• by Wendy Davis  @wendyndavis, January 31, 2006

With budgets shifting to non-traditional media, marketing executives expect that interactive agencies will see a frenzy of mergers and acquisitions, as will agencies that specialize in buzz marketing, according to a study released Monday by merger and acquisition firm AdMedia Partners.

Seventy-nine percent of 3,200 marketing executives surveyed in December said they anticipated strong demand for mergers and acquisitions in the interactive marketing space. Fifty-two percent of respondents also expected strong demand for experiential marketing, such as buzz, viral, guerrilla, and event marketing; almost half the respondents--48 percent--foresaw strong demand for database marketing.

Additionally, more than two-thirds of respondents--69 percent--said they were considering entering or expanding in interactive marketing, as did 46 percent for experiential marketing.

Already this year, the experiential space is bearing out predictions. Two weeks ago, a major consolidation was announced: BuzzMetrics agreed to merge with former competitor Intelliseek, and VNU's Nielsen agreed to take a majority stake in both companies.

As demand for interactive shops rises, so will the multiples they can command, predicted the report. The median multiples for interactive agencies this year are likely to range from six to 10 times their operating profits--up from the five-to-seven range last year. Traditional agencies, by contrast, are expected to command multiples of five-to-six times their profits this year, flat from 2005. One respondent was quoted as saying: "Large traditional shops will need to bite the bullet on valuations, but probably won't regret it."