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aQuantive springs back in a big way
Seattle Times staff columnist
Some people see Google as the proxy for the current Internet boom — as Google goes, so does Web 2.0.
I wonder, though, if there's a better canary in the coal mine right here in Seattle, at aQuantive. The digital-advertising company was born at the start of the first bubble, barely survived the downturn and fought its way back.
Now a big portion of the ads online are placed by aQuantive on behalf of Fortune 500 clients. It's buying more digital ads than anyone in the U.S., said Jeff Lanctot, senior vice president of Avenue A | Razorfish, aQuantive's ad-agency unit.
The company's also broadening its reach, buying smaller companies to add new services and expanding in fast-growing foreign markets.
It's been on a tear lately. Profits rose 53 percent last year, but that's tough to match. This year it's expecting 9 to 18 percent profit growth, and Wall Street analysts are divided on whether to buy or hold the stock.
Lanctot, whose family published a small newspaper in Sunnyside, Yakima County, wouldn't say much about the company's outlook. But he shared insights into the market when we reviewed the company's latest report on the state of digital advertising.
Despite caution flags such as Wall Street's recent sell-off, he said aQuantive sees "many more opportunities for us in the digital world, and our importance with clients will increase."
Among the surprising trends last year was a return of portals, which reclaimed some of their share of the digital ad market. Lanctot attributed this to the resurgence of AOL, where his agency's billings grew 454 percent last year. AOL pushed Yahoo! and MSN to sell harder, lifting the whole group. "They'll continue to see healthy increases in 2007, but I don't expect they'll continue to gain share," he said.
The firm's also expecting more spending at "community" sites such as MySpace and Facebook, after the category's billings grew 69 percent.
Avenue A is placing ads on more sites — 863 last year, up from 500 the year before — but Lanctot's unsure about whether there's enough to support the big players and the river of technology startups expecting to be supported by advertising.
"I'm just not sure that when we see this breakthrough of ad revenue that enough of it is going to go to that long tail to make all these business models pay off and all these investments pay off," he said. If there is a downturn, Lanctot is confident digital advertising will fare better than traditional media.
"For anyone who believes that digital is so hot that it's going to be protected from economic downturn, I think that's a naive way of viewing things," he said. "You have to be realistic... history tells us that advertising is impacted broadly."
But when companies cut costs, "they funnel money toward those things that are accountable, where they know if they spend a dollar they'll get X back," he said.
I asked if Lanctot thinks Microsoft can catch Google. He said it may still have a chance.
"Their window opens when the digital world is a multidevice world, from an advertising perspective, because right now Google's so dominant on the Internet and the desktop," he said. "Once we see an ad model come to gaming and get established, and mobile and perhaps even television, it restarts the race and it gives Microsoft a chance to leverage adCenter in multiple channels."
Brier Dudley's column appears Mondays. Reach him at 206-515-5687 or firstname.lastname@example.org.
Copyright © 2007 The Seattle Times Company