Well, if everything we are seeing now since mid-2003 is reminiscent of the Web’s first show of force (1994-2000), then today’s announcement that Doubleclick bought video ad company Klipmart is both surprising and not so surprising.
First off, let’s consider the fact that Klipmart is a video ad specialist known for their premium, high-end campaigns, creative and platform. The company has been on the rise and judging by their CEO Chris Young alone, have solid management and brain power in the space.
DCLK’s Dart Motif is an advertiser favorite (along with aQuantive’s Atlas suite) but as of last year was an investor dog. That’s why San Francisco buyout firm Hellman & Friedman LLC for roughly $1.1 billion. The company was playing the red hot online advertising sector, but since many view ad serving as a commodity, it could not get the kind of premium pricing in its stock. The one-time stock market darling was trading in a rut and it actually made a lot of sense to take the company private, spruce it up to one day sell it to a larger player, a competitor or simply spin it off in an IPO once again.
I know, we’re not in a bubble, this time it’s different. And you know what, it sort of it. Klipmart realized that alone it would have a hard time competing in a tough, overcrowded rich media space. I should know, for five years I worked in sales for an online publisher and the options for rich media were plentiful: Klipmart, Unicast (who itself was sold for $100 million to Viewpoint), Eyeblaster and Dart and Atlas’ own products makes the space sexy but extremely competitive.
But, the deal makes sense for both: DCLK immediately becomes much more interesting to agencies and advertisers, because they now can offer A to Z solutions to clients, and they secure some bright leaders in online video in Mr. Young and company. Read more about the deal here.
What’s interesting to note though is that DCLK’s benchmark / competitor / comparable aQuantive is worth $1.85 billion, so it’s safe to assume that such a deal would make DCLK worth more than the $1.1 billion the private investors paid for it. However, you and I both know that like venture capitalists, private investors do not get into a company to make a “paltry” 70% return, but considering that the Klipmart probably cost DCLK something in the $35-100 million range (I know, wide range, but I do not have much data on the privately held companies and am going off the Unicast deal and Paid Content’s website) it might be a worthwhile investment as Klipmart is sure to jack up DCLK’s multiple.
Note that I own shares in aQuantive as well as DCLK until it went private.
Tags: Internet & Web, M&A, Video|
Posted By: Ashkan Karbasfrooshan | Jun 29th
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