iCrossing on the Verge of Being Acquired by Hearst – What Does It All Mean?

By David Levy, Director, Marketing & Business Development

As recently reported, it appears as though Hearst Corporation is close to acquiring the digital marketing agency iCrossing.

Clearly, we’ve seen similar moves by publishers in the past, when Microsoft acquired aQuantive, and when Meredith Corporation acquired Genex and New Media Strategies.

On one hand, it seems to make sense – a large publisher with a significant online presence acquiring a large digital marketing agency. On the other hand, you begin to wonder what the real value is to iCrossing… as well as Hearst, its publishers, its audience and its advertisers. Here are some thoughts…

First, the positives:

• New Revenue Channel – this is the obvious one. Hearst will now have a completely new revenue stream. By adding a top digital agency underneath its umbrella, it just added over $120MM in incremental annual revenue to its top line.

• More Ad Revenue – search provides a wealth of data around audience intent. We can see where people land on a site, how much time they spent there, what keywords they searched to get to a specific piece of content, etc. Well, Hearst is in the publishing business, which means they’re in the ‘selling ads on our sites’ business. The deep consumer analysis and data that iCrossing could bring to the table would allow Hearst to better understand its publishers’ online audience. This leads to higher CPMs charged to advertisers by serving more targeted ads.

• Grow Audience Share – Hearst will be able to leverage iCrossing’s SEO expertise to better optimize its publishers’ digital content. By having better optimized digital content, online users can more easily find it, which would allow Hearst to attract larger audiences to its network of sites… and thus grow both audience share and (as mentioned above) ad revenue.

Now, the (potential) negatives:

• Conflict of Interest – much like when Microsoft bought aQuantive, there will undoubtedly be concerns over whether iCrossing will be incentivized to promote the buying of ads on Hearst-owned sites. This could lead to media plans for its clients that are built on internal interests as opposed to objective data and business goals.

• Innovation (or Lack Thereof) – Hearst is a huge corporation… and huge corporations have a tendency (certainly not always though) to move slowly in this area. How will iCrossing (one of the last significant independent digital agencies) react to new processes and systems that will likely be imposed by its parent? This culture change could limit its speed to market with new and innovative products/services.

• Relevancy – at the end of the day, it seems like this could be a case of “selling to the highest bidder.” Sure, there are a wealth of potential benefits, including those that I’ve listed above. But, how much more growth could iCrossing experience if it sold to a technology company that could help build upon its existing search technology platform? Or, if it sold to a holding company that could integrate its search expertise with social media, word of mouth, PR, etc. to build new products?

I’m very interested to see how this plays out… but my gut tells me this is about money, and hey, who am I to say there’s anything wrong with that?

And there are also plenty more potential implications than those I’ve listed here…

So… what do you think?