Ben Langdon, former UK head of advertising network Euro RSCG and before that a key figure at McCann-Erickson, leads Digital Marketing Group (DMG), which backed into Seashell 2, the Lord Ashcroft shell, in October alongside a £7.8 million funding. DMG recently lured a further £10 million from keen institutions at 70p in an oversubscribed placing.

Langdon, chief executive, has quickly acquired four businesses in digital marketing, digital media, direct marketing and data services, although DMG is not a consolidation play buying up everything in sight. Rather, its strategy is to build a one-stop offering through select deals in complementary fields. ‘And we are not a marketing services company,’ he assures. ‘Our product is digital direct marketing, still a very young, fragmented market.’ Young perhaps, but burgeoning at frightening rates in a flourishing market.

As well as an exciting lag in online marketing relative to the internet’s share of media time, increased use of broadband, higher web retail sales and the emergence of user-generated content all underscore prospects. Return on investment measurability is another plus, with the industry increasingly aware of the internet’s ability to measure precisely how many users viewed a message, how many acted upon it and what transactions followed.

More entrepreneurial

The businesses bought are all located outside London as, to Langdon’s mind, they tend to be more entrepreneurial than London agencies and are often more grounded in terms of pricing expectations. They range from Swindon-based HSM, which offers B2B and telemarketing services to clients such as Vodafone and General Motors, to Dig For Fire, a Sheffield-based direct marketing concern whose clients include Tesco and HSBC. Another acquisition, Cheeze, is a Web 2.0 and user-generated content specialist.

All digital focused, they have none of the traditional media legacy burdening larger incumbent competitors. ‘We just don’t have the baggage of the past,’ explains Langdon. This year expect pre-tax profits of £3.9 million from sales approaching £24 million, ahead of £5.1 million of pre-tax profits from £30.8 million of sales by 2008, before further acquisitions.

Astute business figure Lord Ashcroft speaks for 25 per cent of the group through his Mayfair vehicle, and I urge readers to investigate further, though the shares have surged to 117.5p and a pause for breath is due.

IMSG in demand

Another in demand with institutions is International Marketing & Sales Group (IMSG), which has also brought on board backers enthused about prospects. Following a recent £3.8 million investment into the business from a mystery investor â“ thought to be a wealthy Russian individual â“ this emerging markets counter has raised a further £9.5 million through a placing with institutions and private players at 178p. Due to the bumper demand, a further raft of shares (some belonging to directors including chief executive Greg Thain) was placed at the same price.

Set up in 1996, IMSG has been profitable since 2002, floated on AIM in December 2005 and claims to be the biggest below-the-line marketing agency in Russia (with clients including Mars, Pepsi and Diageo). The acquisitive group â“ six deals were completed in 2006 and there’s a healthy pipeline of deals to follow â“ is making a push on some of the other fast-growing emerging markets, Turkey, Hungary and India among them.

Despite some negatives outside the company’s control that affected performance last year, IMSG still delivered a 130 per cent rise in revenues to US$96.5 million (£49 million) in 2006 â“ with profits growing more than 70 per cent to $7.8 million â“ and a further surge to $141 million is forecast for 2007. I still think the shares look a bargain at 179.5p, given the growth opportunity ahead. If you are willing to live with emerging market risks, there’s an alluring share price recovery tale here.