Modem Media Adapts to a Merger and Comes out on Top
Modem Media, a rapidly-expanding web advertising company purchased by True NorthCommunications, adjusted to its new role and kept its identity, as reflected in this discussion withG.M. O'Connell, Bob Allen, and Doug Ahlers, the three partners of Modem Media.
Pioneering interactive advertising agency
married into the True North Communications family last year. Now "synergy" is the company's motto as Modem reaps the benefits of familyrelationships and adjusts as a rival-turned-sibling enters the fold through the latest megamerger.
Founded in 1987 by Doug Ahlers and G.M. O'Connell, Modem Media revolutionized the Web bycombining technology and advertising know-how to help create the still-immature industry of onlineadvertising. The Westport, Conn., startup pushed interactive brand identity forward with innovativecampaigns such as those executed for Zima and AT&T in 1995, the first year that online ads existed.Modem was a giant fish in the tiny $50 million pond of online advertising revenues, but industryanalysts were predicting an imminent flood.In October 1996 Modem merged with TN Technologies, an interactive holding company under thelarger umbrella of True North Communications, the $8 billion advertising colossus whose holdingsinclude Foote Cone Belding (FCB). O'Connell became the president and COO of TN; Ahlers became president of Relationship Technology Group (RTG), a TN company which developedtechnological underpinnings for Web sites; and Bob Allen, a Modem partner who had joined thecompany in 1989, became president of Modem.When
last wrote about Modem (Vol. 3, 1997), the company was celebrating its10th year in business. However, in O'Connell's words, they were "in the top of the first inning" inrelation to playing on the TN Technologies team. A year later, they've been through the rotation,fewer players are on the roster, and Modem is TN's starting pitcher."As we got into it, we found out by far the company with the most potential within the holdingcompany was Modem Media," explains O'Connell, "and we made a conscious decision about threemonths into it to really try to consolidate all of our units around our strength."
Instead of being subsumed by the larger holding company, the agency became the dominant brand,absorbing sister agency Northern Lights Interactive and RTG. All of the Northern Lights officeswere converted to the Modem name, and the RTG unit run by Ahlers now operates within Modem.When Modem entered into the merger,
estimated its revenues at $11.5 million. Themerger instantly tripled its size, while the absorption of Northern Lights gave the company globalaccess far more quickly than they could have built from scratch (Modem now has offices inWestport, New York, Chicago, San Francisco, Toronto, London and Hong Kong). The cooperativerelationship with FCB also provided the thin end of the wedge at prestigious and lucrative FCBclients."We have a lot of synergy with FCB," admits Allen. "In several cases we've shared clients that pre-existed, but we've also gained access to some of FCB's star clients. Some of the clients who havecome out of the FCB relationship include Kraft, Nabisco, Lucent — we've gone and joined the pitchto do business and we've both won."