Welcome to the new world
Seven years ago, no one had any idea what the tiny interactive advertising agency, E-dologic was. Five years ago, only a few people had heard of its founders Yinon Landenberg and Doron Tal.
But two years ago, after the Internet suddenly started to take a real bite out of advertising budgets, all the big names in Israeli advertising suddenly knew all too well what the company and its founders were about. By then, however, it was a bit too late.
But only this morning when the rest of the Israeli advertising sector opens the paper and sees how much money is involved in the sale of the agency will the oldtimers really appreciate the change. Landenberg and Tal, who seemingly came out of nowhere, are about to make more than many of the biggest names did in double the time.
The IPO of advertising agency Adler Chomsky, Israel's second largest after McCann Erickson, allows us to compare the new and old worlds.
Adler Chomsky's annual profits over each of the last two years were around NIS 24 million, and the firm is traded on the Tel Aviv Stock Exchange at a company value of around NIS 190 million; about eight times profits.
The negotiations over the purchase of E-dologic are based on a ratio of 15, almost twice that of the largest firms. Over the past decade, a number of deals have been struck in the advertising business, all in the range of 4-8 times profits. Until now, a number like 15 seemed limited to the high-tech world.
Does this imply a bubble? Not necessarily. Looking at the advertising world, the one sector worth entering is interactive. Television may still draw big money, but interactive is where the growth is.