AQuantive: The Ad World’s Model Performer

For aQuantive, times are good. Last week, it reported revenue growth that dwarf those of traditional holding companies. Granted, the percentage gain comes off a tiny fraction of the revenue base of those companies, but the growth—due largely to its structure of combining services, technology and media—is enviable to most.

The company’s Q4 revenue was up 53 percent from a year ago to $133.4 million, and profits nearly doubled to $20.4 million. With $278 million in cash, the company plans to expand its Avenue A/Razorfish agency network into new markets and extend its Atlas ad server into video on demand and elsewhere.

And now, several private equity firms are considering backing rollups that mimic its model. But aQuantive CEO Brian McAndrews warns that may prove difficult. “It would be hard to start from scratch, slap three companies together and have a new aQuantive,” he said.

McAndrews cites DrivePM, an ad network that buys banner ads and resells them using targeting technology. The unit brought in $52.3 million in 2006. “A company in Atlas’ space alone or Avenue A/Razorfish’s business alone would never have created it,” he said. “It took aQuantive having both pieces to have enough understanding.”

The challenge, said Piper Jaffray analyst Aaron Kessler, is aQuantive holding its own against big holding companies’ integrated offerings. McAndrews is sanguine: “I believe all media will become digital. Our belief is all agencies will be digital agencies.”