Ad technology player ValueClick on Tuesday acquired paid search company Search123.com for $5 million in cash.
With the deal, Westlake Village, Calif.-based ValueClick will have a paid search complement to its suite on online advertising offerings. ValueClick will pay privately held Search123 $3.3 million in cash and another $1.7 million to cover transaction costs and certain liabilities. Search123 will maintain an independent identity, operating under ValueClick as a wholly owned subsidiary.
"When you look at the spectrum of all the things going on online, the one missing piece for us has been search marketing," said John Ardis, vice president of corporate strategy at ValueClick. "It's a pretty solid player in the next rotation down" from Google and Overture Services.
The four-year-old Search123 is a bit player in the pay-for-performance search market, maintaining distribution partnerships with smallish players like meta-search engines WWW.com and TurboFind.com. The Agoura Hills, Calif.-based company also provides paid listings for NetZero's personal finance section and Razor Magazine's site search. Search123 boasts 5,000 advertisers.
Ardis said ValueClick hopes to cross-sell its array of online media services to Search123's advertiser base.
While the top players Google and Overture fight over the top portals for distribution, a variety of small outfits serve the lower rungs of the search market, providing paid listings for meta-search engines and niche sites. In addition to Search123, companies like Mamma and ah-ha.com offer paid listings for the lower end of the market.
In a recent report on consolidation in the search industry, Yankee Group analyst Rob Lancaster said the options were few and far between for further acquisitions at the top end of the market.
ValueClick has become a quiet favorite of Wall Street, thanks to its improving results and huge pile of cash. Since the beginning of the year, ValueClick shares are up 80 percent. In the first quarter, ValueClick reported $1.2 million in net income on $19.5 million in revenues. As of the end of March, the company's balance sheet carried $224.1 million in cash and cash equivalents.
