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Web Development - Tuesday, July 31, 2007

SEM Firm iCrossing Buys Web Builder Proxicom

Arizona-based SEM giant iCrossing has bought Proxicom for an un-disclosed amount from Gores Technology. The deal was financed by a funding round last week by iCrossing where it raised $62M from Goldman Sachs and some VC firms.

Now iCrossing says it is buying Proxicom and with it $100M in annual revenue, as well as 500+ people in 12 offices. This will more double iCrossing's size and enable it to go public earlier.

As Marketing Pilgrim reports, "iCrossing’s acquisition of Proxicom is a watershed moment in the SEM industry. To date, most SEM firms have been acquired by marketing services or web agencies, but this is the first case where a major SEM firm acquired a major web development firm." The deal is also interesting because iCrossing seems to be a smaller company than Proxicom by revenues. iCrossing's 2005 revenues were $31.3M on a headcount of 215.

An old friend sold his company to Proxicom in 2001 or thereabouts and made a small fortune. At the time Proxicom was on a roll, buying company after company and enjoying a very high stock market valuation. When our friend saw that Proxicom was too busy deal making and had lost focus on its clients he sold all of his stock much to the displeasure of management. Best financial decision he could have made. Proxicom went on to tank.

Given how many buyouts iCrossing has done recently (NewGate Internet, Spannerworks, Sharp Analytics) they are making us nervous - it is as if they are becoming the Proxicom of old. This is a classic case of a company buying revenues, but with-out the certainty of knowing how to manage all of these integrations.

Read - Marketing Pilgrim