Internet Marketing Sector Ripe for Consolidation

A fragmented internet marketing sector is ripe for consolidation in 2007, according to a new study by AdMedia Partners. The study surveyed 3,200 advertising and marketing services executives, 70 percent of whom said they believe there would be “strong” M&A activity in the internet marketing sector in 2007, AdWeek reports (via MarketingVox).

The respondents said they expect the mergers to be fueled by the shift of budgets to digital marketing, along with the need of advertisers to further integrate their online and offline services, rather than relying on a roster of many standalone service providers.

The study’s findings include the following:

• Increased merger and acquisition activity by both strategic and financial buyers, with the only concern being the quantity of quality acquisition targets - creating premium valuations for such firms.

• The most deal activity is expected to be in search marketing, analytics, mobile marketing and buzz/viral/guerilla marketing, closely followed by online lead generation and database marketing/CRM.

• Some 87 percent of survey respondents expect to approach or be approached about an acquisition in 2007, and roughly half of the respondents expect to complete one transaction as a buyer or seller.

• The U.S. holds the most growth potential for mergers and acquisitions of advertising and marketing services, though a strong minority say Asia, with emerging markets China and India and a resurgent Japan, is the most promising.

• Some 25 percent of survey respondents say they expect to be involved in a transaction outside the U.S.

“We believe 2007 will be marked by transactions that facilitate integration of online and offline marketing services as well as by campaigns across digital devices like cell phones, PDAs and television,” AdMedia Partners Managing Partner Abe Jones said in a statement.

“In addition, the internet is causing a reexamination of how media companies reach consumers through evolving marketing services. Meredith Corporation’s recent acquisition of two interactive agencies, Genex and New Media Strategies, highlights this trend.”