• by Laurie Sullivan , Staff Writer @lauriesullivan, June 4, 2010

Throw traditional out the window and stop thinking like a creative in a print publication waiting for someone to turn the page. It's outdated. Only those who believe everything you know about online advertising continues to become outdated shortly after it hits the Web will succeed. That's how technology companies profit and thrive, by continually innovating, and now ad and media buying and service agencies must do the same to survive.

Publishers have begun to evolve, too, especially when it comes to their thoughts on search marketing. Hearst Magazines announced Thursday it acquired iCrossing and will roll the company into Hearst Marketing Services, a new business unit led by Matthew Petersen, senior vice president at Hearst Magazines who previously held a similar position at Meredith.

Not surprising, Hearst's plan to build out its marketing services will concentrate on digital. A couple of ad and search execs who have met with the Hearst media team say they "don't get search. With online publishers falling behind, it's not uncommon to see a publisher the size of Hearst trying and play catch-up by acquiring a company strong in search market and digital media, though Forrester Research named iCrossing as one of the top search firms in 2009.

Hearst's acquisition of iCrossing is likely to inspire other similar agreements, according to Scott Brinker. Ion Interactive's president and chief technology officer says in the short term traditional media companies and others supporting old businesses will come under threat by the dynamics of the digital world still have money and power to buy their way into the future.

In the long term, the architecture of the "future" media company continues to emerge, but it makes sense that search marketing and an integrated Web experiences should become a core competency of publishers, Brinker says. For him, the question becomes will Hearst become successful in incorporating iCrossing's services into their overall strategy and leadership.

For others, the big question remains whether this combined company creates a conflict of interest for the publisher. Could the deal put Hearst in competition with media agencies? Aaron Goldman, principal at Connectual, who tells me independent stand-alone SEM firms are a rare and dying breed, says it it's a total conflict of interest for an agency that buys media to be owned by a publishing group.

It's akin to MSFT owning Razorfish or Google owning Performics, both of which have since divested those assets. However, there is precedent for this with Meredith buying Genex and New Media Strategies in late 2006 and early 2007, Goldman says. "Still, iCrossing will undoubtedly continue to serve and chase business with marketers that might otherwise work with different digital shops," he says, noting the company will likely spruce up its own properties to generate more traffic.

Similarly, Adam Heimlich, Razorfish group search director, who worked at iCrossing in 2005, calls the Hearst/iCrossing relationship "strange, a conflict of interest." Maybe as a media buying agency for other publishers other than Hearst, but I view iCrossing more as a technology company that provides bid and feed management, SEO automation, display ad serving services, optimization, and dashboard reporting. The media buying would sit on the sidelines for the dozens of Hearst publications, both online and offline.

Industry execs agree iCrossing's SEO and paid search services for the online versions of Hearst's magazine portfolio provides obvious synergies. But a "neutral" media buyer looking for the best place to insert a campaign would find conflicts when trying to determine where to place ads for iCrossing clients like Coca-Cola, Bank of America, Epson and Toyota in other publications other than Hearst's.

Heimlich says you have to compare the price they paid for the company with the price they would pay to rent out services from another agency. A brand could hire Razorfish, for example, to work fulltime for less than $350 million, the reported sale price. For Heimlich, it makes more sense to believe Hearst wants a new revenue stream and plans to get it through iCrossing's media buying and professional services business.