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AQUANTIVE INC. Seattle, Washington - Marketing Consultant Rides The Online Wave - Web Ads On The Rise - ...

By MARILYN MUCH

AQUANTIVE INC. Seattle, Washington – Marketing Consultant Rides The Online Wave - Web Ads On The Rise - This company looks to take advantage through its focus on innovation. Advertising is a critical part of just about any industry, but it's not always easy to gauge whether ads are effective.

After all, how do you really know if your ad is encouraging someone to head out and buy your product?

For some companies, the answer is to use tools that gauge the effectiveness of ads. One firm that offers such products is aQuantive Inc.

Its Avenue A and i-FRONTIER ad agencies offer Internet media buying, media planning, creative development and e-mail marketing. Its Atlas DMT unit develops tools to help customers determine how well - and if - their Internet ads are working.

aQuantive has earned high marks from industry analysts for its innovation. An example is last month's launch of ChannelScope, a tool that helps retailers and other land-based firms measure the impact online ad programs have on offline sales.

"They're the only ones offering this (tool) now," said analyst Richard Ingrassia of Roth Capital Partners LLC. "It's an example of aQuantive delivering an analytic tool the market is clamoring for."

In launching ChannelScope, aQuantive not only offers clients an important tracking guide - it also serves as a sales tool for aQuantive.

The company launched ChannelScope after testing it with two Avenue A clients.

In the tests, the data showed that online advertising has a positive impact on offline sales. One test revealed that online advertising directly drove more than 20% of a client's in-store sales, says aQuantive Chief Executive Brian McAndrews.

"We've always believed online ads (benefit) offline sales, and now for the first time we're able to prove there's a benefit," he said.

Toasting Its Success
aQuantive has been building muscle on other fronts as well. Last month it spent an undisclosed amount to buy GO TOAST, which provides what's known as a paid search management and optimization tool.

In this case, an advertiser pays to have its Web site show up as a link on search engines such as Google. The advertiser bids to have its link listed in a certain spot. So a travel firm might pay a certain premium price to have its link listed first in a Google search on, say, Florida.

With GO TOAST, aQuantive manages the bidding process for clients and advises them on how to do the bidding, McAndrews says.

It also helps clients optimize search engine campaigns. aQuantive will integrate these tools with its Atlas suite of tools.

Ingrassia gives the buy a thumbs up.

"GO TOAST adds to their analytical ability on the paid search niche of advertising, which is very hot," he said.

He expects GO TOAST to add more than $5 million in revenue and between 2 cents and 3 cents a share to earnings this year.

Online Shift
Financially, aQuantive was doing pretty well even before the acquisition. Its third-quarter profit hit 5 cents a share, up from 1 cent the prior year. Revenue climbed 70% to $58.6 million.

Analysts polled by First Call expect earnings for all 2003 to come in at 17 cents a share, then more than double to 36 cents this year.

The company should get a top-line boost from the six new clients it signed in 2003, including Alaska Air Group Inc., Victoria's Secret and Starwood Hotels & Resorts Worldwide Inc.

"From the industry side, the most powerful force driving aQuantive's growth is the shift in marketing budgets from traditional ad channels to the online channel," Ingrassia said.

One reason for the move is that online advertising is gaining credibility, CEO McAndrews says.

"We're seeing a shift in attitude in prospects and traditional companies that a year and a half ago would have asked, "Why should (we) spend money on online ads?' " he said. "Now (they're) asking how they should do online advertising."

Online ad spending in the U.S. rose 14.8% to $6.9 billion in 2003, estimates emarketer.com, an industry tracker. It expects such spending to rise 13% to $7.8 billion in 2004.

A couple of years ago the trend was heading in the opposite direction. aQuantive lost money each year from 1998 through 2001. The early losses were mainly due to heavy spending on infrastructure. Then it got hurt by the dot-com crash.

"A good amount of our early growth came from dot-com clients," McAndrews said. "When a lot of (these) companies started to struggle we felt the pain (too)."

The financial picture began to brighten in 2002, when aQuantive turned its first profit. It has since built a stable of traditional land-based clients such as Best Buy Co. and Eddie Bauer.

To maintain its momentum, the company likely will eye internal and external growth vehicles.

"We don't need acquisitions, but we're profitable and have a lot of cash, so we feel we should be open to opportunities," McAndrews said.

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