16 March 2007

Can BlueFreeway survive the Web 2?

Here at DIFFUSION we all witnessed the meteoric rise and soporific fall of digital agencies during the late 90s. Indeed, we were there in London and New York when they tried to recruit us to their agencies. The list is long and the names mostly forgettable: Scient, Viant, Deepend, Zentropy, Monday, Razorfish, Digitas, Lante, USWeb, CKS, Spray, China DotCom. Even in Australia, the likes of Attik, Spike, Deepend, MarchFirst, Razorfish all came and went with only smaller agencies and the larger integration houses surviving. So why is BlueFreeway going to be any different?

Their model is similar to those of companies like the Nasdaq-listed aQuantive, who acquired the Razorfish in 2004 and now works with leading brands to build large-scale websites and the digital marketing programs that drive traffic to them. Like BlueFreeway, aQuantive is an aggregator of digital design, marketing, performance and advertising services and has been busily acquisitive with no less than 12 companies in its portfolio spread from Avenue A/Razorfish in New York to Amnesia in Sydney. Like BlueFreeway, they range in size and market footprint.

Last week the ASX-listed BlueFreeway announced a combined profit growth of 27% across its group of companies for the six month period ending December 2006. While it was great news for those who managed to get shares in the oversubscribed float, the sustainability of the model is still under question. The results were unaudited and excludes costs associated with the Destra, which are already attacking the bottom line. Most of the agencies in the BlueFreeway group are small and perhaps with the exception of Spin and hosting company Destra, subject to the same kinds of market vagaries and pursuit of the unknown that killed so many of the more pioneering aggregation plays in the late 90s. More interestingly, like aQantive, the challenge will be see if this model can really make the kind of impact that CEO Richard Webb was able to with his former company RedSheriff. Or does Web 2 leave companies founded on old notions of how to build revenues (the traditional agency/service model) floundering?

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