers and acquisitions result in failure for a variety of reasons. One golden rule to remember is that some flavors simply don’t go together. As my friend Keith said, “Some companies are apples. Some are oranges.”
And I dare say I’ve never seen apple-orange roll-up.
