Analyst: aQuantive Poised to Outpace Rivals

NEW YORK Investment bank A.G. Edwards said aQuantive’s technology focus would continue to differentiate the digital ad company in the marketplace, giving it a chance to outgrow the industry.

Analyst Denise Garcia said the Avenue A/Razorfish parent’s proprietary technology, which includes the Atlas ad server and bid management systems, differentiate it from holding companies like Interpublic Group and WPP, while also giving it an advantage over digital agencies AKQA and Digitas.

Thanks to aQuantive’s work in IT systems and marketing automation, A.G. Edwards sees the firm’s addressable market at nearly $50 billion, well above the $31 billion spent on Internet advertising.

Garcia sees the biggest challenge to aQuantive coming in its agency business, which will need to compete with traditional firms that have gained interactive expertise. Still, she believes Avenue A/Razorfish’s systems integration and site-building capabilities provide a competitive advantage.

“Most agency holding companies have entered the interactive media marketplace by leveraging their traditional agency strengths in media placement and advertising strategy but continue to lack systems integration skills such as site strategy, development and technology expertise,” she wrote.

Holding companies have beefed up their digital ad expertise, often bundling Internet buying with their traditional media operations. For example, Publicis Groupe in December bought Digitas in a $1.3 billion deal.

Still, a recent survey by Forrester Research found over half of clients saying their traditional agencies are ill-equipped to handle digital marketing. This was exemplified by Nike’s expression of dissatisfaction with the digital capabilities of its long-time agency, Wieden & Kennedy.

“Until and unless these traditional holding companies and [technology] consultants decide to invest in developing this kind of expertise, we believe aQuantive enjoys a unique and differentiated position between traditional agencies, agency holding companies and systems integrators,” Garcia wrote, adding, “But that position is tenuous.”

A.G. Edwards rates aQuantive’s shares a “buy/speculative,” noting the risks inherent in a new market, expecting its shares to hit $32 from their current $27.