• by Ross Fadner , June 28, 2004

Seattle-based marketing services company aQuantive acquired SBI.Razorfish, the world's largest interactive agency, on Monday for $160 million in cash and convertible notes. aQuantive executives said Razorfish will be combined with Avenue A and rebranded as Avenue A/Razorfish, making the joint company the largest independent buyer of interactive media on the Web, and the fourth largest interactive agency overall.

Avenue A will cover the media buying and analytics dealing more closely with Web publishers, while Razorfish will focus on marketing and technology services. SBI.Razorfish currently provides Web development and design services for a bevy of corporate clients. AQuantive expects Razorfish's services to complement offerings from both Avenue A and i-Frontier, the latter of which will remain a separate entity. The joint venture will enable Avenue A/Razorfish to offer large brand advertisers Web site building and brand management services, along with media buying.

SBI.Razorfish's existing clients include 25 of the Fortune 100, including Kraft Foods, Visa, Microsoft Corp., and the Ford Motor Co. Avenue A/Razorfish's combined client roster will include more than 50 client relationships. The acquisition will have no impact on DRIVEpm and AtlasDMT, aQuantive's other properties, according to aQuantive executives.

Jonathan Nelson, chairman and co-founder of Organic, a rival in the Web development and marketing services space, said that the Razorfish acquisition means that the market will look at aQuantive somewhat differently, positioning it more as a marketing services firm He said the acquisition would double the size of the company, and could present it with "integration issues."

JupiterResearch associate analyst Nate Elliott noted that aQuantive acknowledged that it may have some problems integrating the two companies, but said that any company that has made as many acquisitions would have initial problems with integration. "This is a company looking to extend its services into everything they don't do. Site building is something they don't do," he said.

AQuantive's Atlas DMT unit acquired Go Toast late last year, and in late 2002, the company snapped up iFrontier, a Philadelphia-based online creative shop with a stable of pharmaceutical clients. The company's purchase of Razorfish is expected to close in late July. SBI Group, who is selling Razorfish to aQuantive, originally purchased the company in November 2002 for $8.2 million. Razorfish is privately held and has over 500 employees, with offices in New York, San Francisco, and Chicago.

In 2003, Razorfish had net revenues of $93 million; it is expected to increase its revenue by 10 percent in 2004, according to aQuantive. Provided the acquisition is complete by the end of July, Razorfish is expected to generate $41 to $43 million for its new owner in 2004. In April of 1999, after the icon of dot-com excess went public, it was valued at $800 million. Razorfish was bought by professional services provider SBI last year for less than $9 million.