WPP Acquires Digitaria Interactive - Analyst Blog

WPP Group plc (WPPGY), through its subsidiary, has acquired US-based Digitaria Interactive Inc., which is a renowned digital agency that concentrates in transferring brands to Web applications, devices, appliances, multimedia and other digital media platforms.

Based in San Diego, Digitaria employs about 100 people with Dreamworks, ESPN, FOX Corporation, National Football League, NBC Universal and Qualcomm included in its client base. Total revenue generated by Digitaria in the fiscal year ended March 2010 amounted to $14.3 million and gross asset was $4.5 million at the end of the year.

WPP Group’s subsidiary, JWT Group Inc., which made this acquisition, is a global marketing communication company. The acquisition solidifies its expertise in digital media and is in line with the company’s strategy of expanding into fast growing markets. The company has acquired a 100% stake in Digitaria, which also strengthens its client base.

This is the second acquisition made by WPP Group in the month of August 2010. Recently, the company acquired a 100% stake in the US-based agency Geoff Howe Marketing Communications Inc., engaged in the marketing of animal health, and diet and nutrition products.

WPP Group is one of the leading companies providing advertising and communications services worldwide and operating through a number of established global, multinational and national advertising and marketing services companies. New markets, new media and consumer insights are the company’s three areas of strategic focus. Moreover, the company has a dominant market share in many areas and has the pricing power to improve margins and sustain future profit growth.

However, a highly-competitive market, immense international presence and dependence on a limited number of clients are the prime causes of concern, which may prove to be detrimental to the company’s growth. The prime competitors of the company are Interpublic Group of Companies Inc. (IPG), Omnicom Group Inc. (OMC) and Publicis Groupe SA. We have a Zacks Rank of #3 (short-term 'Hold' recommendation) on shares.

 
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