Media Inc (24/7) - More Acquisitions Followed By Downturn In Online Advertising, 2000-2001

Major acquisitions in 2000 included Exactis.com Inc., a Denver-based e-mail marketing and communications firm, for $490 million in stock. Exactis reportedly sent out more than 10 million e-mail marketing messages a day and had highly scalable, precise e-mail delivery and advanced data mining systems. Following the acquisition 24/7 Mail had 23 million permission-based e-mail addresses under management. Another acquisition involved iPromotions, a market leader in incentive marketing programs. The acquisition added online sweepstakes, incentive offers, premiums, contests, and viral marketing programs to 24/7 Media's offerings. In August 2000 24/7 Media acquired Website Results for $95 million in stock. Through its proprietary technology, Website Results was able to deliver traffic to client Web sites. It accomplished this by performing queries on major Internet search engines and improving a site's positions within search results.

By the third quarter of 2000, the downturn in Internet advertising was apparent. The stock prices of the three largest ad networks—DoubleClick, 24/7 Media, and Engage—were all down approximately 90 percent from their 52-week highs. Although 24/7 Media had diversified into e-mail marketing, Internet banner ads still accounted for most of the firm's revenue. In November 24/7 Media laid off about 200 workers, followed by another 100 layoffs in January 2001, which brought the company's workforce to about 900. While it continued to maintain offices in Europe, Asia, and Latin America, 24/7 Media UK dropped about 25 percent of its client base to focus on top brands. The action marked a rethinking of the firm's strategy to gain the greatest reach in favor of representing only the strongest Web publishers.

News of 24/7 Media's second round of layoffs sent the company's stock price below one dollar a share. The company announced it was evaluating strategic alternatives regarding its cash position and even took the drastic step of delaying the announcement of its fourth quarter results. When the company finally released its financial results for 2000, it reported revenue of $185.2 million, an increase of 106 percent over 1999. European operations posted revenue of $35.8 million, a 501-percent increase over 1999. The firm's three principal sources of revenue were its ad network (68 percent), e-mail (16 percent), and technology (16 percent). Overall, the company had a net loss of $677.1 million for 2000. With the downturn in Internet advertising and an overall economic slowdown, 24/7 Media reduced its reenue forecast for 2001. The company remained confident that the online advertising market would recover by the end of 2001. However, by April 2001 the firm's stock had traded below one dollar a share for 19 consecutive days, and it faced de-listing from the NASDAQ.