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Analysts and industry participants said this month that consolidation isn't over in the online direct marketing business. On Tuesday, they were proved right.

Online advertising firm

24/7 Media


is acquiring email marketing and communications company


in an all-stock deal valued at $490 million. 24/7 Media's shares fell 3 Tuesday to close at 46 1/2.'s shares jumped 7 13/16, or nearly 42%, to close at 26 1/2.

The transaction confirms market suspicions, explored in a recent


article, that many of the companies in the small but growing online direct-marketing business will wind up as part of larger advertising and email firms rather than continue as standalone entities.

We Hardly Knew Ye

The deal also illustrates how 24/7 Media, itself the subject of

takeover speculation, is aggressively making acquisitions to better compete against two online advertising firms the market has awarded a value several times higher than 24/7's:




Engage Technologies


, which is majority-owned by




"You're going to see continued consolidation in the overall online advertising space," says Susan Walker White, Internet and new media analyst for

J.P. Morgan

. In particular, says White, online direct marketing companies that have gone public over the past year -- like, which went public Nov. 19 at 14 and climbed as high as 36 3/8 that first day of trading -- are likely acquisition targets. "Many of those companies are not going to be around a year from now," she says.

One of the benefits of the deal for, says White, is that it now will have a much broader array of products it can offer customers beyond its core service, which is managing outbound and incoming email for prospects and customers of corporations including

Sony Music Entertainment


Charles Schwab


. White doesn't cover; she has a buy rating on 24/7 Media, for which her firm co-managed the initial public offering and a follow-on offering.


Meanwhile, a linkup with will benefit 24/7 Media in several ways, starting with adding the ability to handle incoming email messages for clients, not just outgoing mail, according to 24/7 CEO David Moore. Saying there would be "little trouble" with integrating the technologies of the two companies, Moore says, "What we end up with is an end-to-end technology solution that allows us to acquire and retain customers for marketers, like nobody else in the business."

Along with other acquisitions, like the purchase of international online ad-serving company

Sabela Media

, 24/7's announcement Tuesday indicates that it wants to operate on its own, White says. "The company clearly has decided they want to be a long-term player in the market," she says. As would be the case with any two companies, she says, 24/7 and face risks in integrating their technical operations. "We'll have to wait and see" how the systems gel, she says.