Updated from 9:07 a.m. EST

CMGI

(CMGI)

, an Internet holding company that owns a growing array of e-commerce ventures, strengthened its

Engage Technologies

(ENGA)

subsidiary Thursday in a reshuffling that could make CMGI a major competitor to

DoubleClick

(DCLK)

, a leader in online advertising and marketing.

Engage will gain control of

Adsmart

, an online advertising network, and

Flycast Communications

, which conducts research that monitors what consumers are buying on the Web. CMGI purchased Flycast only recently.

Under the arrangement, Engage will purchase the two businesses from CMGI for $2.5 billion worth of Engage stock. That will increase CMGI's ownership of Engage from 80% to 87%.

CMGI fell 1/2, or 1%, to 121 13/16 in midday trading. Engage rose 18 1/4, or 24%, to 94 3/4. Doubleclick fell 4 3/16, or 3%, to 122 5/8. (CMGI closed down 1 3/4, or 1.43%, at 120 9 1/16. Engage closed up 21 1/16, or 27.53%, at 97 9/16.)

"When we announced the acquisition of Flycast last September, we highlighted the complementary nature of these businesses, and today we have begun to fulfill our larger vision for a single, highly integrated Internet marketing company," David Wetherell, chairman and CEO of CMGI, said in a statement.

"By combining the strengths of these three business models, Engage is creating a new entity that will redefine how online marketing is done, well beyond what we see today," Wetherell said.

Paul Merenbloom, an analyst at

Prudential Securities

, said the arrangement would turn Engage into a full-service Internet advertising company that could more aggressively compete with DoubleClick.

"Before, Engage was reactive -- they were waiting for the customer to come to them. Now they are an organization that can work directly with advertisers," said Merenbloom, who rates CMGI a strong buy and has not done any underwriting for the company. Merenbloom does not have a recommendation on Engage.

DoubleClick analysts acknowledged that the CMGI reshuffling would result in a more competitive threat to DoubleClick, but noted that, as of now, the market was big enough for two full-service Internet advertising players.

"There is absolutely room for two companies right now. Will there be room for two in the next five years? We'll have to see," said Tara Long, an analyst at

C.E. Unterberg, Towbin

. Long rates DoubleClick a strong buy. Her firm has not done underwriting for the company.