Aquantive Buy Shows Net Advertising Is Back

The Internet ad business is heating up again.

Online advertising firm aQuantive (AQNT Quote) said Monday it was buying privately held interactive agency SBI.Razorfish.

The $160 million deal, which comes only days after Time Warner's (TWX Quote) America Online said it was buying online ad firm Advertising.com for $435 million, is another example of mergers-and-acquisitions activity in the fast-growing Internet advertising business.

For aQuantive, whose revenue has been growing at the rate of about 50% annually, the deal represents a quick way to expand its presence in the business of building Web sites for major marketers. Seattle-based aQuantive already runs two full-service ad agencies and also has businesses in the areas of serving ads on Web sites and assisting with search engine marketing.

The transaction also serves as a reminder of the changing fortunes of companies that went public during the turn-of-the-century dot-com bubble. Razorfish, one of the biggest stars of New York's Silicon Alley in the late 1990s, had a market capitalization of $800 million after it went public in April 1999, but was bought up by the professional services firm SBI last year for less than $9 million.

The acquisition, aQuantive chief Brian McAndrews said Monday, "gives us an opportunity to continue to take advantage of overall industry growth."

Razorfish's specialty of designing and developing Web sites for corporate clients is complementary, says McAndrews, to what constitutes most of aQuantive's current media business: developing "outbound" online advertising that doesn't necessarily run on a company's own Web site.

"Over time, the Web site is going to become more and more important as part of the marketing mix," says McAndrews. Contributing to that growing importance, he says, is the fragmentation of offline media and the increasing prevalence of broadband connections to the Internet, enabling ever-more-elaborate and interactive experiences.