The online ad company buys search-engine marketing specialist Performics in a bid to profit from the fast-growing sector.
New York-based DoubleClick sells technology to manage, track and deliver Web advertisements and e-mail promotions. With the acquisition of Chicago-based Performics, it plans to offer advertisers added tools to manage marketing campaigns conducted with search engines, an industry expected to be worth up to $2.1 billion in 2004. In addition, it will provide software to analyze affiliate-marketing campaigns using Performics technology.
The terms of the deal stipulate that DoubleClick will pay an additional amount of up to $7 million, based on Performics' revenue. The deal is slated to close by mid-June, subject to certain conditions.
The acquisition was not entirely unexpected, given that DoubleClick has talked publicly about introducing tools for search-engine marketing this year. The software developer is one of the top specialists in online marketing technology, but it has largely not picked up on the lucrative opportunity in software for search-engine promotions until now.
The Performics product will enable DoubleClick to offer a product that meets large advertisers' need for software to simplify the running of multiple ad campaigns on search engines. Marketers typically bid for hundreds or thousands of keywords on search engines such as Google and Yahoo to appear in query results for those terms. Keeping tabs on bid amounts and the effectiveness of any given keyword is the specialty of Performics' software.
After the deal closes, DoubleClick will offer a new product called DART Search, which will be integrated with its existing ad-management and ad-reporting tools for marketers, the companies said. They also plan to join their management tools, which should help them enlist clients from each other. Performics' 200 customers include America Online, Eddie Bauer and Motorola.
"Our marketer and agency clients have been telling us that they want to work with DoubleClick to build and buy search through our media planning tools," DoubleClick CEO Kevin Ryan said in a statement.
DoubleClick said that Performics expects revenue to rise by 50 percent this year. In that case, Performics would report added revenue of $10 million in the second half of 2004. However, the company's total operating expenses and cost of revenue are likely rise by nearly $9 million during that period, DoubleClick said.
DoubleClick said that it expects Performics revenue to be immediately accretive, or additive, to its earnings before interest, taxes, depreciation and amortization. But it said that it will reduce its earnings per share based on generally accepted accounting principles, or GAAP. That's because it expects charges related to intangible assets, such as intellectual property.
Still, financial analysts applauded the move.
"We believe the deal is much more important than any potential accretion or dilution may suggest, as search has become the fastest growing and the most important area of online advertising," Safa Rashtchy, a Piper Jaffray financial analyst, wrote in a research note.