"This is a good name to play the shift of dollars online," said the Merrill Lynch team, headed by lead ad industry analyst Lauren Rich Fine. "aQuantive is a leading independent interactive agency that is participating in the growth of online regardless of format and continues to be increasingly valued for its Web development and media services as companies increase their focus online."
Wall Street is also keen on Digitas, the other major "pure play" interactive agency holding company, noting that they are strong rivals to the interactive units held by the traditional holding companies and suggesting that either or both may ultimately be acquired by one of the Big 6: Aegis Group, Havas, Interpublic, Omnicom, Publicis and WPP Group. Aegis, the parent of Isobar and Carat, however, may not be freestanding much longer. Havas Chairman Vincent Bollore, also the largest shareholder of Aegis, continues to make noises about gaining some influence on the Aegis board and potentially control of the company.
Among the traditional agency holding companies, Merrill Lynch expressed a strong recommendation only for Omnicom, citing its consistently strong quarterly growth, and the fact that it has the largest mix of "marketing to advertising services, which is serving the company well in an increasingly fragmented media space."
That fragmentation is being accelerated in part due to the transition to digital media, and the shifts are beginning to impact the growth rates of traditional and interactive agencies.
While average rate of growth of traditional agencies has slowed down over the past 15 years, digital shops are on a steep upward curve.
"Internet advertising continues to grow at a very fast pace and these agencies will clearly benefit from the continued shift of ad dollars online," the securities firm said. "Digital agencies have been generally seeing 20-30%-plus organic growth, which is in-line with online advertising growth. Digitas, whose roots are in direct marketing, still does a fair amount of direct marketing, resulting in a lower than average growth rate, but on the online side is still keeping up with online industry growth."