• Red Herring, Friday, June 8, 2007 11 AM

It's all about consolidation in the online advertising industry, which makes the recent decision of Innovation Interactive, parent company of search agency 360i, to buy itself out seem strange. However, in arranging a management-led buyout, the marketing services holding company may be dressing itself up for a resale.

But why did Innovation pull out in the first place? Remember Livedoor? The Japanese Web portal crumbled nearly 18 months ago after it was revealed that a widespread accounting scandal might have misled shareholders. The sell-off following allegations of fraud was so massive, Japan's stock exchange, the TSE, was forced to halt trading. Prior to the scandal, Livedoor had purchased Innovation Interactive, whose holdings include 360i--one of the largest search advertising agencies--the ad auction management firm SearchIgnite and an advertising network. Understandably, the American company wanted out, as Livedoor still finds itself mired in the controversy.

Meanwhile, 360i competitors like DoubleClick unit Performics, the largest search-engine marketing agency, Digitas and 24/7 Real Media were being acquired by ad industry giants Google, Publicis Groupe and WPP Group, respectively. Sensing an opportunity, Innovation CEO Will Margiloff said becoming independent would allow the company to better take advantage of the scrutiny and skepticism with which Google's acquisition is being viewed by some search marketers.

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