Strong Avenue A Growth Shows Hope for Online Ad Industry

Exceptional growth at interactive agency and marketing technology firm Avenue A, Inc. could be a sign that overall online ad industry recovery is on its way.

The recently named AdWeek Independent Interactive Agency of the Year and Media Magazine Bronze “e” Planning Award winner has seen “more and more traditional companies spending more and more dollars online,” according to president and CEO, Brian McAndrews.

While the industry continued to struggle in 2002, Avenue A showed significant boosts in revenue which rose to $132.7 million for full year 2002 from $89.6 million for full year 2001. 2002’s Q4 revenue grew to $44.4 million, compared to $24.4 million in Q4 2001. High Q4 numbers are partly attributable to an MSN 8 online ad blitz and Eddie Bauer cross media campaign.

During its first year as a stand alone unit, Avenue A’s digital marketing technology arm, Atlas DMT signed over 60 agency clients including TBWA\Chiat\Day and Carat Interactive. Avenue A also acquired interactive ad agency i-Frontier which served to supplement Avenue A’s somewhat lacking creative capabilities that, according to McAndrews, were a “handicap” in the past.

Company specific changes only show part of the picture. Avenue A may be experiencing a rising tide which could lift all online ad industry boats in the future. McAndrews points to greater online media consumption stealing market share from traditional media outlets. A new report from Nielsen//NetRatings shows slow but steady shifts online among Fortune 500 advertisers; 286 launched Web campaigns during Q4 2002 as compared to 270 in Q4 2001.

A move by branded publisher sites and portals towards working with agencies as opposed to directly approaching advertisers is evident in Avenue A’s push to partner its advertiser clients with portals, as well as the agency’s recent publishers’ summit in Seattle.

“There were issues in the past with long term portal deals, but portals are working with us to measure effectiveness,” stresses McAndrews. “The tone has changed.”

Advertisers are also starting to see online efforts as a means of boosting offline sales. To better assist its retail clients, Avenue A is developing methodologies for measuring how online advertising drives offline sales. The firm hopes to roll out the beta-stage technology and tracking based measurement services to more clients in the future.

Wide advertiser adoption of search engine marketing also contributed to Avenue A’s growth in 2002. The company’s focus on direct marketing and analytics fits in well with the data-driven goals of search marketing. Avenue A has developed close relationships with Google and Overture, and measures search performance by comparing different campaign components as well as search engine to search engine results.

Avenue A expects 2003 revenues in the range of $160-$180 million, with gains coming through its existing client base as well as through new clients.

The company’s growth is a positive sign for the online ad industry as a whole, says McAndrews. “We think others will follow,” he predicts. “The reason our results are strong is because our clients’ results are strong.”

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