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Avenue A/Razorfish Q3 Revenue Up Sharply

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NEW YORK aQuantive's Avenue A/Razorfish agency continued its strong growth in the third quarter, helped by strong demand for Web site development.

Seattle-based aQuantive said the interactive media and creative agency's 2004 third-quarter revenue increased from $28.3 million to $48.5 million this year. Both its media and site development businesses grew strongly, with the latter improving the most. Revenue from Web media was $15.7 million; revenue from site building was $32.8 million.

"We believe that in due course the Web site will replace the 30-second television advertisement as the central expression of an advertiser's brand," CEO Brian McAndrews said in a conference call with analysts. "TV will not go away, but will increasingly be used to direct consumers to the Web site."

Avenue A/Razorfish is benefiting from this trend by adding new Web site projects, company executives said. "We've had a more robust pipeline than we expected," McAndrews said.

McAndrews said Avenue A/Razorfish clients are now more likely to run campaigns to build brand awareness. "Brand dollars are beginning to follow their direct response counterparts," he said.

Overall, aQuantive reported third-quarter revenue of $78.8 million, up 69 percent from a year earlier. Net income was $9.4 million, compared to $23.6 million in last year's third quarter, which included a onetime $20.6 million gain from deferred tax assets.

Revenue at the company's digital marketing unit, which includes its Atlas ad-serving platform, was $23.5 million, up 51 percent year over year. Operating income was $10.6 million, up from $6.7 million in third-quarter 2004. In the newer performance media unit, home to its Drive ad network, revenue was $6.8 million, compared to $2.8 million in Q3 2004. Operating income was $972,000, compared to $99,000 a year earlier.

AQuantive said its chief financial officer, Michael Vernon, would leave the company in the second quarter of 2006 after five years at the company to pursue other opportunities. McAndrews said the company would begin a search for his successor.

For the fourth quarter, aQuantive forecasts revenue between $78 million and $82 million. Vernon said the company expects 20-25 percent revenue growth in 2006.