Stock Answers
Promotions.com restructures as its share price dwindles.
Promotions.com last month laid off 13 percent of its workforce as part of a corporate restructuring designed to turn around the still-developing marketing company’s recent Wall Street woes.
The online promotions agency eliminated 25 positions and merged its direct marketing unit into the Webstakes.com consumer-focused division. The moves are expected to save $3 million to $3.5 million annually, and were seen as a bid to assuage investors who have watched the company’s stock price plummet from a high of $22 per share in January to less than $1 per share in early October.
“We have rededicated our resources to eliminate duplication and improve communication,” ceo Steven Krein said in a release announcing the moves. Company executives declined additional comment on the changes.
News of the reorganization came one week after Promotions.com unveiled third-quarter estimates projecting revenues of $6.4 million to $6.9 million and a net loss between $5.8 million and $6.5 million. If the numbers are accurate, it would mark the first time the four-year-old company’s revenues did not increase from quarter to quarter.
Since bursting onto the promotion scene last year, Promotions.com has grown rapidly, nearly doubling its staff and moving into bigger New York City offices (June PROMO). It spent $14.8 million on sales and marketing efforts in the first half of 2000, more than three times the total in the first half of 1999. It has also been establishing alliances in such overseas regions as Asia and Latin America.
The company has conducted campaigns for such big names as Kraft Foods, General Mills, and the World Wrestling Federation this year as it seeks to focus its business more on behind-the-scenes strategy and execution work for clients and less on the consumer-focused Webstakes.com operation (which lets marketers buy into regularly scheduled sweepstakes and contests). It worked with almost 300 clients in the first half of 2000, compared with 72 in the first half of 1999.
The erstwhile direct unit uses the database information compiled through Webstakes.com to develop email promotions.
The company’s Customs Solutions Group, largely unaffected by the restructuring, is run by a pair of industry veterans, Steve Caputo and Chris Bragas, both of whom previously worked at sweepstakes specialist Don Jagoda Associates.
The disparaging eye Wall Street has recently cast on public marketing services companies is having a significant impact on the promotion agency community. Cyrk, Inc., which owns Los Angeles-based Simon Marketing, is currently working with Donaldson, Lufkin & Jenrette to explore strategic alternatives for the future in a bid to jump-start its market value (October PROMO).
Likewise, promotional products distributor Ha-Lo Industries is in discussions to sell its Upshot agency division as it seeks to turn around a stock price that fell to $4 per share in September, its lowest level since July 1995. Ha-Lo acquired Upshot in June 1998 for 3.3 million shares, which at the time were worth more than $60 million.
NOVEMBER 2000 Former PROMO 100 member Fusion 5, Westport, CT, was acquired by Added Value, a London-based strategic-marketing consultant owned by the Tempus Group. Added Value will use the Westport shop as a springboard into the U.S. market. Seven-year-old Fusion 5 specializes in strategic development and consulting for marketers targeting teens, young adults, Latinos, and urban audiences, and has worked with Ford, Nike, Coke, and Disney. Founders Patrick Meyer and Robin Austin will continue to lead the agency.
Chicago-based DraftWorldwide, part of the Interpublic Group of Companies, purchased Toronto-based Fuel Advertising, an agency with $11 million in billings and a client list that includes Hudson’s Bay Co. and the Ontario Ministry of Tourism. It was Draft’s third Canadian acquisition in less than two years.
Ha-Lo Industries, Nile, IL, added Internet marketing muscle to its Upshot agency division by acquiring Westminster International Computers, Inc., a Toronto company that uses patented technology called YourMail to build Web pages and deliver personalized e-mails. Financial terms were called “immaterial.”
Marketing Drive Worldwide, Wilton, CT, gained more corporate branding expertise when parent True North Communications acquired Luxon Carra, a global shop with offices in San Francisco, New York City, London, and Hamburg. Luxon will be merged with New York City-based brand identity firm The Peterson Group. The agencies’ two principals will remain in their roles, reporting to Marketing Drive brand and design president Steve Lawrence.
