| SIZE MATTERS Especially as more marketers are looking for agencies that can handle their global marketing duties. Need proof? Look at the 1,000-person shop WPP is setting up for Dell. (And it's perhaps no coincidence WPP made several major purchases in 2007, including Schematic, Blast Radius and 24/7 Real Media.) Look for agencies and holding companies to continue to grow in 2008. |
| INTERNATIONAL INTEREST Thanks to the weak-dollar effect, several industry prognosticators suggest we'll see more international firms looking to snap up American companies. "On a per-employee basis, the U.S. is still a cheap market, as hot as it is," said Michael Seidler, CEO of Madison Alley Ventures. |
| NEXT-GENERATION AGENCIES Whether you want to call it an aQuantification of the business or an inevitable trend as more money moves to digital, a new crop of agencies rooted in search or digital creative are trying to expand into other areas and create a new breed of agency. AKQA, with private-equity investment, has been aggressive in this space. Also watch for the formerly search-centric iCrossing and 360i. |
| ANALYTICS WILL BE HOT -- AND EXPENSIVE As more marketers laser in on return on investment, expect the value of firms such as Web Trends, CoreMetrics and Omniture, which has been steadily gaining since its mid-2006 IPO, to rise. "It's driven by supply and demand and right now there's not enough really good companies across the sector," said Linda Gridley, president and CEO of Gridley & Co. |
| MIXED IPO PERFORMANCES Ms. Gridley's firm has tracked new IPOs for several years. She said there were five in the internet business in 2005 and four in 2006, and the share values of all but one have risen. In 2007, performance was mixed -- a trend she expects to continue. "You can get higher returns, but the risk is greater," she said. |
| THERE'S ALWAYS A BIGGER FISH If it seemed like all the big acquisitions already happened (Google-DoubleClick, Microsoft-aQuantive), think again. Likeliest candidates for giant acquisitions? Those with more than one technology or silo, said John Hawkins, partner at Generation, a coastal venture-capital firm. He said AOL is a great example of this philosophy -- even with all its 2007 acquisitions, people are already wondering where it will be when 2008 ends. |
| COMMERCE IS BIG If investments in commerce and transactional companies seem unfashionable, think again, advises Ms. Gridley. "They are at the heart of data centric and consumer-behavior-driven marketing." |
| STRANGE BEDFELLOWS At the onset of 2007, would you ever have guessed Microsoft would own an ad agency? "Ten years ago you had offline agencies buying online agencies," said Mr. Hawkins. "Now you have tech companies coming into the space. ... Tech companies, ad agencies and ad networks -- they're all coming together." |
| VERTICAL AD NETWORKS Expect media companies to continue to invest in this space, either acquiring or building out their own vertical ad networks. The idea behind the trend: While a magazine or TV net might have great reach in their specialized offline space, it's difficult to garner that scale online -- so they seek to aggregate and sell related sites. |
AD-NETWORK CONSOLIDATION
Then again, there are too many ad networks, said Mr. Seidler. This sector has seen astronomical premiums but having too many players negates the advantage of networks: scale. He suggests high-margin rich media networks and those with deep analytic backbones will grow more expensive while the price of commodity networks with lower margins will fall.
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