Prospectus Summary
This summary may not contain all the information that may be important to you. You should read the entire prospectus, including the financial data and related notes, before making an investment decision. The terms "we" and "our company" mean 24/7 Media, Inc., its subsidiaries and each of its predecessor entities. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters' over-allotment option.
24/7 Media
Overview
We are an Internet advertising and direct marketing firm which enables both advertisers and Web publishers to capitalize on the many opportunities presented by Internet advertising, direct marketing and electronic commerce. We generate revenue by selling advertisements and promotions for our Affiliated Web sites. In particular, we:
o operate the 24/7 Network, a network of over 125 high profile Affiliated Web sites to which we delivered an aggregate of more than 900 million advertisements in December 1998;
o operate the ContentZone, a network of over 2,500 small to medium-sized Affiliated Web sites to which we delivered an aggregate of more than 50 million advertisements in December 1998;
o operate the 24/7 Media Europe Network, a network of over 60 Web sites that generated an aggregate of more than 200 million page views in December 1998, through our recently acquired 60% owned subsidiary, 24/7 Media Europe; and o are developing the 24/7 Media Asia Network through an agreement with China.com Corporation.
We believe that advertisers seek to place Internet ads in ways to maximize unduplicated "reach" (the number of unique Web users that visit a Web site or set of Web sites at least once in the given month). According to Media Metrix, our networks reached 50% of all Internet users in December 1998. We believe that this reach figure is among the highest in the Internet advertising industry.
We plan to aggressively recruit Web sites, both domestically and internationally, for our networks. We expect this strategy to further extend our reach, provide advertisers with a broad and diverse base of online content and Web page views, and improve our brand awareness and visibility with media buyers.
In addition, as online advertisers and direct marketers increase their use of the Internet, they seek solutions and technologies that allow them to efficiently deliver highly targeted messages. Our customized solutions allow advertisers and direct marketers to tailor their ad campaigns to reach desired audiences, while reducing costs, easing time pressures and alleviating the need to purchase a series of ad campaigns from numerous Web publishers. We are currently working on several initiatives to increase our targeting capabilities, including the further development of our Adfinity[TM] ad serving technology and our Profilz[TM] database.
As Internet traffic grows, Web publishers increasingly seek to maximize the value of their online advertising inventory. Our extensive sales and marketing experience provides Web publishers access to media buyers at large ad agencies and enables them to sell advertising without incurring the costs and challenges associated with building and maintaining an ad sales force. Additionally, the ad serving and targeting capabilities of Adfinity effectively deliver advertisements to our Affiliated Web sites.
Our senior management team includes several individuals with over fifteen years of experience in advertising sales in the television and proprietary online network industries. Other members of senior management contribute extensive knowledge of ad serving technology and data base targeting. We leverage our media sales and technology expertise to maximize the value of ad campaigns for both advertisers and Affiliated Web sites.
Our principal executive offices are located at 1250 Broadway, New York, New York, 10001, and our telephone number at that location is (212) 231-7100. Our company's main Web site address is www.247media.com.
The Offering
Common stock offered by 24/7 Media ......... 2,000,000 shares Common stock offered by the selling stockholders .............................. 2,000,000 shares Total offering ........................... 4,000,000 shares Common stock to be outstanding after the offering .................................. 18,282,835 shares(1) Use of proceeds ............................ For general corporate purposes, including working capital, expansion of sales and marketing capabilities, and possible acquisitions. See "Use of Proceeds."
Risk factors ............................... See "Risk Factors" for a discussion of factors you should carefully consider before deciding to invest in our common stock.
Nasdaq National Market symbol .............. TFSM (1) Excludes approximately 2,155,305 shares of common stock issuable upon exercise of stock options outstanding at January 15, 1999 granted under our 1998 Stock Incentive Plan (of which 211,186 are vested and exercisable at January 15, 1999) and approximately 721,400 shares of common stock reserved for issuance pursuant to future grants under the 1998 Stock Incentive Plan. The outstanding stock options have a weighted average exercise price of $12.69 per share. Also excludes approximately 3,177,985 shares of common stock issuable upon exercise of outstanding warrants at January 15, 1999. Such warrants have a weighted average exercise price of $9.20 per share.
Summary Consolidated Financial Data
Three Months Ended
March 31, June 30, Sept. 30,
1997 1997 1997
Pro Forma (1) Consolidated Statement of Operations Data: Advertising revenue .............. $ 414,983 $ 591,722 $ 806,543 Consulting and license fees ...... 805,245 639,588 244,890 Total revenue .................. 1,220,228 1,231,310 1,051,433 Gross profit ..................... 741,263 626,595 147,149 Operating loss (2) ............... (3,148,037) (4,431,798) (5,852,286) Net loss ......................... (3,133,895) (4,433,098) (5,882,888) Cumulative dividends on mandatorily redeemable convertible preferred stock...... (136,500) (136,500) (136,500) Net loss attributable to common stockholders ............. $ (3,270,895) $ (4,569,598) $ (6,019,388) Pro forma: Basic and diluted net loss per share (3) ................... $ (0.86) $ (0.98) $ (1.30) Weighted average shares outstanding (3) ................ 3,786,202 4,652,006 4,652,006
Historical Consolidated Statement of Operations Data: Advertising revenue .............. $ 388,892 $ 355,346 $ 315,697 Consulting and license fees ...... 805,245 630,588 233,130 Total revenue .................. 1,194,137 985,934 548,827 Gross profit ..................... 734,550 551,294 37,361 Operating loss ................... (798,059) (1,423,535) (2,400,167) Net loss ......................... (784,377) (1,427,594) (2,433,302) Cumulative dividends on mandatorily redeemable convertible preferred stock...... -- -- -- Net loss attributable to common stockholders ............. (784,377) (1,427,594) (2,433,302) Basic and diluted net loss per share (4) ....................... $ (0.73) $ (1.32) $ (2.25) Weighted average shares outstanding (4) ................. 1,079,116 1,079,116 1,079,116
Three Months Ended
Dec. 31, March 31, June 30, Sept. 30,
1997 1998 1998 1998
Pro Forma (1) Consolidated Statement of Operations Data: Advertising revenue .............. $ 1,819,545 $ 2,347,307 $ 4,126,498 $ 5,461,341 Consulting and license fees ...... 57,173 88,362 39,178 66,000 Total revenue .................. 1,876,718 2,435,669 4,165,676 5,527,341 Gross profit ..................... 555,006 542,938 816,035 911,799 Operating loss (2) ............... (3,359,372) (4,412,069) (5,193,928) (6,041,801) Net loss ......................... (3,437,217) (4,590,761) (5,157,817) (5,796,349) Cumulative dividends on mandatorily redeemable convertible preferred stock...... (136,500) (136,500) (151,689) (90,607) Net loss attributable to common stockholders ............. $ (3,573,717) $ (4,727,261) $ (5,309,506) $ (5,886,956) Pro forma: Basic and diluted net loss per share (3) ................... $ (0.76) $ (0.75) $ (0.67) $ (0.50) Weighted average shares outstanding (3) ................ 4,681,998 6,342,350 7,892,251 11,737,255
Historical Consolidated Statement of Operations Data: Advertising revenue .............. $ 407,170 $ 1,076,250 $ 3,661,110 $ 5,461,341 Consulting and license fees ...... 12,501 -- 39,178 66,000 Total revenue .................. 419,671 1,076,250 3,700,288 5,527,341 Gross profit ..................... 170,024 146,247 602,341 911,799 Operating loss ................... (587,601) (2,130,580) (10,291,973) (6,041,801) Net loss ......................... (660,555) (2,297,838) (10,256,792) (5,796,349) Cumulative dividends on mandatorily redeemable convertible preferred stock...... -- (33,500) (151,689) (90,607) Net loss attributable to common stockholders ............. (660,555) (2,331,338) (10,408,481) (5,886,956) Basic and diluted net loss per share (4) ....................... $ (0.60) $ (0.76) $ (1.32) $ (0.50) Weighted average shares outstanding (4) ................. 1,109,108 3,055,432 7,892,251 11,737,255
As of September 30, 1998 Actual As Adjusted (5)
Consolidated Balance Sheet Data: Cash and cash equivalents ............................................... $42,784,975 $109,602,475 Working capital ......................................................... 41,400,833 108,218,333 Goodwill, net ........................................................... 11,519,218 11,519,218 Total assets ............................................................ 62,566,159 129,383,659 Obligations under capital leases, excluding current installments ........ 42,759 42,759 Total stockholders' equity .............................................. 54,580,974 121,398,474
(1) Pro forma consolidated statement of operations data reflects the consolidation of the results of operations of Petry, Advercomm, Intelligent Interactions and CliqNow! as if each entity had been acquired on January 1, 1997 (or inception, if later). Our pro forma results of operations for the three months ended September 30, 1998 are equal to our historical results for the same period because our last acquisition took place on June 1, 1998.
(2) Includes acquisition related non-cash charges for amortization of goodwill beginning in the first quarter of pro forma 1997 and excludes the one-time write-off of in-process technology. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
(3) See Note 2 to our Consolidated Financial Statements for the determination of shares used in computing pro forma basic and diluted net loss per share.
(4) See Note 1 to our Consolidated Financial Statements for the determination of shares used in computing basic and diluted net loss per share.
(5) Adjusted to reflect our sale of 2,000,000 shares of common stock, the net proceeds from which are estimated to be approximately $66,817,500 after deducting underwriting discounts and estimated offering expenses payable by us. We intend to use the net proceeds of the offering for general corporate purposes, including working capital, and for the expansion of our operations and sales and marketing capabilities. See "Use of Proceeds."