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Wednesday, June 18, 2003

This Just In: FindWhat Acquires Espotting

In a move that surely caught observers and competitors off guard, FindWhat, arguably the third-place player in the paid search industry, has acquired Espotting, a pay-per-click search advertising service that can still claim #1 spot in Europe, and a solid top-five contender overall. This would appear to vault FindWhat from a "tenuous third place" position into a "strong third place," although it's unlikely to threaten Google or Overture anytime soon.

In the wake of the announcement, FindWhat raised its financial outlook for the remainder of the year. It expects to earn a solid $0.46 per share after tax.

Although some will argue that the two companies won't grow stronger as a result of being combined, in fact consolidation is a clear trend in this sector for a number of reasons. In the first place, too many companies are chasing advertiser mindshare. Using fewer advertising services and scaling those listings more widely makes sense to most businesses placing ads online. Second, it's not as easy as it looks to upgrade account management and customer service functions. We tend to think that Findwhat was stronger on the former, though Espotting might have been stronger on the latter.

Those of us who actively use these services to promote client websites will be interested to see what kinds of changes are coming (especially with regard to the convenience of use of the campaign management interface) as a result of the merger. In my forthcoming Pay-Per-Click Advertising Buyer's Guide (expected release date: June 30), Findwhat actually scored slightly higher than Espotting, but both placed well. Findwhat's reach and company management have continued to make strides in the past year, and they've done quite a bit to improve the ease of use of the service. We found Espotting's interface to be less flexible, although customer service was excellent.

Forgive us for speculating on what blockbuster mega-merger may come next in this space. We still have a hunch that a traditional online ad serving company such as Doubleclick may merge with (or, the way things are going, be swallowed by) the likes of Overture or Google. The recent trajectory of merger & acquisition activity in online advertising is surely proof that the companies which do the best job of reducing friction between buyers and sellers (of goods and services, and of the advertising that helps buyers and sellers find each other) are pushing less efficient, less accountable business models into oblivion. Will the data-centric practices of "online ROI advertising" indeed spill all the way over into the mainstream (eg. television) advertising industry?

We thought that "paid search was here to stay" when we first reviewed Goto.com in early 2000. Who would have thought, though, that it would be "kicking ass and taking names" by 2003?

Posted by Andrew Goodman




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