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24/7 Real drops ad-hosting price to zero

The company will offer new customers free online ad-hosting through the end of the year, upping the stakes in a fierce price war ultimately aimed at unseating DoubleClick.

24/7 Real Media said Tuesday that it will offer new customers free online ad-hosting through the end of the year, upping the stakes in a fierce price war.

The promotion comes amid a shakeout in the Internet-advertising industry, which has seen several companies shut down. Others have retrenched or merged with rivals in attempts to survive and compete with DoubleClick, the No. 1 player in the market.

"DoubleClick has been No. 1, 2 and 3 from a technology standpoint, and others have been fighting for dead last," said Rich LeFurgy, general partner at Walden VC and a board member of the Interactive Advertising Bureau.

DoubleClick declined to comment on 24/7 Real's fire sale.

Last week, 24/7 Media merged with rival Real Media, becoming the second-largest service offering online ad-hosting. Even before the acquisition, Real Media was peddling its services at 25 percent off to "stranded" technology clients of L90, whose assets were bought by DoubleClick.

Similarly, Engage this week began offering "substantial discounts" to customers of L90's adMonitor and Real Media's OpenAdStream software who were willing to migrate to its own advertising-management program.

A recent advertisement from Avenue A touts not only its technology but also its financial health in calling on former customers of now-defunct MatchLogic (owned by Excite@Home) and Adknowledge (recently bought by Bluestreak) to switch to its services.

By dangling such carrots, companies are hoping to seize some of DoubleClick's power in the advertising technology market. The New York-based company has about 1,000 customers using its Dart for Publishers technology, and it serves about 55 billion ad impressions per month.

"We've removed all barriers for people getting started," said Mark Naples, a 24/7 Real spokesman, adding that an earlier promotion resulted in half a dozen new customers.

Free offers and discounts carry only so much weight in the online-ad market however, according to media executives, who said switching providers can be costly and time-consuming. As a result, discounts will appeal most to companies that do not have an ad-serving provider or to businesses looking to cut costs.

"The 'free' gets the customer in the door, but long term you have to get people trained on the software and adopt new reporting methodologies," said Jerry Quinn, media director at Agency.com's i-traffic, a media planning and buying company. "Much harder for 24/7 is to change those already with an ad server, because their information, data, experience and entire reporting structure are built around" a competitor's system.

Developing a stronger customer base is crucial for 24/7 Real.

The company expects fourth-quarter revenues to land between $10 million and $12 million, with pro forma operating net losses, excluding depreciation, in the $6 million to $6.5 million range, or a per-share loss of 13 cents to 15 cents. The company had about $7.4 million entering the fourth quarter, and PubliGroupe, Real Media's former parent company, is offering a lifeline loan of $6 million and an additional $1.5 million if it reaches earnings targets.

24/7 Real would not say how much the promotion will cost the company or estimate savings to customers, because contracts typically depend on the average volume of ads served. Its free offer will last through the end of the year. The company also is offering new clients introductory rates of 40 percent below standard fees.

Beyond discounts, however, the company's best hope for survival could come from the market's reluctance to hand DoubleClick an unchallenged monopoly.

"We do not want this market dominated by one company, (because) costs will rise, innovation might slow, and service might decrease. It's a very good time for advertisers because the ad servers are continuing to innovate and provide new features," said Quinn. "DoubleClick has to stay on its edge."