• by Ross Fadner , December 22, 2004

Marking the first significant acquisition of a top-tier search engine marketing firm by a major holding company, Isobar, the digital agency network of UK-based Aegis Group said on Wednesday it would acquire search firm iProspect for $50 million. This deal marks the seventh overall acquisition for the global agency network Aegis, which now owns major interactive shops in France, the U.K., Germany, and Spain. In total, Aegis, a London-based advertising conglomerate, has more than 350 clients through 36 offices in 24 markets worldwide, including major brands like Adidas and Pfizer. Other U.S. properties of Isobar--formed by Aegis in July--include Carat Interactive and Freestyle. iProspect, which employees 85 people, will continue to operate as a stand-alone entity, as do the rest of Isobar's digital brands.

Aegis will pay an initial $32 million for iProspect with a further $18 million deferred and payable over two years, subject to performance. In total, the interactive ad shop network has billings of $500 million and projected revenue of $100 million. Isobar will be gaining 68 new clients through the iProspect acquisition, according to a company spokesperson. iProspect executives will now report to Nigel Morris, president of Isobar Worldwide.

iProspect's bid management and analytics tool, iSEBA, will slowly be rolled out across Isobar's agency network, said Sarah Fay, president of both Isobar U.S. and Carat Interactive. Isobar's roll-out of iSEBA has "huge" implications for Isobar properties outside the United States, said Fay, because almost all overseas interactive agencies currently outsource pay-per-click bid management tools to American search firms and technology vendors.

Fay said the iSEBA platform will allow Carat--Isobar's largest American property--to serve and manage paid inclusion and search engine optimization campaigns in-house. Carat's existing search marketing team, lead by Ron Belanger, handled paid search and organic optimization, but had to outsource paid inclusion and license its optimization technology from another vendor.

JupiterResearch analyst Niki Scevak said the iProspect acquisition is "certainly the most noteworthy transaction" of a search firm by a major player in interactive marketing to date. He said that other noteworthy search firm acquisitions have been primarily technology-based, particularly aQuantive's acquisition of GO TOAST, 24/7 Real Media's acquisition of Decide Interactive, and DoubleClick's acquisition of Performics earlier this year.

"You'll see a lot of similar transactions next year," he predicted, adding, "direct marketing agencies will lead the consolidation."

At least one search marketing firm plans to stave off all offers in the short term. Richard Hagerty, chief executive officer of Impaqt, said the firm has turned down several offers potential buyers and will continue to do so. "Being specific to search allows us to innovate faster, instead of having to go to an executive board for approval," he said. "Since the search engines change so quickly without telling anyone, we need to be able to turn on a dime," he added.