Hearst Nears iCrossing Pact

http://online.wsj.com/article/SB20001424052748703594404575191953291549276.html#mod=todays_us_marketplace

Newspaper-and-magazine publisher Hearst Corp. is near a deal to acquire digital-marketing firm iCrossing, according to people familiar with the matter, the latest sign of how publishers are going head to head with Madison Avenue to grab some of the growing revenues from online advertising.

Under the deal, which is in the final stages of negotiations, iCrossing, one of the nation's biggest independent digital-marketing shops, is likely to fetch about $375 million, plus bonus payments if it reaches certain targets, these people said.

ICrossing, whose clients include Travelocity, Coca-Cola and Toyota Motor, has about 550 employees specializing in Internet-search marketing. In the past few years, it has acquired several digital-marketing companies to expand into other areas, such as marketing on social-media sites and Web analytics, or measuring, collecting and analyzing Internet data to aid in ad targeting.

ICrossing is led by Chief Executive Officer Don Scales, the former CEO of Omnicom Group's Agency.com, and Chairman Richard Rosenblatt, former chairman of social-networking site MySpace.

http://adage.com/agencynews/article?article_id=143375

Why would a publisher want a search shop?
"If you're selling media, what do you do with search? I don't know. It doesn't make sense," said Michael C. Seidler, CEO of Madison Alley. "Meredith makes sense -- they sell media, so they can do custom publishing and custom digital marketing to broaden its offering, which they've done well."

Compare that model to iCrossing, which is the largest U.S. search agency by 2008 revenue, according to Ad Age DataCenter. Founded in 1998, the Scottsdale, Ariz.-based agency has made attempts to diversify its services beyond search, though some have called those attempts unsuccessful. ICrossing acquired web development shop Proxicom in 2007, but that integration is said to have gone badly.

ICrossing also offers services in mobile and analytics, though 50% to 60% of the agency's revenue comes from search, according to a spokesman. Across 12 offices, iCrossing counts Bank of America, Toyota Motor Sports and Sears as clients, and it had $120 million in U.S. revenue in 2008, according to Ad Age DataCenter. The agency has attracted $125 million in funding from Goldman Sachs, Oak Investment Partners and other investors.

If it goes through, this deal would speak volumes about the difference between Hearst's agency acquisition strategy from that of Meredith Corp. According to the reported terms, Hearst will get one large shop for a price tag as high as $375 million. Compare that to Meredith's multiple acquisitions across social media, digital, database and consumer relationship management -- all functions that dovetailed nicely with the publisher's existing custom-publishing unit. What's more, execs familiar with the matter estimate Meredith's total acquisitions, taken in $20 million to $30 million chunks, would come in at less than $375 million.

Under such a deal with iCrossing, Hearst, the publisher of Esquire, Good Housekeeping and daily and weekly newspapers, would automatically add 550 digital agency employees. In contrast, Meredith has built its staff of 550 through multiple acquisitions since 2006. Longtime digital agency exec Martin Reidy heads Meredith Integrated Marketing, which encompasses the acquisitions of digital agencies O'Grady Meyers and Genex; social media shop New Media Strategies; database marketing agency Directive; and health-care marketing specialty Big Communications. Last summer, Meredith bought a stake in mobile agency The Hyperfactory.

"What Meredith did was buy creation, which also helps advertisers build customer programs," said Rob Norman, CEO of Group M North America. "What Hearst is doing is buying assets to help distribution ... and, sure, if Hearst is creating content on behalf of clients, they'd want to offer their agencies their best distribution for that content."